Use the marketing funnel to measure, then to plan

The marketing funnel continues to be one of the most challenging aspects of any of the digital, social, and analytics classes that I lead at General Assembly. There are a few points that should become clear after one has taken the time to learn and understand the funnel:

  • It’s just math
  • Everyone’s funnel is different
  • The key %s in the funnel change constantly
  • “Optimization” is the process of improving your funnel metrics
  • The funnel is a measurement and a planning tool

This last point is what I’ll address here. To do that, I’ll give a simple explanation of a hypothetical marketing funnel from a simple e-commerce business that sells widgets for $10 each. The owner emailed his entire list of 1,000 subscribers to inform them that the new widget was now available on his website. Twenty-five percent of his subscribers opened the email. Fifteen percent of them clicked on the “buy now” link. Of those 150 people who clicked (15% of 1,000), 33% (or 50) made a purchase of exactly one widget each. This website owner and widget salesman sold $500 worth of widgets. What’s his funnel look like?

  • Total target audience: 1,000
  • Open rate: 25%
  • Opens: 250
  • Click Through Rate (CTR): 15%
  • Clicks: 150
  • Conversion definition: purchase
  • Conversions: 50
  • Conversion rate: 33%
  • Average order amount: $10
  • Total revenue: $500

In that example, the funnel is a measurement tool that looks back to determine results. However, the funnel now becomes a planning tool for this widget website. Here’s how that works. If Mr. Widget wants to increase his revenue, he has several options. He can:

  • Improve his open rate by improving his email subject line
  • Improve his click through rate by testing a different call to action
  • Improve his conversion rate by making it easier to make a purchase
  • Increase his price to test price elasticity
  • Increase the number of email subscribers

If the Widget Master does not know the math of his funnel, he subsequently does not know where he could improve his business. Since he does have this math at his fingertips because he uses Google Analytics, he can plan for future campaigns. For example, he can focus his daily efforts on getting more website visitors to subscribe to his email list by providing great content to his email subscribers. If, over the course of time, he gains 500 new email subscribers, his funnel math could change like this:

  • Total target audience: 1,500
  • Open rate: 25%
  • Opens: 375
  • Click Through Rate (CTR): 15%
  • Clicks: 225
  • Conversion definition: purchase
  • Conversion rate: 33%
  • Conversions: 74
  • Average order amount: $10
  • Total revenue: $740

Not only might Mr. Widget increased his revenue, he is now able to plan intelligently for each email campaign using the math of the marketing funnel. Now, obviously, this is a simplified example, and no two campaigns will behave exactly the same; however, over time, digital campaigns will become consistent in their results because the people marketing them will learn what works and what doesn’t work. More importantly, marketers will do so using the actual historical measurements of results from the marketing funnel.

 

What do you think?