What is a marketing funnel and how can you implement it in your business to increase sales?



What is a marketing funnel and how can you implement it in your business to increase sales?

"Yo dude, you need to increase your funnel size". Today, we will understand what does this phrase mean when some entrepreneur asks you to increase your funnel size.

There are various ways of marketing available to capture potential customers, some being more effective than the other. A business's objective includes selling its product or service to maximum number of customers possible in order to garner the benefit of economies of scale and increase the revenue as well as the profit.

Now, coming straight to the topic, a marketing funnel is a journey of any person who is the ultimate buyer of your product or service. The marketing funnel is so important that companies like Amazon, Ford, Bigbasket and Reliance Jio also use it. Observe the image below carefully that the funnel narrows down as you go down i.e. with each level of filtering the number of potential purchasers reduce. The marketing funnel is usually segregated into 4 levels:


  1. Awareness: In the first stage of marketing funnel, a company creates awareness about its product by different mediums. Cash rich companies can go for tv commercials and sports events sponsorships, on the other hand some beginner companies may resort to social media marketing like Instagram, Youtube and Facebook ads. Organisations also conduct various marketing campaigns to spread the word. The new trend which is being followed by a lot of big and small companies both is influencer marketing. The objective in this step is to create awareness about your existence to maximum number of customers. 
  2. Interest: In the second stage, a certain percentage of aware people become interested in the product or service and try to gain more info about the product. At this stage the company which has multiple products and services will try to target the customer with relevant product info. For eg. a car company will try to inform a customer with relatively low income about an entry level car, whereas if the same person is a millionaire entrepreneur, the same car company may try to make the person aware about the most expensive car they make. In this stage some companies may try to engage personally with the buyer. Have you seen chat options on the bottom right on various sites, it exists so that an interested customer can be made more aware and his details like email address or mobile number can be obtained.
  3. Consideration: This is one of the most crucial stage which plays a critical role in high conversion rate for a customer. In this the interested buyer will be offered consideration to make an intent to purchase. The consideration can take numerous forms such as heavy discounts, demo products, test drives or free trials. For eg. If you were among the people who bought a Jio sim in India in the first year of its launch then you fell for this consideration wherein the company was giving months and years of free trial and giving away premium cards for free. Today, everyone got addicted to using GBs of data to watch youtube videos and browse the internet and this made everyone pay for the Jio service now on a monthly basis. In the online world as well, the companies give consideration in form of access to some digital products like ebooks, DVDs etc. 
  4. Purchase: The last level will include satisfying the consumer that the product is best suited for him and making a sale transaction complete. Did you know a lot of people when buying online will do a lot of scrutiny, read reviews and add products to the cart but eventually not buy that product. It can be because of the tedious or non-user friendly payment procedure or absence of user generated reviews to provide trust to the customer. Also, the customers may have last minute doubts which must be cleared and an assurance, warranty or free replacement can help make the decisions easier. Today a lot of people just sell things but have bad after service or if its a service oriented business, they have many hidden charges. Having a good after-sales service and transparency in the charges will fetch you more purchases by potential clients. Have you seen those mails from e-commerce sites, "you have items waiting to be purchased in your cart". It is just one example of trying to complete the sale transaction.

Why is the marketing funnel important?

The marketing funnel will help you understand the reach of your product and the conversion rates at different stages of your sale path. Once, you have designed a funnel for your business, then you just need to fine tune it, by seeing at which stage are you losing potential customers and improving that particular stage. Say for example the ads that you put on social media attracted few potential customers to your website, but then you observe people do not take actions after opening home page, in that case you will have to fine tune your website so that the customer feels like clicking and being more interested in the product or service you are offering. A typical funnel conversion will be as follows:

Awareness :      1,000,000 customers
Interest :              300,000 customers
Consideration :   150,000 customers
Purchase :             40,000 customers

The above conversion rate is a very ideal scenario. If you observe carefully it is 4% conversion rate, which is considered very good by industry standards. Anything above 4% will be a plus for you. Also, this can be used to identify the cost incurred to acquire a new customer. You can do that by dividing your total marketing cost by total number of customers acquired. Say for example, you incurred Rs.5,00,000 of marketing cost and you acquired 40,000 customers, then cost of acquiring each new customer will be 5,00,000/40,000 = Rs.12.5/customer.

I hope you now understand the importance of building a very strong marketing funnel in order to increase your sales count and make it to the big leagues.

Thanks for reading!

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Comment on any query you had like me to address.

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