March 16, 2017
Marketing Funnel Explained
Over a century ago in an ad agency, the mysterious “marketing funnel” began to take shape. Today, you probably have one whether your realize it or not.
You may not know what it looks like or how it works. You might call it a “conversion funnel” or a “sales funnel,” or a number of other names – but if you’re part of a business that relies on customers to grow, then you have a funnel.
If you’re searching for further clarification on it, you’re not alone. In theory, the marketing funnel is straightforward: It’s the representation of your buyers’ journey from prospect to customer, combined with the tools and processes you use to gracefully guide them through. But in practice, constructing a marketing funnel is far more confusing. What do the building blocks of a successful one look like? What processes ensure the maximum number of leads become customers that stay loyal to your brand?
The search for those answers started in 1898 with a four-letter acronym: AIDA. And today, it ends by flipping the whole funnel on its head.
The early marketing funnel
At the turn of the 20th century, agency owner and future advertising hall-of-famer, Elias St. Elmo Lewis, developed a model that mapped the stages of a customer’s relationship with a business. Those stages were as follows:
- Awareness: The prospect becomes aware of their problem and potential solutions to it.
- Interest: The prospect expresses interest in a particular group of products or services that solves their specific problem.
- Desire: The prospect shows interest in a particular brand or product and begins to evaluate whether it meets their needs.
- Action: The prospect decides whether that brand or product meets their needs. If it does, they become a customer. If it doesn’t, they continue to evaluate until they find a brand or product that does.
In 1924, William H. Townsend combined the AIDA model with the funnel concept, and the first marketing funnel was born:
At the top in the “awareness” stage is a mass of potential customers who have a problem. Some will make it to the “interest” stage after deciding your class of product can solve that problem, while others will drop out and choose another class.
Afterward, some in the “interest” stage will make it to the “desire” stage while others will drop out, and so on and so forth. It’s for that reason, from a business’s standpoint, the customer journey has been compared to a funnel. You’ll start with many potential customers at the top, and end with only a few actual ones at the bottom.
Since 1924, though, the marketing funnel has undergone drastic changes. Today’s model reflects a new empowered customer, as well as an emphasis on metrics beyond the “action” stage.
In fact, the modern funnel looks a lot less like a funnel. Some say it resembles more of an hourglass. We say it should be flipped completely on it’s head. While everyone has their own take, one thing they can all agree on is this: It looks nothing like it used to.
The evolution of the marketing funnel
The marketing funnel is so mysterious that there’s not one model universally accepted by all business professionals. The most basic can be separated into three stages:
You’ll hear marketers talk a lot about “TOFU” (top of funnel), “MOFU” (middle of funnel) “BOFU” (bottom of funnel) metrics and processes. This is the model they’re referring to when they do. HubSpot elaborates on it further:
In this three-stage model, the “interest” and “desire” stages from AIDA have been lumped together to form the “consideration stage.” The “awareness” stage remains the same (as it does in most models), and the “action” stage is identical to the “decision” stage in all ways except the name.
But if you examine the customer journey a little more closely, you’ll see the funnel is made up of more components than Elias St. Elmo Lewis initially proposed:
In this one from Aweber, you’ll notice the added “loyalty” and “advocacy” stages. Why? Because today’s businesses have finally realized the importance of customer lifetime value. Research shows that even a 5% increase in customer retention can boost a company’s profits by 95%.
A positive customer experience beyond the “action” (or “conversion”) stage results in not only repeat purchases, but glowing testimonials. And considering that 88% of consumers trust online reviews as much as personal recommendations, those two added stages are crucial to widening the top of that funnel to attract more potential customers.
That’s why more and more businesses are connecting an inverse funnel to the bottom of the traditional one. The folks at TrackMaven call it “the customer experience funnel.”
The result of combining the traditional funnel with this upside-down “customer experience” one is what Duct Tape Marketing’s John Jantsch calls “the hourglass.”
However, there’s something crucial to a business’s growth that this model doesn’t take into account.
Deconstructing the marketing funnel
Like an orchestra counts on each individual musician to play their part correctly, the marketing funnel’s success depends on each stage to contribute to the next. When it doesn’t, the end goal of turning prospects to customers to advocates becomes unattainable. Here’s what you need to know to guide your customer through each stage:
The awareness stage
Jantsch calls this the “Know” stage. It’s the stage in which your prospect first becomes aware that they have a problem and starts looking for a solution.
- Your prospect’s goal: To put a name to their problem and begin determining possible solutions. If they’re befuddled by taxes, then maybe they’re considering hiring a CPA or purchasing do-it-yourself tax software.
- Your goal: To position yourself as a worthy solution with a clear USP, and to prove your authority with educational content. That starts with generating visitors to your website and turning them into email subscribers.
- The best content to offer: Blog posts, website content, webinars, guides, social media posts, email newsletters.
- Key performance metrics to track: Website traffic (visits, unique visits), social reach, email subscribers, inbound links, referrals.
The consideration stage
Of all the stages in the marketing funnel, this is the one that gets morphed most from model to model. In Lewis’s AIDA, it’s divided into the “interest” and “desire” stages. In Jantsch’s hourglass, it’s separated into the “like” and “trust,” stages. The reason is for the space it occupies in the marketing funnel.
If the funnels above were drawn to scale, the consideration stage would be much larger than the others. It can take weeks and even months for prospects to evaluate a business’s authority and its capability to solve their problem. During this time, it’s crucial you guide them to that decision with helpful content.
- Your prospect’s goal: To determine which class of products or services can solve their problem, then to begin evaluating businesses within that class. If we’re using the tax example, this would be when the prospect decided to use a DIY tax software solution over a hiring a CPA. Afterward, they’d start evaluating specific software, like TurboTax or QuickBooks, for example.
- Your goal: To nurture your leads with strategic emails, blog posts, and lead magnets that prove your business is an authority capable of solving their problem. Since this stage is also where the marketing team hands off leads to the sales team, it’s crucial your organization has settled on a clear definition of a sales-qualified lead (SQL).
- The best content to offer: Ebooks, case studies, free tools, whitepapers, webinars.
- Key performance metrics to track: Email open rates, landing page conversion rates, lead source, cost per lead, lead quality.
The purchase stage
This is the stage at which a lead chooses a specific product or service to solve their problem. They arrive here only after a coordinated effort between a business’s sales and marketing teams to educate and nurture the lead.
In Lewis’s early model, this stage concluded the marketing funnel. For today’s businesses, though, the “action” or “purchase” stage is a new beginning – one that has the potential to grow the funnel exponentially by leading into the “loyalty” and “advocacy” stages.
- Your lead’s goal: To decide which business and specific solution can solve their problem. For someone searching for a DIY tax software, this is when they’d not only choose which brand to purchase from, but which specific product they need. Do they need the basic version or the deluxe one?
- Your goal: Here, your goal is to show leads exactly how you can solve their specific problem and help them decide which product best meets their needs. While the consideration portion of the funnel focuses on proving your authority and ability, this one focuses on solving their problem in detail.If your product is software, free trials and demos allow leads to try before they buy to ensure a solution is practical. If you’re a service-based business, this is where a one-on-one consultation can prove you’re capable of solving a client’s unique problem. If you have a physical product, this is where social proof like detailed testimonials and case studies will persuade leads to click the “buy” button.
- The best content to offer: Testimonials, detailed case studies, product comparison whitepapers, demos, free trials, consultations.
- Key performance metrics to track: Customers, lead-to-sale conversion rate, revenue, cost of customer acquisition.
The loyalty stage
If we were comparing this point in the customer journey to a real-life human relationship, it’d be the honeymoon stage and beyond. Your new customer is excited to have a tool to solve the problem they’ve been struggling with, but after that excitement dies down, they want to know they can rely on you to help them get the most out of their purchase. If you don’t provide the support they need, they’ll abandon you for a business that can.
Of all the stages in the marketing funnel, this one varies most in size from business to business. If you can provide ongoing product education and support, your customers will remain loyal and their value to you will grow. If you can’t, this stage has the potential to be the shortest in your entire funnel.
- Your customer’s goal: To become comfortable with the product, continually learn new uses for it, and decide whether any of your other products are worth claiming based on their satisfaction with their purchase and your support.
- Your goal: To provide ongoing customer support to boost loyalty, and in turn, customer lifetime value.
- The best content to offer: Forum threads, FAQs, tutorials, blog posts, customer service content (chat, social media posts).
- Key performance metrics to track: Recurring revenue, customer lifetime value, active customers, churn rate.
The advocacy stage
This is stage with the most potential to grow your marketing funnel, and ironically, it’s the one you have to work the least in. The “advocacy” stage is your reward for all the work you put into the stage before. When you keep your customers happy, they’ll not only remain loyal to your business, but they’ll recommend you to friends and industry contacts facing a similar problem to the one you solved. They’ll brag about how easy life is with your product or service and how hard you work to keep them happy. The result is not only a bigger marketing funnel, but the chance to get a head-start on your competitors.
With a friend’s recommendation, your business will already be top-of-mind when they begin researching a solution to their problem. It’s in the “advocacy” stage your customers actually become your marketers by escorting their friends through the “awareness” stage and straight to “consideration” in your funnel.
- Your goal: To grow your funnel by turning your customers to marketers.
- Your customer’s goal: To help their friends overcome struggles similar to their own.
- The best content to offer: Surveys, referral incentives, loyalty discounts.
- Key performance metrics to track: Net Promoter Score, referrals, reviews.
What your marketing funnel should look like
If you follow the above steps, over time you’ll start to notice something peculiar about your marketing funnel: It’s not a static funnel, or even an hourglass. When you draw it out, it’ll start to look like an upside-down, ever-growing funnel:
The more you continue to delight your advocates, the more they’ll contribute to its growth by referring other prospects. And as it grows, so will your customer base, along with your business.
Did we miss any stages? Which model do you prefer? Let us know in the comments, then begin guiding prospects through the marketing funnel with automated emails based on their behavior