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This is part 1 of a 5 part series on Funnels.

Funnels are one of the most common analytics tools for improving your business, so it’s shocking we haven’t covered them yet! We will fix that this week.

A funnel is simply a series of actions that customers need to take to generate value for your company. You can think of them like the sequence of events leading up to actions that make your business work. For example, if you sell shoes online your funnel might look like the following:

funnel (1)

Each row here is a step in the process a customer goes through to purchase shoes from our example e-commerce site. The percentage on the right is the percentage of customers who start this sequence that complete that step. The first step is always 100% (as it’s the baseline) and in this example 90% of visitors searched for shoes and 32% clicked purchase. Note that all percentages are computed against the baseline so 32% of all visitors who visited the website clicked on purchase.

Hey, that is pretty simple.

I agree! It is referred to as a “funnel” because you will lose customers at every step in the sequence (also, it looks like a funnel). If you start with, 1,000 users visiting your website in the first step you may only expect 3 or 4 to complete their purchase in the last step. You can build similar funnels for enterprise sales, retail stores and any other kinds of business where the customer needs to complete a series of actions in order for you to make money.

Funnels are a useful tool because you can identify where and when you are losing customers in your conversion flows and work to fix those problems. A well understood funnel with strong analytics should make it obvious where there are problems in your business and where to start fixing them.

This week we’ll go into depth on how to use funnels across a variety of businesses.

Quote of the Day: “Let your head be more than a funnel to your stomach.” – German Proverb


The Funnels series