Over a century ago in an ad agency, the mysterious “marketing funnel” began to take shape. Today, you probably have one whether you realize it or not.
You may not know what it looks like or how it works. You might call it a “conversion funnel” or a “sales funnel,” or a number of other names – but if you’re part of a business that relies on customers to grow, then you have a funnel or, perhaps, a growth loop.
If you’re searching for further clarification on it, you’re not alone. In theory, the marketing funnel is straightforward: It’s the representation of your buyers’ journey from prospect to customer, combined with the tools and processes you use to gracefully guide them through.
But in practice, constructing a marketing funnel is far more confusing. What do the building blocks of a successful one look like? What processes ensure the maximum number of leads become customers that stay loyal to your brand?
The search for those answers started in 1898 with a four-letter acronym: AIDA. And today, it ends by flipping the whole funnel on its head. Are you ready to have the marketing funnel explained? Let’s get started.
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At the turn of the 20th century, agency owner and future advertising hall-of-famer, Elias St. Elmo Lewis, developed a model that mapped the stages of a customer’s relationship with a business. Those stages were as follows:
Awareness: The prospect becomes aware of their problem and potential solutions to it.
Interest: The prospect expresses interest in a particular group of products or services that solves their specific problem.
Desire: The prospect shows interest in a particular brand or product and begins to evaluate whether it meets their needs.
Action: The prospect decides whether that brand or product meets their needs. If it does, they become a customer. If it doesn’t, they continue to evaluate until they find a brand or product that does.
In 1924, William H. Townsend combined the AIDA model with the funnel concept, and the first marketing funnel was born:
The top “awareness” stage sits a mass of potential customers who have a problem and are looking for a solution. Some will make it to the “interest” stage after deciding your class of product can solve their problem, while others will drop out and choose another class.
Then the prospects within the “interest” stage will filter into the “desire” stage while others will drop out, and so on and so forth. It’s for that reason, from a business standpoint, the customer journey has been compared to a funnel. You’ll start with many potential customers at the top, and end with only a few actual ones at the bottom.
The marketing funnel has undergone drastic changes since its conception in 1924. The modern funnel resembles more of an hourglass as it reflects a new empowered customer, as well as an emphasis on metrics beyond the “action” stage.
The evolution of the marketing funnel
Just to make life that tad bit more interesting, there’s not one marketing funnel model that is universally accepted by all business professionals. However, we are going to run through the basic marketing funnels, to get you started:
ToFu, MoFu and BoFu
Where there are marketers, there are acronyms. “TOFU” (top of funnel), “MOFU” (middle of funnel) “BOFU” (bottom of funnel) are all referring to different stages of the marketing funnel:
TOFU - Awareness Stage, where your potential customers are learning about your brand and the specific problems that you solve.
MOFU - Consideration Stage where a customer has identified their problem and is looking for a solution. They may have heard of you, but need a bit of coaxing into deciding that your brand is the right fit for them. They need to be convinced!
BOFU - Decision Stage. This is where your brand needs to persuade your potential customer to move through the final step of the sales funnel and convert.
The buyer’s journey
In this three-stage model, the “interest” and “desire” stages from AIDA have been lumped together to form the “consideration stage.” The “awareness” stage remains the same (as it does in most models), and the “action” stage is identical to the “decision” stage in all ways except the name.
The customer experience funnel
If you examine the customer journey a little more closely, you’ll see the funnel is made up of more components than Elias St. Elmo Lewis initially proposed:
In this version, you’ll notice “loyalty” and “advocacy” as added stages, because modern businesses realized the importance of customer lifetime value. Research shows that even a 5% increase in customer retention can boost a company’s profits by 95%.
That’s why more and more businesses are connecting an inverse funnel to the bottom of the traditional one.
The result of combining the traditional funnel with this upside-down “customer experience” one is now referred to as the Modern Marketing Funnel or the ‘hourglass’.
Where the sales and marketing funnel finishes, the customer support funnel commences, creating an immersive experience for your customer. Once the sale has gone through, the next stage is turning your customers into advocates, which in turn will lead more customers to you.
Marketing funnel stages
Like an orchestra counts on each individual musician to play their part correctly, the marketing funnel's success depends on each stage to contribute to the next. When it doesn’t, the end goal of turning prospects to customers to advocates becomes unattainable. Here’s what you need to know to guide your customer through each stage:
The awareness stage
It’s the stage in which your prospect first becomes aware that they have a problem and starts looking for a solution.
Your prospect’s goal: To put a name to their problem and begin determining possible solutions. For example, if they’re befuddled by taxes, then maybe they’re considering hiring a CPA or purchasing do-it-yourself tax software.
Your goal: To position yourself as a worthy solution with a clear USP, and to prove your authority with educational content. That starts with generating visitors to your website and turning them into email subscribers.
The best content to offer: Blog posts, website content, webinars, guides, social media posts, email newsletters.
Key performance metrics to track: Website traffic (visits, unique visits), social reach, email subscribers, inbound links, referrals.
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Of all the stages in the marketing funnel, this is the one that gets morphed most from model to model. In Lewis’ AIDA, it’s divided into the “interest” and “desire” stages. In the hourglass version, it’s separated into the “like” and “trust,” stages. The reason is for the space it occupies in the marketing funnel.
If the funnels above were drawn to scale, the consideration stage would be much larger than the others. It can take weeks and even months for prospects to evaluate a business’s authority and its capability to solve their problem. During this time, it’s crucial you guide them to that decision with helpful content.
Your prospect’s goal: To determine which class of products or services can solve their problem, then to begin evaluating businesses within that class.
Let’s go back to the tax example, the prospect has decided to use a DIY tax software solution over hiring a CPA. Afterward, they’d start evaluating specific software, for example TurboTax or QuickBooks.
Your goal: To nurture your leads with strategic emails, blog posts, and lead magnets in order to prove your business is an authority capable of solving their problem.
Since this stage is also where the marketing team hands off leads to the sales team, it’s crucial your organization has settled on a clear definition of a sales-qualified lead (SQL).
The best content to offer: Ebooks, case studies, free tools, whitepapers, webinars.
Key performance metrics to track: Email open rates, landing page conversion rates, lead source, cost per lead, lead quality.
The purchase stage
This is where a lead chooses a specific product or service to solve their problem. They arrive here only after a coordinated effort from the companies’ sales and marketing teams to educate and nurture the lead.
In early marketing funnel models, this stage concluded the marketing funnel. For modern businesses, though, the “action” or “purchase” stage is a new beginning – one that has the potential to grow the funnel exponentially by leading into the “loyalty” and “advocacy” stages.
Your lead’s goal: To decide which business and specific solution can solve their problem. For someone searching for a DIY tax software, this is when they’d not only choose which brand to purchase from, but which specific product they need. Do they need the basic version or the deluxe one?
Your goal: Here, your goal is to show leads exactly how you can solve their specific problem and help them decide which product best meets their needs.
While the consideration portion of the funnel focuses on proving your authority and ability, this one focuses on solving their problem in detail. If your product is software, free trials and demos allow leads to try before they buy to ensure a solution is practical.
If you’re a service-based business, this is where a one-on-one consultation can prove you’re capable of solving a client’s unique problem. If you have a physical product, this is where social proof like detailed testimonials and case studies will persuade leads to click the “buy” button.
The best content to offer: Testimonials, detailed case studies, product comparison whitepapers, demos, free trials, consultations.
Key performance metrics to track: Customers, lead-to-sale conversion rate, revenue, cost of customer acquisition.
If we were comparing this point of the customer journey to a real-life human relationship, it’d be the honeymoon stage and beyond. Your new customer is excited to have a tool to solve their problem, but after that excitement dies down, they want to know they can rely on you to help them get the most out of their purchase. If you don’t provide the support they need, they’ll abandon you for a business that can. Harsh but true.
Of all the stages in the marketing funnel, this one varies the most in size from business to business. If you can provide ongoing product education and support, your customers will remain loyal and their value to you will grow. If you can’t, this stage has the potential to be the shortest in your entire funnel.
Your customer’s goal: To experience the value of the product first hand, continually learn new uses for it, and decide whether any of your other products are worth claiming based on their satisfaction with their purchase and your support.
Your goal: To provide ongoing customer support to boost loyalty, and in turn, customer lifetime value.
The best content to offer: Forum threads, FAQs, tutorials, blog posts, customer service content (chat, social media posts), courses and certifications.
Key performance metrics to track: Recurring revenue, customer lifetime value, active customers, churn rate.
The advocacy stage
This is the stage with the most potential to grow your marketing funnel, and ironically, it’s the one least demanding of your time. The “advocacy” stage is your reward for all the work you put into the stage before.
When you keep your customers happy, they’ll not only remain loyal to your business, but they’ll recommend you to friends and industry contacts facing a similar problem to the one you solved. They’ll brag about how easy life is with your product or service and how hard you work to keep them happy. The result is not only a bigger marketing funnel, but the chance to get a head-start on your competitors.
With a friend’s recommendation, your business will already be top-of-mind when they begin researching a solution to their problem. It’s in the “advocacy” stage your customers actually become your brand’s spokespeople by escorting their friends through the “awareness” stage and straight to “consideration” in your funnel.
Your goal: To grow your funnel by turning your customers to advocates.
Your customer’s goal: To help their friends overcome struggles similar to their own.
The best content to offer: Surveys, referral incentives, loyalty discounts.
Key performance metrics to track: Net Promoter Score, referrals, reviews.
What your marketing funnel should look like
If you follow the above steps, over time you’ll start to notice something peculiar about your marketing funnel: It’s not a static funnel, or even an hourglass. When you draw it out, it’ll start to look like an upside-down, ever-growing funnel.
The more you continue to delight your advocates, the more they’ll contribute to its growth by referring other prospects. And as it grows, so will your customer base, along with your business.
But what about growth loops?
This may be the new buzzword making the rounds in marketing meetings, but how do growth loops compare to marketing funnels? Let’s call them the new kid on the block. Growth Loops were typically suited for SaaS based products, however ecommerce and B2B companies are also seeing some benefits when embracing this model.
Growth Loops feed themselves. They are closed loop systems formulated so every action or input goes through a set of steps to then induce an output which is then reinvested as an input. Being a loop, this acts as a never-ending process, providing the advantage of leveraging exponential growth.
Marketing funnels versus growth loops will be a hot topic of conversation between marketers, but there is a world where they can coexist and, better yet, complement each other. Marketing funnels are useful in acting as a visual outline of the stages we want customers to go through to convert. Growth loops will help determine what we want prospects to do once they become customers and advocate product growth.
Now with a comprehensive understanding of marketing funnels fresh in your mind, it’s time to take your learnings and begin guiding prospects through to conversion and on to advocacy. Ortto can help with this. At every step of the customer journey, create and automate a campaign to encourage your potential customer to take the next step.