Every business depends on its customers. So, all business strategies must be modeled on specific customer requirements. To do that, an entrepreneur must look at the buying process from the customer’s point of view.
A customer goes through many stages before buying a product. At every step, there is always something that influences their decision. As the market is diverse and customers have different choices, it is important to adapt by constantly learning about evolving requirements of your customers.
The marketing funnel is a concept that allows you to understand various customer journeys holistically.
What is a Marketing Funnel?
The marketing funnel is a business concept that allows you to make sense of the non-linear and unpredictable behavior of your customers. Not only that, but it also helps you take the right steps at the right stages to maximize your chances of making a sale.
There are three stages of a marketing funnel:
Awareness: Top of the funnel
At the top of the funnel are those customers who have minimal to no knowledge about your product. Since these customers are looking at you with very little interest, you cannot pitch a sale immediately.
The best thing you can do is spread awareness, which can be done via social media, paid advertisements, and landing pages, to evoke customer interest.
Consideration: Middle of the funnel
The middle of the funnel represents the stage when customers are contemplating buying your product or subscribing to your website. Think of a customer as being in the middle part of the funnel when he/she has followed you on Facebook/Twitter or signed up for a newsletter or subscribed to emailing list.
Conversion: Bottom of the funnel
This is the most important part of the funnel. The chances of converting a customer at the bottom of the funnel are the highest. But it does not mean that conversion is a given. At this stage, you need to engage your customers in the best possible way.
For example, you can show your potential customers some case studies and reviews from your existing customer base.
Analyze and Improve Funnel Planning by Evaluating the Metrics
A business tactic is considered successful when it helps increase revenue. By constantly measuring the following metrics, you can fine-tune your funnel planning and boost your business prospects:
Evaluating the Value of a Customer over a Period
Customer lifetime value is a very important business metric for companies that provide Software as Service (SaaS) or Platform as Service (PaaS).
But it can be also useful for companies that sell tangible products if they know how to predict customers’ buying patterns, which is possible in today’s time via Big Data analytics. Depending on the value of your customer, you can increase or decrease your effort at every stage of the marketing funnel.
Evaluating the Cost of Customer Acquisition
For every customer acquisition, there is an associated cost. So, you must know exactly how much you have to spend to get a new customer. If the cost exceeds the eventual returns, it is better to change the customer acquisition strategy.
For example, if you are spending too much in spreading brand awareness through TV advertising and not getting the desired returns, you can change your approach and focus on social media marketing.
Evaluating the Conversion Rate
Conversion doesn’t always mean a sale. It can also mean a new subscriber is added to your company’s email list. The subscriber might convert into a buyer at a later stage, but there is no guarantee of that.
When you know the conversion rate at every stage of the marketing funnel, you get a better view of what’s happening in different customer journeys. Hence, it becomes easier to adapt one’s business tactics according to the customers.
Managing every customer journey in a diverse market is nearly impossible. But with the help of business tactics such as funnel planning, it becomes easier to understand where most of your customers are – whether they are aware of your product, considering it, or about to buy it.
However, creating certain business tactics and then resting on one’s laurels is not enough.
One needs to constantly evaluate market metrics such as conversion rate, cost of customer acquisition, and value of customers. By analyzing these market statistics, one can adjust the marketing funnel tactics (at every stage) accordingly and always stay one step ahead in their business plans.