What is Funnel Analysis and Why Does it Matter?

What is Funnel Analysis and Why Does it Matter?

by Benjamin Tang Posted on Sep 06, 2018

You have probably heard of conversion rates and sales funnels. You may even have a thoughtfully designed sales funnel and an eagle eye on your conversion rates already. What does any of this really mean though? Why does it matter, and what do you do with the data?

Customer Journeys, Funnels, and Conversion Rates

Think of the paths your customers take as they move through your website or mobile app and decide to buy your product or service. It is helpful to consider each customer’s path as a journey. When this path is performed online or on a mobile app, it is known as a digital customer journey. Tracking journey information is easy with the appropriate tools at your disposal.

If you have tools for tracking your customers’ digital journeys, you may feel like you are drowning in data without a handle on how to use any of it. From clicks to page rankings to conversion rates, digital journey data can be a bit overwhelming. One way to simplify this data overload is to think about it in terms of a sales funnel.

Imagine your potential customers enter the widest part of a funnel with their first interaction on your website or mobile app. After that, they click and tap their way to various options, such as a specific category of product listing or services. As they continue moving through the funnel, they get closer and closer to the narrowest end of the funnel where they complete the intended final action, such as finalizing the purchase of a product or signing up for a service.

How many of your potential customers entering the widest part of the funnel actually complete the final action of purchasing your products and services? This is your conversion rate. Although the conversion rate is a useful number to know, it does not give you the whole picture. What is happening at each stage of the sales funnel? When and where are you losing potential customers? Why are they dropping out of the funnel instead of completing the journey? This is where funnel analysis comes in handy.

Analysis and Adjustment Required to Maximize Conversion Rates

Let’s say you have an ideal customer journey for your website or mobile app. You probably have a few, but for the sake of simplicity let’s say there is one ideal journey. You know what steps you want your customers to take. You have session replay data demonstrating some of your potential customers taking the path you would like them to take. Then you create a sales funnel from a specific session replay you think exemplifies the best path and monitor the data as it comes in.

With data collection at each stage of the journey, you have information at your fingertips that is more meaningful than a conversion rate by itself. Monitoring the complete customer analytics record tells you exactly what is going awry and helps you to see why. If customers are clicking links unrelated to their journey, maybe there are some subtle adjustments you can make to your features or settings to encourage them to stay on track.

With real-time analytics, you can make adjustments, sit back, and watch what happens with the next set of customers entering your funnel. Do you have a higher rate of conversions now? Are customers staying on track? If not, what else do you need to keep in mind?

With complete funnel data, you can look at which stage of the funnel you are losing the most customers. This gives you a clearer idea of where to start your investigation and allows you to focus on the most impactful changes to increase your conversion rates. You can use other tools, such as session replays and clickmaps for a visual on what is going awry at that particular stage once you have narrowed it down. This can give you better insights into what is happening and how to keep more customers in the funnel, leading to more sales and fewer missed opportunities.

Data is useless if you do not put it to work for you. With funnel analysis, you can use your data to help keep your customers on track and moving along towards the desired end result efficiently and effectively. Customers are happier because they are not getting lost on your website looking in all the wrong places, and you are happier because all your hard work is paying off with more conversions and sales. What will you do with your data?

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