Introduction to Funnel Analysis

Every Entrepreneur strives to increase the number of customers, revenue, and profits. But how do you ensure potential customers visiting an E-Commerce Website convert to paying customers? Funnel Analysis is a way to identify potential improvement opportunities in a costumers journey on a website to improve conversion numbers. Therefore Funnel Analysis is an essential tool to improve conversion rates.

A Funnel Analysis concentrates on the sites and moments in a purchase journey during which potential customers leave the page. In this article, you can read about how to do this optimally and how you can use Funnel Analysis for your website.

What is Funnel Analysis?

Any Sales process – physical or digital – can be visualized as a funnel. It doesn’t matter if the product is ice cream, movie tickets, or an E-Commerce product. But why is this especially interesting for Online Businesses?

A Funnel is just an image used as an analogy for the journey a customer takes on the purchase path. Online this journey usually starts with a click on an ad or a google search result that refers them to your website. They then land on a Landing Page. Here the customer will inform themselves about the product they were looking for and start their decision process. Those customers that then move on to product pages and purchase something are called conversions.

Not all customers actually convert on the website. This does not necessarily need to be a purchase. It could also be a Lead or a Sign-Up. Some will leave the page at certain steps and after taking different steps on the site. This is where Funnel Analysis comes in. Its job is to identify the steps that are usually taken on the website and at which point a potential customer usually leaves the website. This way problems can be identified and fixed.

The steps of Funnel Analysis

The Steps analyzed during Funnel Analysis can be visualized like this:

A pyramid containing the Phases of an E-Commerce Funnel

In the Awareness-Phase awareness for the products on offer is generated. The potential customer starts saving information about the products and can recall what their features are. This does not take a long time and even a couple of small actions on the website indicate that this process has taken place. The measure taken to complete this step can be manyfold:

Interest in the product is then generated in the next step: The Interest-Phase. This means that the customer has now progressed from being curious about the product to an interest in the product and its possible purchase. They will now ask themselves, „Is this the right product for me?“. This is where the Content, Usability, and Design of a website can help progress the customer toward a purchase.

In the Desire Phase, the offers on the website will come into focus. Knowledge of the products offered is internalized and offers are compared to competitors. This is where in-depth information comes into play. Maybe a whitepaper on the product or product images and videos can help at this stage. This way active interest in the offer is converted to a desire to purchase the product. Information like payment options, shipping costs, and transparent pricing is especially important.

In the final Action-Phase, a potential customer decides to buy and converts. This is where the page has to provide an easy and comfortable checkout process. Ease of use is one of the main driving factors in converting a potential customer in this phase.

These Stages are not only relevant to purchasing a product but are reflective of a general decision process. Every phase and Funnel step is important and their performance is reflected in different KPIs. This is why professional and high-quality website tracking is important to determine which steps are performing well and which aren’t.

Different Types of Funnels

A Funnel can be used for different purposes. There is the classic Marketing-Funnel that describes the process listed above from generating interest through ads and then converting via a well-designed website. Many marketing processes can be described by the funnel analogy. A few examples are:

Sales Funnel in an Onlineshop:

A typical Sales Funnel is that of an Online-Shop. Here the steps can be linked to certain pages and actions on the website. It often starts on the main pages and then progresses to product pages, information pages, and finally the cart and checkout process. It is important to find out where the visitors „bounce“. That is to say: Where the visitors leave the page.

A typical example of the exit numbers in different Funnel Satges

This example shows that 5000 people have visited the Category Page of a product. About 80% of the progressed to the Product Detail Page. These 4000 people, therefore, were interested and decided to pursue further information. About 3000 visitors then added a product to their basket and 1000 visitors started the checkout process. At the end around 250 visitors decide to purchase and enter their shipping and billing information. This translates to a Conversion Rate of 5% and an Add to Cart Cancellation Rate of 75%. Therefore the overall Conversion Rate is good, but the cart might need some more work to make it more attractive for potential customers to enter the Checkout Stage.

Why is Funnel Analysis so important?

It’s a common problem: Reach and website users are rising but conversion numbers are stagnating and not rising at the same rate. In this case, there is probably some optimization potential on your website that can be identified through funnel analysis.
Through tracking and analysing user behaviour along your conversion path you can determine which problems are leading to a subpar conversion rate. Funnel analysis is therefore the most efficient possibility to find out what the problems are that need to be changed. The reasons can vary widely:

As soon as the problems are identified measures can be taken to improve performance. The results of a funnel analysis can also help understand how useful the changes to a website have been. This way a process can be identified to continuously identify problems and improve performance. This way customer satisfaction and revenue will continue to rise over time.

How to perform a Funnel Analysis

Being a web analytics agency IT-WINGS has a lot of experience with funnel analysis. Our recommendation for the process is defined in the following steps:

  1. Implement high-quality tracking
  2. Define Funnel Steps
  3. Define KPIs
  4. Visualize Funnel through Click Paths, Heatmaps, etc.
  5. Collect data
  6. Analyse data
  7. Implement optimization potentials

What tools can be used for a Funnel Analysis?

There are a lot of tools out there that can be used for funnel analysis. Some are free and others can be very expensive. Which tool is best for your company depends on budget, needs, and preferences.
A basic free tool is Google Analytics. It offers a lot of features that let you analyze your website in great detail. However, Google Analytics is becoming increasingly difficult to use because its use is forbidden due to data retention problems in the EU. Other options are:

IT-WINGS is a certified partner of all tools mentioned above and therefore ideally suited to help you make the right decisions for your tracking and visualization tools.

Contact IT-WINGS for a professional Funnel Analysis

Contact us if you want a detailed professional Funnel Analysis of your website or webshop. Our many years of experience and unique knowledge of Digital Analytics will help you identify potential and increase your performance.
Contact us today to arrange a meeting and a first consultation. We look forward to hearing from you and your projects!

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