What is a customer acquisition funnel – and why your business needs one
An effective customer acquisition funnel will drum up new business leads and convert them into sales while you sleep. Here, marketing experts share their advice on how to create one with maximum impact.
Thriving brands and businesses across the world are often lauded for their out-of-the-box innovation and creative brilliance.
And while it’s true that every successful business starts with a brilliant product or service, there’s usually a science to their success, as well.
When it comes to customer growth, this usually starts with a ‘customer acquisition funnel’ or sales funnel.
“Sales funnels have been around forever,” says Simon Gould, director of Orbit Marketing. “[But] they're more technologically advanced now. Back in the day, a salesperson would have to sit making cold calls to tell people about a product or service.”
"Sales funnels have been around forever. But they're more advanced now.”
Cold-calling is still a strategy used by some businesses in the initial customer acquisition phase, but today there are much more sophisticated methods available to reach new audiences – and then move them through the customer acquisition funnel towards conversion.
What is a customer acquisition funnel?
A sales funnel or ‘customer acquisition funnel’ refers to the sequential stages a customer progresses through on their path to purchase. It begins with initial awareness of a product or service and ends when a person becomes a paying customer. By carefully and purposefully guiding a shopper through the process, a brand can increase the likelihood of converting that sale.
The imagery of a funnel is intuitive: the top of the funnel is wide and represents the point when a business is trying to catch as many people’s attention as possible. As customers are guided down the sales path to the bottom of the funnel, some will inevitably drop off and decide not to purchase. An effective sales funnel will maximise the number of leads that are converted into sales by eliminating any sources of friction along the way.
For example, a fashion brand might use billboard or magazine advertising to grow awareness, and this could be described as ‘top-of-funnel’ customer acquisition.
A certain percentage of people who see those advertisements might visit the store online. There, they might be encouraged to sign up for a weekly newsletter in return for a discount on their first purchase. This stage is the ‘interest’ or middle of the funnel. Finally, after a few weeks of receiving the newsletter, they might proceed to through the sales funnel and purchase an item online or instore.
Automating funnels
Today, many businesses are automating their sales funnels, so that when a customer interacts with the brand, the next step in the sales funnel is triggered.
For example, the first step might be scheduling a paid social media post. Each person who views that post could then be retargeted by social media ads a few days later with a free (and relevant) content offer, which requires an email address to be provided. Sales staff would then contact them.
“Having an automated process in place means that the sales funnel can run 24/7."
“Having an automated process in place means that the sales funnel can run 24/7, and it is more cost-effective,” says Gould. “In the meantime, the business operator is watching the results and tweaking the funnel to optimise its performance.”
The three stages of a customer acquisition funnel
Top of the funnel: Awareness
The customer acquisition process starts when a prospective customer first learns about a product or service.
This could be the result of many forms of marketing, such as advertising, word-of-mouth, or a post by a social media influencer. Brands must strike a balance between casting their net as wide as possible to capture the largest potential audience, while also looking for advertising placements that will reach the right audience, in terms of demographics and purchasing power. Otherwise, the likelihood of engagement is low.
For example, a health food store may enlist a social media influencer to post a video of them cooking pumpkin risotto using ingredients from their store. The influencer might mention the store in the video to raise awareness and encourage the audience to click on a link for a free book of recipes. In return, the customers must leave their email address in order to receive it. The e-book works as part of the sales funnel because the ingredients list contains hyperlinks to the health food store.
“The health food store isn’t urging you to buy their products, but the content works hand-in-hand for them, because if you want to make the recipe, it would be convenient to order the ingredients from them in one go,” says Charmaine Schembri, marketing director of Melbourne-based marketing agency Little Miss Social.
The health food store can then re-target paid social media ads to any of the influencers’ followers who interact with the video post (for example, liking, commenting or sharing it). This moves those followers further down the funnel.
The store can also contact the customers who downloaded the free book of recipes, again driving them deeper into the sales funnel.
Primary top-of-funnel tools: Social media, content marketing, retail SEO targeting for the right demographics, relevant influencers, magazine advertisements, billboards, event sponsorships.
Middle of the funnel: Interest
When a potential customer expresses interest in a specific product or service, they begin a process of evaluation to determine if it can solve their problem or satisfy a need. This is the ‘interest’ or ‘middle-of-funnel’ phase. At this point, customers will typically seek more information about the brand, product or service and compare the offerings in the market.
At this stage it is critical for the brand to persuade the potential customer about the merits of their offering.
For example, a brand might showcase customer reviews on their website, create content for its social media pages or offer information about the brand and its ethos online.
Primary tools: Customer reviews, case studies, e-books, newsletter landing page, webinars or content.
Bottom of the funnel: Action
The final stage of the sales funnel is the act of making a purchase and becoming a customer. To convert the deliberation phase to a decision, you might offer a time-limited deal, a money-back guarantee or provide testimonials from satisfied customers.
Tools such as Afterpay can also assist when it comes to bottom-of-funnel marketing, as Buy Now Pay Later reduces friction and eases the path to purchase.
Don’t forget repurchasing
Nowadays, it is also common for sales funnels to include a post-purchase section – and encourage repurchasing intent. In other words, as soon as a customer has purchased, brands should think about how to encourage the next purchase.
This can be achieved through a subscription model or by offering a subsequent discount to returning customers. An affiliate or referral program whereby a friend who refers a friend gets a discount can also lead to more conversions.
"Referral programs are effective because the brand doesn't have to go through the whole process of building trust."
“[This is] super effective because if somebody I know and trust tells me to buy a product, then the brand doesn't have to go through the whole process of building trust with me. I instantly trust the brand because my friend already does,” says Gould.
Primary tools: Affiliate program, discount coupons, pop-up offers on online store, automated SMS messages (with mandatory opt-out options) and email campaigns.
The six-stage funnel
Generally speaking, a customer acquisition funnel refers to the three stages: the top, middle and bottom of the funnel. However, some marketers prefer a more granular six-stage approach.
A six-stage customer acquisition funnel might include the following stages:
· Awareness
· Interest
· Evaluation
· Engagement
· Action
Why your business needs a sales funnel
Building a sales funnel can be arduous and time-consuming, however, it’s an important way to create long-term stability for your business.
“I’ve heard business owners claim that word of mouth is their best form of advertising,” says Gould. “That may be true in terms of quality, but it's [not consistent]. A business may get a referral one week, zero the following week and ten the next week. It's just so unpredictable.”
By contrast, a well-oiled sales funnel creates a consistent and reliable flow of new leads that can be converted into revenue.
"Without a sales funnel, it is impossible to plan or scale your business."
Gould goes on to explain: “Without a sales funnel, it is impossible to plan or scale your business… If you don’t have a reliable way of acquiring new business, where are your customers coming from? You risk going out of business.”
How to fix a leaky funnel
As the term implies, a leaky funnel means that customers are slipping out of the sales funnel rather than making it to the end and completing a purchase. Business owners who are unaware of leaks or blockage points are oblivious to problems that can generally be fixed.
First, identify where the leak is. Where are customers dropping off? Perhaps social media ads are attracting views, but comparatively few people are clicking through to the website. Or maybe your website is receiving a high number of daily visitors, but only a handful of people are downloading a lead magnet such as a free e-book. In this instance, the e-book may be the cause of the leak. Is its content genuinely relevant to solving the customer’s pain point?
"If you don’t have a reliable way of acquiring new business, where are your customers coming from?"
A leak or blockage could also be caused by a nurturing process that is too rushed, suggests Gould.
“If people are clicking through to the website and I know that my offer is right, am I asking them to buy too quickly? Do I need to invest more time in building the relationship and building trust?”
Gould suggests testing different audiences to check whether aspects of the offer need to be repositioned or targeted. Experiment with different offerings and measure the results, then tweak as needed.
Know your customer to serve your customer
Another way to identify flaws in your customer acquisition strategy is to survey customers using satisfaction polls. You can also pay close attention to reviews and feedback to determine why customers didn’t make it all the way through the customer acquisition funnel. If possible, speak to customers who may have left your business and find out why.
“Ask them why they left or changed their mind – often people will be really open."
“Ask them why they left or changed their mind – often people will be really open,” says Gould. “You could say something like, ‘I'm not trying to win you back… but what I really want to do is improve what we're doing. What was it that we got wrong?’”
Above all, building an effective sales funnel requires more than just a hunch about what your customers need. As Gould says, “You have to understand their fears, frustrations, goals and desires, and then offer them something that will either solve the problem or move them closer to realising their ambitions.”
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