What is Marketing Funnels and How it works?

In the pre-digital days, the marketing function of any company approached customer acquisition and retention through four clearly defined stages called the AIDA:

Attention Interest Desire Action.

The AIDA model was created toward the end of the 19th century by an American advertising practitioner, Elias St. Elmo Lewis. His model worked on a “problem-solution” approach and proposed that every purchase involved the following:

1. Awareness: The potential customer is aware of a problem and a possible solution to that problem
2. Interest: The customer expresses an interest in a service or product that could solve the problem
3. Desire: The customer initiates the process of examining a particular brand
4. Action: The customer takes a purchase decision

The Digital Revolution and How it has Changed Customer Acquisition

Customers today are becoming increasingly digital and consume content, shop, and watch movies on a digital device. Therefore, it has become mandatory for most companies to have an online presence and market their products or services to customers digitally.

However, even in the digital age, customer acquisition still goes through the AIDA process. The only difference is that this journey is now conducted online, and companies have developed what is called a “marketing funnel” to move consumers from one stage of the journey to the next. This funnel maps the customer journey through the AIDA process and allows the brand or company to determine the content and digital tools required to engage existing customers and convert leads into paying customers.

Marketing Funnels

Essentially, the marketing funnel is a visualization of the process of converting leads into customers. As the number of “customers” narrows from the lead stage to the final consumer, the journey takes on a “funnel shape,” narrowing as we go along the process.

A typical marketing funnel (for an e-commerce site, for example) looks like this:

Image source: https://neilpatel.com/blog/how-marketing-funnels-work/

In simple terms, the customer:

1. Visited the e-commerce site
2. Explored the products available or signed up for a trial
3. Selected the product
4. Upgraded to paying

Different Types of Marketing Funnels

The basics of the marketing funnel have not changed fundamentally since its creation in the early 1900s. While different companies can have different types of funnels depending on their business model and expected outcomes/business objectives, we can identify two main types of funnels, based on the end customer base:

1. B2B marketing funnel
2. B2C marketing funnel

Within these broad categories of marketing funnels, we can have several types of funnels:

1. Marketing funnels
2. Sales funnels
3. Webinar funnels
4. Email funnels
5. Video marketing funnels
6. Lead magnet funnels
7. Home page funnels

It is important to note that all these “funnels” have the same objective: define the prospective customer’s journey to conversion.

Most companies use a relatively straightforward marketing funnel strategy called the “TOFU – MOFU – BOFU” strategy, which refers to:

• Top Of The Funnel (TOFU)
• Middle Of The Funnel (MOFU)
• Bottom Of The Funnel (BOFU)

Each of these elements has a distinct content/digital marketing approach to appeal to customers at these stages of the funnel.

Comparison Between B2B and B2C Marketing Funnels

There are some key differences between B2B and B2C marketing funnels:

• B2C customers go through the various stages of the customer journey either alone or with someone they trust
• B2C clients may never engage directly with a company or brand
• B2B customers have larger and more involved buying representatives
• B2B consumers engage directly with sales representatives in BOFU stage of the marketing funnel

A visualization of these two types of marketing funnels is presented:

Image source: https://www.skyword.com/contentstandard/how-the-marketing-funnel-works-from-top-to-bottom/

The key differences between a B2B and a B2C funnel can be summarized in the following table:

Importance of Marketing Funnels

The importance of a building marketing funnel in today’s online marketplace cannot be over-emphasized. In fact, a properly designed and implemented marketing funnel can prove to be a game changer for the company or brand as it tries to engage and acquire customers.

The main benefits of a marketing funnel are given below:

1. Save time and effort
   1. Mapping the customer journey and designing a plan of activities or content for each stage of the journey helps the company automate its marketing process
   2. This helps the marketing team save time and effort to concentrate on strategic and tactical plans of acquiring and retaining customers
2. Design the marketing strategy
   1. Understanding a marketing funnel aids the marketing team in learning and realizing why a prospective customer drops out before making a purchase
   2. It also helps them develop strategies and tools to keep the prospect engaged with the brand through all stages of the customer journey
3. Consistent marketing promotions
   1. A marketing funnel tells the marketing team exactly what to do at each stage of the customer journey
   2. This helps the team refine the messaging and promotions to be consistent with each stage of the journey and provide a rich and useful engagement to the customer
4. Close deals easily
   1. This is particularly important for companies in the B2B space, where both marketing and sales teams need to work together
   2. Marketing funnels give deep insights into customer behavior, allowing the sales team to figure out how to close a deal faster
5. Increase sales
   1. A marketing funnel helps the company nurture and guide a lead towards a purchase decision
6. Make better sales forecasts
   1. Funnels allow the company to analyze the results of each marketing activity in a detailed manner
   2. Funnels provide the quantity of lead conversion for each stage, and using historical data, the company can forecast how many of the current leads will become paying and regular customers
7. Customer retention
   1. No company wants to lose a customer, and retaining a customer is up to five times cheaper than acquiring a new one
   2. Knowing the post-purchase behavior of the customer can help the company plan how to keep customers engaged and make them return to purchasing the brand

Benefits of a Well-designed Marketing Funnel

Customer behavior has changed dramatically over the last 20–25 years with the advent and development of digital marketing and online marketplaces.

The huge amount of information and promotions available online has led to potential customers doing research on even the smallest details or probable purchases. A company has to stand out and grab customer eyeballs and draw them in consistently to stay in business.

Hence, every company, whether in the B2B or B2C space, should have a marketing funnel. There are several benefits of designing and maintaining a marketing funnel:

1. Measurability
   1. The biggest benefit of a marketing funnel to a company is the measurability it provides
   2. Gaining visibility of where the customer is in the customer journey, and how many customers are likely to drop out at each stage, allows the company to take steps to retain customers
2. Prevents “funnel leakage”
   1. A well-designed funnel ensures that the prospective customer is engaged sufficiently at each stage of their journey to keep the company or brand in their consideration set
   2. Thus, it prevents a leakage, or dropping out, of prospective customers from the funnel
3. Access to data
   1. A “marketing funnel report” is a set of data which lets the company see which stage of the customer journey it is losing customers at
4. Make the customer journey simpler
   1. A funnel makes the customer journey predictable and easy for companies to track and follow
   2. Companies can visualize each stage of the customer’s decision process and design an appropriate solution for each
5. Can be applied to most customer engagements
   1. Marketing funnels work for all kinds of customer interactions
   2. A marketing funnel can be used for generating online sales, push traffic to a physical store or for engagements as an affiliate marketer
   3. A proper marketing funnel gives visibility to every stage of engaging with the customer

Conclusion

A marketing funnel is a visualization of the journey a prospect goes through, from awareness to purchase and the subsequent actions. A carefully designed and researched marketing funnel allows the company to determine how to engage and influence customers at specific stages in the purchase cycle.

While setting up a marketing funnel can seem challenging to a company doing it for the first time, the process and outcome of having one is of immense value to the brand and company. It is always better to think with a long-term perspective and build an omnichannel, cross-platform funnel that ensures the company connects with the customer in every possible way and minimizes the chances of a “funnel leakage.”

One of the key outcomes of a marketing funnel is a “funnel report” that shows the company where people are leaving in their conversion path. This helps the company optimize the conversion path, engage and retain customers, and increase revenue.

Marketing funnels are required to engage the audience, build trust, and create an authentic base of “promoters” of the brand. They help companies listen to its customers and improve its content to respond to their challenges, needs, and wants.

A marketing funnel not only helps acquire new customers, but it also pushes them to be loyal and promote the brand to their contacts.