The complete guide to funnels

In digital marketing and sales, these journeys are represented as funnels. 

This post walks you through the fundamentals of funnels: what they are, why they matter, and how to use them to improve your conversion rate and customer experience.

What are funnels?

A funnel is a visual representation of the journey a prospective customer takes as they progress along the steps from initial awareness to conversion. There are various types of funnels (more on that later), but they’re all used to map and guide users through predefined stages and nurture them from prospects to customers.

How does a funnel work?

Funnels can have multiple stages and touchpoints, but in its simplest form, a funnel has three key stages:

As prospects progress through the funnel, the number of people at each stage decreases.

This narrowing is expected—alas, not everyone who is aware of your brand will become a customer—but it’s important to carefully track and analyze your funnels so you can spot any increase in drop-offs that isn’t expected. This also enables you to continually improve your funnels for conversion rate optimization (CRO).

But knowing how many people are at each stage of the funnel isn’t enough if you don’t know what you need to do to improve it. This is where a funnels tool comes in. 

Using the right tool—one that doesn’t just show you where users are dropping off but also reveals why—allows you to connect the dots between your numbers and the behavior behind them. This enables you to quickly find and fix conversion pitfalls anywhere in your funnel, so you can make data-driven, customer-centric changes that lead to more conversions.

3 reasons to use funnels

Whether you’re using funnels for marketing or sales, mapping your user journey makes it easier to understand what’s working—and what’s not.

Here are three major benefits of using funnels.

Improve conversions

Use funnel analysis to understand which tactics drive results, and which ones need improvement. Then, learn from your highest-converting flows and replicate your winning formula to increase conversion rates.

For example, if you spot that flows with fewer steps yield higher conversion rates, you could try reducing the number of steps in low-performing flows to positively impact conversions.

📈 Metrics boosted: revenue, conversion rate

Identify (and fix) issues

Combine funnels with behavior analytics tools like session recordings and heatmapping software to get a deeper understanding of user behavior and uncover issues affecting conversions. This allows you to see where users drop off, spot UX issues in moments, and quickly make fixes.

For example, maybe users want to convert and make that purchase—but an unclickable button makes it impossible to do so. By contextualizing the drop-off rate in your funnel with recordings showing users’ rage clicks (repeated clicking on certain areas or elements over a short period of time), you can spot blockers and prioritize impactful fixes.

📈 Metrics boosted: customer satisfaction, conversion rate, revenue

Understand your users

Get valuable data about how real users progress through your funnels, and apply filters and create segments to compare conversion rates. Use this detailed information to create more personalized customer journeys that resonate with different user cohorts—and deliver better experiences.

For example, your funnel analysis could reveal that users coming from social media channels need more time before they’re ready to convert. In this case, you could add an extra step to the flow for users who come from lower-converting channels, giving you an extra opportunity to build trust and persuade them.    

📈 Metrics boosted: conversion rate, revenue, customer satisfaction, retention

4 different types of funnels (and how to use them)

Every business tracks multiple customer journeys, and you can create as many funnels as there are journeys. As a result, there are lots of impactful ways to use funnels at every stage of the customer life cycle, from marketing to engagement and beyond.

Here are some examples of common funnels to get you started.

1. Marketing funnel

A marketing funnel aims to generate leads by attracting, engaging, and converting prospects.

Some marketing funnels use the AIDA—Awareness, Interest, Desire, and Action—model, but our friends TOFU, MOFU, and BOFU work just as well here. Some examples of tactics used at different stages of the marketing funnel include email marketing, a content strategy, and search engine optimization (SEO).

It’s important to note that the final bottom-of-the-funnel ‘conversion’ goal of a marketing funnel doesn’t have to be a purchase. It may be another call to action, such as signing up for a webinar, downloading a gated piece of content, or signing up for a free trial, all of which bring the prospective customer into the sales cycle—and potentially a whole new funnel.

KPIs to measure: cost per acquisition (CPA), customer lifetime value (LTV), conversion rates, conversion rate per marketing channel

2. Sales funnel

A sales funnel aims to convert leads into sales by nurturing prospects until they become paying customers.

While both marketing and sales funnels are designed to guide people from initial awareness to paying customers, the main difference between these funnels is in how the conversion stage is defined. Sales funnels are specifically designed to turn leads into paying customers, so the conversion stage of the sales funnel should reflect that.

KPIs to measure: cost per acquisition, lead generation, conversion rates, average order value (AOV)

3. Click funnel

A click funnel aims to guide users to a conversion event by providing a targeted customer journey that gets narrower as it goes on.

Click funnels are often used in conjunction with landing pages. Once a user lands on your landing page, they generally have a  limited number of ‘next steps’. For example, your page might have a reduced number of clickable elements, so users don’t navigate away to an unrelated page, making it easier to direct them to the point of conversion. 

As with marketing funnels—and unlike sales funnels—this conversion isn’t necessarily a purchase. For example:

1. A user lands on a landing page for a subscription service where the only call to action (CTA) on the page is to enter their email address to sign up.

2. The user enters their email address and is taken to a sign-up flow. This is another series of landing pages that requests more information to create their account. All necessary information, such as pricing, is included on these pages.

3. Each of these pages takes the user further along the process to create their subscription until they have successfully signed up (i.e. converted).

KPIs to measure: click-through rates for paid ads, landing page traffic, drop-off rates, conversion rates

4. Ecommerce conversion funnel

An ecommerce conversion funnel aims to turn website visitors into customers by guiding them from first site visit to making a purchase.

Ecommerce funnels can be tricky because most modern ecommerce customer journeys are nonlinear. Some people will make a purchase the very first time they see your product, while others will follow your brand on social media for months before they click ‘Add to cart’. This means you have to find strategic ways to engage (and re-engage) customers at every stage of the buying process.

KPIs to measure: engagement with marketing campaigns, cart abandonment rate, conversion rates, conversion rate per marketing channel, cost per acquisition

Getting started with funnels

Whether you’re creating marketing funnels, sales funnels, or any other type of funnel, having the right tool to map out and analyze your funnels is crucial to getting the most out of them.

With Hotjar (hello! 👋), it’s easy to build and analyze all types of funnels, so you can create custom funnels that measure the things you care about. Using the clicked element filter and custom events, build funnels that go beyond page visits to gauge real engagement. Then, filter by specific events or attributes to get relevant, tailored insights based on how real people progress through these customer journeys. 

All of this gives you the data you need to replicate your most successful flows and optimize your less successful ones, so you can improve conversions and drive real results.

Keep users flowing through your funnels

Mapping and analyzing your customer journeys using funnels helps to provide the best experience for your customers—and the best conversion rates for your business. By quickly identifying issues, understanding the behavior behind conversions and drop-offs, and making data-driven improvements, you’ll create powerful funnels that maximize your revenue.