Understanding The Sales Funnel

If you have spent any of your time working with a team of digital marketers. You might have heard the term ‘funnel’, but the chances are, the word had just been thrown around assuming you knew exactly what these are and how they are used in digital marketing. We’re here to explain exactly that, in terms that you will be able to easily understand. Another set of words that can best describe a marketing funnel would be, ‘A buyer’s journey’.

In a nutshell, we work in funnels, the top of funnel (TOF), the middle of funnel (MOF) and the bottom of funnel (BOF). These funnels are combined by audiences that you create through your digital marketing efforts. These are not software programs and are not to be confused with platforms like ClickFunnels, Geru or Ziflow.

Top Of Funnel (TOF)

The TOF is the section of the funnel where a customer is first introduced to your service or product. We call these, cold customers. Cold customers have not yet come by a solution to their problem or need. When we market to these sorts of customers, is it important to evaluate a couple of aspects. The first and most important is your target audience, you need to understand your customer as best as possible when creating audiences in Google and Facebook. You will need to have a good understanding of their problem, pain point or need, which keywords they are using to find solutions, the interests that they have, locations that they live in, ages, gender, demographics and even behaviours that best describe your ideal customer. The TOF audiences are most commonly the largest of all your audiences in the various funnel sections. The reason for this is that the objective with the TOF audiences is to reach as many people as possible, at the lowest possible price. Depending on the objective of your TOF campaign, will reflect the outcome of the type of audience you will build to be able to re-market with.

Middle Of Funnel (MOF)

The MOF is the remarketing section of the funnel. In this section the objective is to remind your audiences about your product or service offering and to evoke further interest and desire to encourage action. The audience is populated by your cold customers, after engaging with your brand in some way, these potential customers then move further down the funnel into becoming warm customers. Warm customers have shown interest in your brand and therefore you have successfully captured their attention. In this section it is important to evoke a sense of desire and communicate a strong call to action to encourage your engaged customers to either ‘shop now’, ‘sign up’, ‘subscribe’, ‘apply now’, etc. An example of the types of engaged customers you will be remarketing with in this section are your website visitors, Facebook or Instagram engagers. The depth that you can dive into these audiences is quite variable, one would need to make sure the audience is big and strong enough to be able to work optimally as a remarketing section.

Bottom Of Funnel (BOF)

The BOF is the final section of your funnel where the objective is to close the deal, if it has not yet already been done. By this stage, you will have had a flow of customers, working their way down the funnel from the point of introduction, to the creation of desire, a possible action and finally a strong possibility of a customers first transaction with the business. In this section, often a special offer is put into place in order to make the transaction more attractive. This can be in the form of a monetary discount, a free trial, a buy one get one free scenario, or anything that would be most attractive to your clientele and suits your product well. The BOF audience is targeted using dynamic ads, or otherwise a deeper dive into the pages or actions that have been visited or engaged with. For example, a potential customer that has visited a specific page on your website, has viewed a product and possibly even added it to their cart, but has not yet gone through with the purchase. We call these customers, hot, people who are aware of your brand and are aware of the solution that you have created for their problem and are ready to initiate their first transaction with your business. The job of the marketer is to create an offer that is irresistible to the customer.

The customer journey, however, does not end at the BOF. It is important for you to hold onto your customers and to practice something we call client retention. At the end of the day, one would like to be able to achieve a customer’s lifetime value (CLTV) with each of the customers they have managed to convert. A CLTV is the lifetime value of how much money a customer will bring to your business throughout their time as a paying customer. You will gain a better understanding of how much you need to be needing to invest on converting a customer when comparing this with the value that a potential customer will bring into your business. A simple formula that can used to work this out is:

Why is this important for an ecommerce business?

It’s an effective way to generate additional revenue through client retention. The wrong side of the coin to review is to simply maximise your budget. The right way to review are your methods of practising client retention. For instance, every 1% of paying customers who return to your ecommerce site increases your revenue by at least 10%.

The second reason would be because retention is an easier way to increase repeat customers. The likeness of selling your products to an existing customer is around 60-70% in comparison to a cold customer at 5-20%. In addition to this, if the customer has enjoyed their experience with your business, the probability of them spending a higher value the second time around is higher.

The third reason why is because it’s a more profitable path to extended revenue and customer loyalty. Ever heard of the Pareto Principle? This explains that 80% of your revenue comes from 20% of your engaged customers.

In conclusion, the customer journey is an endless one, there are limitless possibilities and opportunities for one to be able to hook cold, warm, hot and existing customers to achieve maximum growth and extended revenue to ultimately scale a successful and wholesome business.