The good news about funnels is that you already have them as part of your product or service today! To understand your funnels, you simply work backwards from your preferred customer outcome (purchase, conversion, ad click, etc.) and identify all the actions that might have led to that outcome. For example, the steps a customer completes to purchase something from an e-commerce site might look like the following:
That is easy to understand and easy to track! In fact, most major analytics products include funnel tracking as part of the core product.
The real challenge is how to track customers’ progress through the funnels that you identify, because it it’s likely that your customer funnels will extend beyond the scope of just one system. In our example above, how do we know the user clicked on an ad? How do we know if the order placed was shipped? Most e-commerce companies use many different advertising partners, website analytics tools and payment/shipping providers which means the data is spread out across many systems.
To make sure you can track funnels effectively across systems, here are some best practices:
- Referrer Tracking. Most systems allow you to pass referral information in the form of tags (UTM is a common convention), which will allow you to identify which users are coming from what systems. For example, you advertising provider can tag incoming website traffic with the ad campaign and other information so that your web analytics service can track that step of your funnel.
- GUIDs. You should assign your customers Globally Unique Identifiers (GUIDs) which you use to identify them in every system. A common GUID is email address, but you can also use phone number or some randomly generated value. As long as all systems use the same GUID you can always export the data from your systems and put it all together into a master database.
- Isolation. In some cases it might not be possible to track every step of the funnel in one place, in which case you can isolate the parts of the funnel that are important and easily tracked. We can think of our example above as actually three different funnels (Ad Click, Website Activity, Order Fulfillment):
Even when you have proper funnel tracking in place, you need some form of baseline to know if the conversion rate between each step in your funnel is good or bad. Is a 5% conversion from web site visit to order placed good? Is a 3% credit card rejection rate bad? Without a good baseline you may have a lot of data but not know how to interpret it.
Lucky for you there are many online resources with industry specific benchmarks for different kinds of conversion rates. You can easily find benchmarks for ad click conversion rates by industry, email click rates by industry and even credit card failure rates. There will be some conversion rates that are specific to your products and user experience, so in those cases you will need to use your judgement and do some testing to decide what makes sense for a benchmark.
Once you have those benchmarks in hand, it should be clear where you are over or under performing in your funnel. Tomorrow, we’ll cover funnel optimization which is the process of improving your funnel conversion rates!
Quote of the Day: “The term bench mark, or benchmark, originates from the chiseled horizontal marks that surveyors made in stone structures, into which an angle-iron could be placed to form a “bench” for a leveling rod, thus ensuring that a leveling rod could be accurately repositioned in the same place in the future.” – Wikipedia