How To Start A Conversion Funnel Analysis

Conversion funnels are a staple for marketers who mostly use them as a roadmap or analysis tool to get most of their marketing efforts. But knowing what to do and implementing are two different things. That's why learning how to optimize and refine these pathways to truly enhance your marketing game is key.

This blog is your guide to mastering the ins and outs of the conversion funnel and how to analyze and optimize it. Over 70.19% of cart abandonments in 2024 highlight the need for insights. That's why we’ll start from basics to decipher your funnel, pinpoint issues, and optimize touchpoints step by step.

What Is A Conversion Funnel Analysis?

Simply put, a Conversion Funnel (also known as a sales funnel, e-commerce funnel, or website funnel) represents the journey a user takes from being introduced to a product or service to completing a desired action, such as making a purchase or signing up. A conversion funnel analysis, on the other hand, outlines and scrutinizes each stage of the journey of your potential customers’ mindset to identify drop-off points, bottlenecks, and opportunities for optimization.

A conversion funnel is divided into 3 distinct levels, namely the “top-of-funnel” (or “TOFU”), “middle-of-funnel” (or “MOFU”), and “bottom-of-funnel” (or “BOFU”). The below image shows the importance and significance of each level.

Conversion Funnel Analysis Example

For instance, if you are a SaaS company specializing in project management software that launched a new marketing campaign, here is a Conversion Funnel Analysis example you can take inspiration from.

During the campaign's first week:

• 200 users signed up for a free trial.
• Among them, 120 users reached the activation point, while 80 dropped off.

Later analysis revealed that out of the 120 activated users:

• Only 40 users upgraded to the premium plan.

Based on this data, we observe the following metrics:

• 200 users initiated the free trial.
• 60% of the 200 users reached the activation point.
• Out of the 120 activated users, 33.3% subscribed to the premium plan.
• For every 100 free trial users, there were approximately 20 paying customers, resulting in a 10% trial-to-paid conversion rate.

This analysis highlights opportunities for improvement, such as optimizing the activation process to retain more users and refining the value proposition or pricing strategy to increase the conversion rate from activated users to paying customers. Such insights will help your SaaS company tailor strategies to enhance conversions and maximize the campaign's impact.

What Are The Stages Of A Conversion Funnel?

A Conversion Funnel is typically named a 'funnel' because it illustrates the gradual narrowing down of users from initial interaction to the final conversion or desired action. This analysis breaks down the user journey into various following stages, also known as the AIDA(R) model:

• Awareness: Users become aware of a product, service, or brand through your website, PPC ads, affiliate marketing, blogs and organic search, social media marketing, etc.

• Interest: They show interest by engaging further, exploring content, or considering options, which can be due to your content, attractive visuals, special offers, social media marketing, brand reputation, etc.

• Desire: In this step, the brand must show the buyer why they should invest in the same to pull them further along the sales funnel. This can be done through positive reviews, sample strategies, social proof, social media influencing, etc.

• Action: In this stage, users convert, make a purchase, subscribe, or fulfill their intended goal. This can happen due to a good call to action, excellent email marketing strategies, a smooth checkout process, free or discounted shipping, etc.

• Re-Engage: This is the final stage of a successful conversion funnel, where the prospect becomes a loyal customer or subscriber. This can happen due to re-engaging, personalized emails, messages, discount coupons, post-purchase treatment, etc.

As you trace this funnel, you will notice that each stage represents a critical point where users may drop off or proceed further in the funnel. Analyzing these stages by tracking metrics such as click-through rates, cost per acquisition (CPA), customer lifetime value (LTV), conversion rates, bounce rates, and time spent on specific pages can give you insights into user behavior, highlighting areas for improvement for future conversions.

What Are The Benefits Of Conversion Funnel Analysis?

While different organizations have different objectives to achieve, Conversion Funnel Analysis is useful for almost all businesses intending to track their customer activities and behaviors. This is crucial not only to generate leads but also in client retention, to study each phase of the customer journey and improve accordingly. Below are the most pivotal benefits you get:

Track Lead To Conversion Ratio

The primary goal of Conversion Funnel Analysis is to increase conversions. By identifying and addressing barriers that hinder users from completing desired actions, businesses can significantly improve their conversion rates and, consequently, their bottom line. They can analyze what's keeping the users from clicking on that “Sign Up” button or subscribing to that plan. By tracking each level of the funnel, they can identify friction points and the reasons behind them.

Optimize Funnel Metrics For Better Conversion

Pinpointing areas of the funnel where users drop off, or face hurdles allows for strategic optimizations. As each of the digital engagement points, be it the checkout process or website navigation, has its own funnel, together they constitute an entire consumer journey funnel. A Conversion Funnel Analysis gives you a macro view of how each funnel operates and how to help customers easily move through each stage to improve your customer lifetime value.

Combine Marketing And Product Team Efforts

Besides helping you identify customer drop-off points, conversion funnel analysis can help your product and marketing team collaborate with each other for better results. Since these departments are two sides of the same coin, a Conversion Funnel Analysis can help the marketing team determine the lagging points for better MQL to SQL conversion, who can then share the data and ideas with the product team to create a more seamless user experience by taking in the inputs for improvement in the funnels.

Resource Efficiency

Instead of applying a broad approach, another important benefit is that Conversion Funnel Analysis allows businesses to allocate resources more efficiently. By targeting specific funnel stages that need improvement, companies can direct their efforts, time, and budget toward initiatives that generate the highest impact on conversions and revenue growth.

How To Start A Conversion Funnel Analysis?

Now that you are convinced that Conversion Funnel Analysis can be effective, it's time to know how to get started with one that represents your buyer’s journey accurately. Here’s a step-by-step breakdown to help you get started with the process.

1. Start With A Top-Level Approach

Starting a Conversion Funnel Analysis begins with a top-level approach before going into further specifications of each touchpoint. You need to identify critical areas for improvement, understand where users drop off, and focus on a structured and purpose-driven exploration of user behavior throughout the conversion journey. A top-level perspective ensures that the analysis remains targeted and aligns with the business strategy, providing a clear direction for optimization efforts.

For instance, if you are a SaaS Company, you can take the help of Google Analytics 4 to take a look at the engagement numbers, be it the landing page, product page, blogs, etc, during the analysis and determine which stages aren’t channeling enough traffic towards your conversion rate. Check whether there are unexpected drop-offs or losses on loyal users to identify the problem areas before optimizing. Here's how it will look.

2. Dive Deep Into Customer Journey And Track Touchpoints

It is critical that you dive deep into the customer journey through tracking of touchpoints across various channels. This can include mapping out user interactions on websites, social media, emails, and other platforms and taking a closer look at these precise conversion points of the funnel.

Analyzing these touchpoints with the help of GA4 will allow businesses to gain valuable insights into user behavior, preferences, and pain points at each stage of engagement, starting from trying out the free trial to a subscription to a paid plan. This funnel analysis report will let you break down your customer journey map to develop tailored strategies, personalized communication, and targeted interventions aimed at guiding your users seamlessly through the conversion funnel and reaching the “Thank You Page”. Here's how the funnel will look.

Source: Online Metrics

3. Track Customer Experience For Each Funnel Stage

You need to monitor customer experience at a macro and micro level at every funnel stage to optimize conversions. Evaluating factors may include website usability, content relevance, and navigation ease, helping you gain insights into user satisfaction and potential pain points. With the help of Microsoft Clarity, you can easily gauge how users are clicking on which page, how deep they scroll, average reading time, etc. This insight will let you identify who or how many are reaching the end of the funnel and who are dropping off at what point. These drop-offs are crucial hints for possible friction, and once identified, they can be eliminated and optimized as per user preference. Here's how it will look.

4. Segment Customers Based On Conversion Stages

Segmenting customers based on conversion stages involves categorizing them according to their progression through the funnel, from initial awareness to eventual conversion. For instance, you can segment your customers based on conversion points, as each will be different for different users. You can group them based on the following:

• Trial users
• Paying users
• New users
• Activated users
• Power users

This segmentation will help you identify partners in the customer behavior of each category and tailor your strategies based on how they progress through the funnel. For instance, by analyzing what worked for your power users, you can modify or apply the same strategy to convert those that dropped off during the free trial period.

5. Iterate And Optimize

To be very honest, Conversion Funnel optimization isn't something that can't be perfected the first time. Now that you know the exact drop-off points, leaks, and what's not working, you can start to refine your strategies, test variations, and implement improvements. This iterative approach involves A/B testing, tweaking CTAs, and refining user pathways. Consistent optimization based on data-driven insights ensures that the conversion funnel remains efficient and aligned with user expectations. Every change that you make with the data at hand will take you one step closer to your desired conversion rates.

6. Encourage Users To Take Action

In the final stage, when you are ready to try out the results of your analysis, you need to encourage users to take your desired action either by compiling clear calls-to-action (CTAs)with the help of ConvertFlow or, through persuasive language, visible buttons, incentives at the checkout, requesting demos, actionable email marketing or best customer testimonials on your landing page. Now, you need to see which of these strategies inspires them to take action the most and replicate that success as and when you require. Here's how a compelling CTA might look.

Source: Agency Analytics

Get Started With Your Funnel Analysis!

Now that you know the reason and the way to start a Conversion Funnel Analysis, I recommend you take the first step toward systematically examining your user’s journey to uncover insights that drive optimization and improved outcomes. Starting your Conversion Funnel Analysis will not only help you meticulously map out funnel stages, analyze user data, and understand user drop-off points but also optimize the user experience for better conversions. So, start mapping the next customer journeys across multiple channels to ensure a good CLV.

FAQ (Frequently Asked Questions)

1. How do you calculate funnel conversion?

To calculate funnel conversion, divide the number of users who completed the desired action by the total number of users at the beginning of the funnel, then multiply by 100 for the percentage.

2. What is the purpose of a conversion funnel?

The purpose of a conversion funnel is to visualize and understand the user journey, identifying stages where users drop off or convert. It helps optimize the process for increased conversions.

3. What are the most important KPIs when measuring a conversion funnel?

Key Performance Indicators (KPIs) include conversion rate, drop-off rates at each stage, repurchase rate, retention rate, average order value, customer lifetime value, click conversion rate and customer acquisition cost. These metrics reveal funnel efficiency and areas for improvement.