What is Your Marketing/Sales Funnel?

As mentioned in previous posts, Joanne O'Connell and I ventured into the field of marketing metrics a few years ago, only to find that there are so many funnels for marketing and sales that it made our heads spin. 

A simple image search on Google will give you hundreds of results. All of them have value and are trying to make a point. But for the metrics that we were looking to develop we couldn't find a funnel that illustrated the concepts that we wanted to capture. So we made our own marketing funnel.

Our marketing funnel, or was we like to call it "Customer Acquisition Funnel", has 5 levels starting with Impressions and ending with Outcomes (see earlier post).

First, let's look at each level of the funnel and then examine some of the metrics that can be developed using the measures at each level.

Impressions is the number of times an advertisement or other image that represents the company is shown to a viewer For online (or digital) marketing, an “impression” usually means the number times the ad was loaded. For traditional advertising, “impression” usually means the number of times the ad was shown to members of the target group. Note: “Impressions” means the audience was exposed to the ad; it does not imply that members of the audience saw the ad.

Visits is the number of times contact was established. For websites, a visit means a person came to a page on a website. For a trade show, a “visit” means the number of persons stopping at a booth. For a retail outlet, “visit” means actual visits to a store location.

Prospects is the number of times that interest is expressed and contact information is recorded. For a website, a prospect may come from a sign-up for a newsletter. For a trade show, a prospect may sign up to request a future call from a sales rep. For a consulting firm, a prospect may request a white paper. 

Offers is the number of times that a proposal, estimate or price is given. For an e-commerce website, an offer can be a product page that has a price listed. For a consulting firm, a proposal would be the offer given to the prospective client.

Outcomes is the number of times the Prospects accept the Offers presented. The Ultimate Outcome of a business is the behavior that you want members of the target market to do. For most commercial enterprises, this is usually to purchase a product or service. For non-profit enterprises, the outcome might be attendance to an event or donating to a cause. Click here for previous post on Outcomes

Outcomes by Funnel Level
The first area that we can look at is what measures are being achieved by each level of the funnel.

One method is to sum the total of Impressions (or Visits...) for each marketing channel such as pay-per-click, Organic Search, Banner ads, eNewsletters, radio, out-of-home, etc. Or you can look at each channel separately.

Once you have the measures collected you can use a ratio between each level to calculate the rate of transfer. All of these are expresses as a percentage (%).

Using language made popular by Google AdWords we first calculate the Click Through Rate (CTR). This world be the percentage (ratio) of Visits to Impressions. In other words, if there was 100,000 impressions and 1,000 clicked through to the website, then the CTR is 1%.

The Conversion Rate is the number of Prospects that are developed as a result of the Visits to the website (or event or physical location). For example, if 100 people expressed an interested in a product from the 1,000 visits, then the Conversion Rate is 10%. Note that in some situations like an ecommerce website, there may not be any Prospects. Our requirement for a Prospect is that we need to have enough information from them to be able to communicate with them. We need an email address, Twitter handle, connection on LinkedIn or a phone number. If a company doesn't have any Prospects, then the solution is drop this level of the funnel and just use 4 levels.

If we divide the number of Offers by the number of Prospects we have the Offer Rate. In our example, of 100 Prospects, we might persuade 30 to accept an Offer. In this case, the Offer Rate is 30%. As mentioned earlier, an Offer has to include a price. A web page with a price can be an "offer". There are some situations where an offer can be made without a true Prospect. An advertisement to a consumer target market that includes a price would be an example. In this case, there is not Prospect as per our definition.

Take Rate is the number of Sales as a ratio of the number of Offers. If we made 30 Offers and 15 were accepted then the Take Rate is 50%. For some companies this would be exceptional, yet for other companies this rate would be dismal and a note for concern.

The final metric in this section is Test Drive. There are a variety of things that can be considered a "test drive" including test driving a car, downloading a software trial, tasting a sample of liquor, or getting a tiny bottle of new shampoo in your mail box. To calculate this metric you need to know the number of "test drives" or samples given and the number of sales that resulted from the experience.

If we know all the costs related to marketing, we can calculate the Cost per Funnel Level.

For each of these metrics you divide the cost by the number of Impressions, Visits... or Offers. In theory these ratios are easy to calculate. Typically, the difficulty is getting the measures (data) out of the various data bases in a company. We can look at over coming this barrier in a future post.

In summary, for this post we have examined the Customer Acquisition Funnel that Joanne and I developed. And we looked are a variety of conversion metrics and cost per... metrics.

What marketing/sales funnel are you using?