Funnel analysis is a powerful tool for brands that can be used to understand where you lose your users, and how.
Visitors scroll down your website every day, or your application is viewed many times in a day, and you get new potential customers every second of the day. But, the traffic you receive from various sources somehow converts into very small percentages of sales, sign-ups, or conversions.
In this blog post, we will talk about Funnel Analysis and its basics. You’ll learn how effective Funnel Analysis can be, and where you can use it to grow your business.
Table of Contents
- What is Funnel Analysis
- Benefits and Importance
- Why we need Funnel Analysis
- Examples of Funnel Analysis
What is Funnel Analysis?
Funnels are a great way to identify how users navigate your website or application before the conversion step. It helps brands to visualize the entire process and to identify why users drop off before the conversion. By analyzing steps individually, and understanding how users go through one step to another, brands can set up the right strategies to grow their business and fix their problems.
With funnels, you can find answers to several questions for your brand including:
- Where are we losing most of our customers?
- How do our users feel about our new update?
- Where should we allocate most of our marketing budget?
Funnel analysis is one of the most valuable tools for brands to understand the user flows through their website or application.
Funnel analysis helps you answer those questions and many more without drowning in complex data, and direct you to the right answer easily. Just like the name itself, a physical funnel is shaped narrow towards the end, representing your users narrowing down towards the end of the funnel, meaning how very few of your users reach the last step of the user flow – conversion.
Benefits and Importance
Funnels are not just about conversion rates. They are important for brands to understand what their customers are expecting from them. The analysis of funnels can lead to illuminating powerful insights for brands to know where and how they need improvement.
The raw data is hard to understand, and funnel analysis can help you mine the raw data that you have about your website and app. Analyzing funnels with user attributes, behaviors, or profiles can lead to great insights.
Moreover, you can also analyze and work on funnels with date ranges, acquisition channels, or by a specific time.
With funnel analysis, you can know the exact problem you have with your website or application, and finding the solution becomes much easier since you won’t waste time trying to figure it out. Funnel analysis can be used by marketers, product managers, or UX designers and is essential for the application’s or the website’s success.
Why We Need Funnel Analysis
Funnel analysis goes beyond tracking conversion rates. Several areas of use for Funnels lead to success for brands. You can compare and measure funnels to understand which users are more likely to convert, the reasons behind the drop-offs, and how to improve your user flows that will end with the conversion by finding out potential flaws.
1. You can monitor conversion rates and figure out the reasons for the drop-off.
Funnel analysis helps you monitor conversion rates effectively. This will lead you to uncover powerful insights like the reasons behind drop-offs. You can take more powerful and much faster actions by figuring out the real drop-off reasons. Marketers can work on converting more users or setting up their campaigns more efficiently with the help of funnel analysis.
Or, you can dig into funnel analysis to find information such as which users are most likely to convert, and focus on the right audience rather than wasting time trying to be successful. This will help marketers to identify the right areas to allocate their marketing budget and efforts.
2. You can detect potential flaws and causes of friction in the user flows.
Another way to use funnel analysis is to easily detect potential flaws that can affect users and conversion rates. After you’ve created multiple steps in your funnel, you can monitor the drop-offs between steps and figure out where the problem is.
For example, an e-commerce brand can easily detect that they have a problem with their checkout forms when users are trying to purchase an item. In this way, funnels can help you save time and effort and help you focus on more important things in your business.
3. You can see how your customers react to changes and developments.
With funnel analysis, you can see how your users react to changes and development you’ve made. Consider adding a feature to your website or app, with funnel analysis, you can use funnels to help you understand how your customers react to changes. Set a funnel before deploying the new feature, and after you’ve upgraded your website or application, set another funnel with the new feature. Now, you are able to analyze the changes between funnels and get powerful insights about your new feature.
4. You can discover areas for improvement and work on your business.
Funnels are great visuals to help you and your team members understand the metrics and KPIs, giving you a starting point for improvement. You can plug the dollar leaks by optimizing your business and start seeing good results.
For example, a massive drop-off from one step to another can lead you to a problem that your brand has in the process. It can be an area to improve or upgrade for better conversion rates. Or, you can track your campaigns with funnel analysis to see which campaign is more effective.
5. You can identify high-converting acquisition channels.
Issues and problems are just some of the things you can spot with Funnel Analysis. You can also detect successes – yes, you’ve heard it right!
With funnel analysis, you can spot where your high-converting traffic comes from. After you’ve understood how visitors convert to your site, you can focus on the high-traffic acquisition channels to get more conversion rates.
Examples of Funnel Analysis
1. Event-Based Funnels
Let’s think about an e-commerce site. The brand is using funnel analysis to convert more users. We can simply create a three-step conversion funnel for this e-commerce brand; the first step is page view or product view, the second step is adding the product to the shopping cart, and the last step is the checkout process. Now that we have our basic funnel, it looks like below:
What is the problem that this e-commerce brand is having? It’s clearly cart abandonment.
We can see that many users who have been interested in the product did not complete the checkout process. This is how we know the problem is cart abandonment. And what causes cart abandonment.
Well, there are several reasons for cart abandonment and we have to check a few of the reasons before thinking about a solution. First, do we have a problem with our payment process? Do we have any UX problems or errors? If not, we can turn our heads to another reason for cart abandonment: users are not engaged enough. There are several other reasons for users to decide not to buy an item or product, such as high prices or not feeling like buying at the moment.
To address and solve this problem, we can try to increase engagement and re-market our products to the people who are already interested in the first place. The brand can automate a pop-up, send a push notification, or address a discount or a coupon for the product to increase its sales.
Netmera is a multichannel engagement platform that helps brands grow their businesses and strengthen its relationship with their customers. Through the Netmera Panel, brands can automate pop-ups, create push notifications, send SMS, or execute e-mail marketing to increase sales and engagement.
2. Detect Causes of Friction in User Flows
Think about an application that needs registration. The brand needs to know the problem behind the application’s low registration rates. Using funnel analysis, they created a four-steps funnel to understand the problem.
The first funnel is to know how many users are coming to the application, the second funnel is set to understand how many users are clicking on the registration button and filling out the form, and the third funnel is to know how many users have received an activation code to their mail addresses. The last step is to know how many users come back and sign in.
Let’s say our basic funnel looks like this:
Looking at the basic funnel we have created for the brand, we instantly understand that there is a problem with the activation link or the code that the users have received.
Usually, every person who received an activation code should activate their accounts, but we see a drop-off between our second and third steps. And the drop-off rate seems unusual for this situation.
After finding the place where the exact problem occurred, the brand discovered that some users received broken links, which blocks them from completing their registration. The related teams can now work on this problem to solve it immediately.
3. Identifying High-Converting Acquisition Channels
A brand needs to know how should it allocate its advertising budget. They are mostly active on Instagram and Facebook, but they also use other social media accounts and Google Ads.
With funnel analysis, the brand can identify high-converting acquisition channels and work more on them to increase their loyal customers. i
So, they can create a four-step funnel showing new user rates to understand the problem:
Looking at this basic funnel, we can see that Facebook and Instagram ads are the best-performing ads when it comes to the acquisition of new users.
But, a higher number of new users does not always mean that they will also have higher conversion rates. To know which acquisition channels are the most effective, we have to dig into our funnels to know our highest-paying customers and where they are coming from.
With this extended funnel, we can get powerful insights about where our customers are coming from and which channels. Although Facebook and Instagram ads are the most performing ads when it comes to new user acquisition, we realize that users coming from Google Ads have higher conversion rates than Instagram.
Instagram ads get us 35% of the new users, but only 13% of them become converted customers. On the other hand, Google Ads get us only 20% of the new users, but 23% of them become converted customers. With this funnel analysis, we get the idea of where to put our advertising efforts to get higher conversion rates: Facebook and Google Ads.
4. Track Performance and Growth
With funnel analysis, brands can also track performance and growth. Funnel analysis helps you get control over how your company does in terms of performance and growth. By comparing monthly funnels, brands can understand if they are growing or not, and how their performance is doing compared to other months. And with the numbers they get from funnels, they can work on growing their business by finding the right solutions.
For more information about Funnels and Funnel Analysis, you can contact us now.