Customer Acquisition Funnel: The Complete Guide
The customer acquisition funnel is an essential part of the marketing process. Eventually, the acquisition funnel provides a useful framework for engaging users throughout their buying journey.
At the top of the acquisition funnel, the widest part, many people interact with your business somehow, even if they're noticing a Facebook ad or post. The narrower the funnel, the fewer people there are at each stage. The final tip of the funnel represents a customer making a purchase. At this stage, the number of people present is the lowest.
Here you'll find information on each stage of the acquisition funnel and how customer acquisition strategy can help marketers increase sales conversion rate.
Table of Contents
- What is a Customer Acquisition Funnel?
- Why a Customer Acquisition Funnel is Important
- Customer Acquisition Funnel Stages
- Customer Acquisition Funnel Tracking and Metrics
- How to Create a Customer Acquisition Strategy & Funnel?
- Common Blockage Points in an Acquisition Funnel
- Customer Acquisition Metrics for SaaS
Customer acquisition funnel is a key marketing model that is used to easily categorize the major stages of the buying journey: awareness, consideration, decision-making and, finally, loyalty. It is connected to the customer journey and is occasionally called a conversion funnel. However, today's buyer journeys are substantially more involved, and very few customer journeys accurately represent the funnel. In order to target clients at every stage of the purchasing process, an even more complete technique, such as the acquisition funnel, is utilized in effective marketing campaigns.
The design of the user acquisition funnel serves as an example of how marketers should cast a wide net to engage as many potential consumers as they can early in the buying process before drawing their attention to each level of the funnel. The audience gets smaller as you descend lower into the funnel. When you are interacting with buyers at the bottom of the acquisition funnel, they are the most likely to make a purchase and, hopefully, turn into recurring customers.
The idea is still crucial even though the client journey is not as straightforward as the one depicted in the acquisition funnel. The digital customer acquisition funnel considers that consumers move in and out of the funnel and that their purchases are not restricted to a single store or geographic area because the digital buying experience is anything but linear.
Given that customers can buy anything, anywhere, at any time, organizations must consider connecting with them throughout the customer journey. Consumers may now conduct comprehensive online research and comparisons throughout the consideration phase of the digital customer acquisition funnel, which is no longer only about comparing shop products. Many organizations have adopted a funnel that entails communicating with customers more genuinely and with more added value to adapt to these new, less linear buying journeys.
Lead generation and retention are both impacted by customer acquisition funnels. Brands use campaigns to entice new prospective clients during the awareness and consideration phases. Brands use campaigns to pique potential customers' attention again during the decision and loyalty phases, ultimately resulting in the creation of brand advocates. Connecting the dots between the channels, techniques, and content that receive the most attention, spark conversations, and ultimately generate sales for the brand is made possible by digital marketing and the acquisition funnel.
The customer acquisition funnel is made up of 4 main steps:
- interest a potential buyer (awareness);
- convert it into a qualified lead (consideration);
- accompany him until the sale (decision-making);
- retain him once he is a customer (loyalty).
The first stage of the customer acquisition funnel is awareness. It is at this stage that people begin to interact with your business. They go from never having heard of you to having at least a general knowledge of who you are and what you do.
There are many strategies to achieve this, and they are all based on one principle: go where your ideal customers already are.
We'll cover three strategies for implementing the awareness stage of your digital marketing funnel.
Leveraging YouTube ads can be a crucial part of an inbound marketing funnel. Almost everyone spends time on YouTube, and directing video ads to your target audience can gradually increase brand awareness.
According to Google TrueView, YouTube viewers who watch a brand's ad for more than three seconds are more aware of the brand, remember the ad, and consider it more.
Another cornerstone of a good inbound marketing funnel is search engine optimization. Optimizing your business page to appear on the first page of search engine results – especially Google – can boost sales by bringing more people to your site.
In the awareness stage of the marketing funnel, consumers are often looking for information or solutions to a problem. You can show them that your brand offers solutions by posting helpful content like how-tos, infographics, blog posts, customer testimonials, “before and after” articles, and video tutorials. Ensure all of this content is optimized to drive the right searchers to your answers.
Remember that you don't expect every visitor to click on your ad and make a purchase at this point in the funnel. This step is designed to raise awareness gradually and build trust.
At this phase of your marketing funnels, your customers know about your business and your products. They are now actively interested in what you have to offer them and are looking for more information to determine if your business is right for them. You can guide prospects to the interest phase of the funnel by providing them with better information.
81% of consumers do research before buying something online. At this point in the digital marketing funnel, providing complete and understandable information will increase potential customers' interest in your business.
Sometimes called the evaluation phase, this marketing funnel stage shows a refined group of consumers actively considering your product and deciding if it meets their needs. However, you have not yet fully closed the deal at this point. Here are three strategies for moving leads through the customer acquisition funnel.
The higher the percentage of leads that reach the bottom of your funnel and make a purchase, the more effective your marketing funnel is.
Create a compelling offer. The bottom part of your marketing funnel — often called the conversion stage — represents the percentage of people who purchase.
To encourage this, it is imperative to offer customers an incentive to buy now. Limited-time offers, abandoned cart emails, or buy-now coupons are great ways to get customers to the final stage.
On average, acquiring a new customer costs a brand five times more than retaining an existing customer. This is why some marketers also call this phase “the engagement”. To build customer loyalty, it is important to continue the dialogue with customers who have invested in your brand's products or services.
Effective acquisition funnels in marketing, such as email renewal campaigns, social media communications, and loyalty programs, can impact customer brand loyalty. At the end of this stage, the goal is to obtain loyal and satisfied customers who become brand ambassadors and long-lasting customers. Without tracking and metrics, measuring the effectiveness of a brand's funnel marketing strategy is impossible. Here are three approaches to measuring and optimizing your customer acquisition funnel strategy.
Without tracking and metrics, it's impossible to measure the effectiveness of a brand's funnel marketing strategy. Here are three approaches to measuring and optimizing your customer acquisition funnel strategy.
1. Understand the impact channels have on each other
A channel is where you first "meet" your customers, whether at a trade show, on social media, or through organic search on search engines (SEO). These channels are the sources through which you bring in customers.
While all SaaS companies can leverage the same channels, which ones will be most effective depends on your buyer personas.
You need to know where your personas spend their time in order to understand how to reach them.
For example, tutoring software targeting teens might be successful in creating paid, organic content for TikTok, but a customer engagement platform targeting B2B executives might be more successful in advertising on Forbes or Harvard Business Review.
Customer acquisition funnel can happen both online and offline, and the channels you can tap into are:
- SEO blogging;
- email marketing;
- cold prospecting;
- Content creation;
- search advertising;
- Social Media;
- Social media advertising;
- Events (online/offline);
- word of mouth marketing;
You need to invest in some of these channels at a basic level to maintain your brand. For example, even if you don't get many results from social media, platforms like Facebook and LinkedIn are used to research companies; not being present is therefore a loss of earnings.
But, when considering where to invest, focus on the areas you think will have the greatest impact. For example, if you think email marketing will generate the most customers, you should spend time and money creating materials to send through that channel.
In a customer acquisition funnel, it is possible to run advertising across many channels to reach customers at any stage of the funnel. It is essential to quickly determine the benchmarks for success to adequately measure the impact of each channel on a brand's key performance indicators. Each phase of the funnel has its success statistics.
Top-of-the-funnel or TOFU
When advertisers need to gain high brand awareness among consumers, TOFU statistics measure the following:
- single litter;
- completion rate;
- the click-through rate (CTR).
Middle of the funnel (Middle-of-the-funnel or MOFU)
MOFU statistics help identify when consumers have a greater propensity to make purchases. These benchmarks measure the following:
- product page views;
- the percentage of the first purchase of the brand;
- brand search index.
These are the marketing metrics that measure the end of the funnel purchase journey by calculating the following:
- return on ad spend (ROAS);
- customer acquisition cost (CAC);
- orders or units sold.
By analyzing the TOFU, MOFU and BOFU comparison criteria, advertisers can optimize their spend at all stages of the customer acquisition funnel.
2. Personalize messages during the different stages of the acquisition funnel
Using an ad server helps brands deliver relevant ads and reach audiences with the right message, depending on what stage of the customer acquisition funnel they're at. For example, a brand could use an ad server to create a rule to show audiences who have already seen its product a different call-to-action or image than those shown to those who have not yet seen it produced before. This allows brands to communicate with shoppers no matter where they are in their buying journey.
3. Compare your spending to your peers
Various tools allow brands to collect data to compare their ad spend to that of some of their peers in the same product category. This can be useful information for marketers to position themselves in terms of sales indexing, brand search, and other statistics.
Online shopping cart abandonment occurs when a user puts one or more products in their cart but does not finalize the purchase. You can calculate your cart abandonment rate by dividing the number of transactions by the number of cart creations. According to a study on shopping cart abandonment, online users abandoned their shopping carts without buying the items in nearly 70% of cases.
1. Start by defining your target audience
The first and main step you need to execute is to identify the right users or potential audience for your business. Chances are your product is the perfect solution to a certain consumer demographic's problem. It's just a matter of finding out who they are and focusing your efforts primarily on them.
If you don't have a target customer in mind, chances are you're limiting yourself in effectively marketing your brand. Unless your offering meets a universal need, finding yourself a niche market is best.
So how do you find your target customers? Do thorough market research and try to figure out who and how you need to market your product to win new customers. For example, according to Invesp, SaaS companies can double the number of their paying customers by simply offering them a free trial without asking them for their credit card information.
In addition, a potent tool to determine and understand your target audience is to analyze your buyer persona. In this way, you will be able to know the smallest details about your ideal client and build an efficient customer acquisition funnel.
2. Define the right customer acquisition channels
A channel is any place where your customers encounter your brand for the very first time. It can be LinkedIn or Facebook, a blog post, a paid advertisement, an email etc. With the help of the right channels, you can effectively attract new customers.
To find out which channels your target is in, refer to your market analysis. Are my competitors on Google via blog posts? Do they use email instead? Do they do social media?
Now, you must refine your strategy and position yourself where your target is the most reactive.
3. Do co-marketing or co-branding
Co-branding is an interesting acquisition strategy. It allows content to be promoted by two brands that have mutually agreed to do so. The extent of the success of this strategy is considerable because seen by your customers and those of the partner brand.
You are partnering with an important customer-focused brand that is not your direct competitor. For example, this was the case for the collaboration between Redbull and GoPro and with their "Stratos" campaign.
This co-marketing event allowed the two brands to increase their notoriety and attract new leads mutually. Then, each brand exploits the situation to convert these leads into customers. It's a win-win collaboration for both brands.
Here are some of the ways to promote and get customers through co-branding acquisition funnel:
- launch a mutually beneficial partnership;
- approach industry experts;
- write guest articles on external platforms.
Customer Acquisition Funnel VS Sales Funnel
Some people use the terms "marketing funnel" and "sales funnel" interchangeably, while others combine them into one term: the sales marketing funnel. In reality, they are two parts of a whole. A company or organization's marketing and sales functions have their own goals, and their respective funnels support those goals. The marketing function is responsible for creating and managing a brand, building brand awareness and attracting potential customers, while the sales function is focused on increasing the products or services sold, whether initial or repeat purchases. Using one to shape the other can help teams stay in sync and create an optimal customer experience.
The hard truth in customer acquisition strategy is that trust in businesses has deteriorated over time. 55% of consumers don't trust the brands they buy from as much as they used to. 65% of consumers don't trust ads, and 71% don't trust sponsored posts on social media.
This obvious lack of trust in brands has made the work of marketing and sales teams infinitely more difficult. What's worse is that most companies don't recognize the problem. They spend more money on "push" marketing tactics, especially social media, hoping they will win them new customers.
So, what are the main blockage points in a customer acquisition funnel?
1. You try everything at once
After looking at the different channels, you might want to be present on all possible ones, but that could hurt your strategy.
For example, if you're trying to reach customers in their twenties, you might want to find your audience on Instagram or TikTok. You may not get the results you want if you spend all your resources on Google Shopping Ads or Facebook.
When developing a strategy for each channel, check:
- What content does your target audience like to interact with?
- What are your competitors posting?
- What are your key performance indicators telling you?
Depending on your strategy, you might find that you don't need to use TikTok if your customers are primarily on Facebook. Or if you find you can say more with videos than words, YouTube or Instagram may be more helpful.
Try to research the best strategies for each channel to get the most out of your customer acquisition funnel.
2. You don’t create high-quality content regularly
Content marketing is hands down one of the most effective and long-lasting customer acquisition strategies out there. Let's look at it this way: it helps you establish your thought leadership in your industry or niche. Building consumer trust in your brand is half the battle, and content marketing integrated into an inbound marketing strategy helps you win that battle.
Starting a blog for your business, sharing social media content, hosting a webinar, and publishing white papers are all great ways to establish yourself as a trusted expert in your industry.
Consumers are more and more informed these days. Empowering your prospects to make informed buying decisions will earn their trust and, in all likelihood, convert them. Creating a valuable, informative, insightful, and engaging offer will ultimately help in getting new customers.
3. You don’t use the cross-channel acquisition
Customer acquisition funnels can be used and reported on separate channels and platforms. It is therefore imperative to unify your strategy across all of these channels. If you reach your target audience on more than one channel, you are more than likely to influence their behavior on another channel.
For example, someone who just saw your marketing email might then search for a product like yours on Google.
In this particular scenario, it becomes essential to determine the search terms these customers use to discover your site. You will thus be better informed about your SEO strategy.
You can then use this strategy to target keywords with search ads or with specific offer elements - ensuring they come to your site instead of your competitors.
You may also find that you get a lot of traffic to your site from a few select keywords in your Google search ads. You can then use this to craft a message in your Display or Facebook ads - designed to better resonate with your target audience.
In addition to this information, you need to understand how many conversions were influenced by your efforts on a given channel, even if the ad didn't immediately entice someone to buy.
In this case, asking yourself a few questions to understand the cross-channel customer journey is essential.
For example, you got 100 people to buy your product. If so, ask yourself the following questions:
- What advertisement or offer did these people see before purchasing a product on your site?
- If someone didn't click on the ad you showed them on another channel, were they still influenced?
- To better understand this, ask how many new customers have touched your Facebook or Display ad throughout their buying journey.
All of these questions will help you achieve cross-channel customer acquisition.
4. You don’t use email marketing skillfully
Email marketing is an old practice that is still relevant today. It allows you to get in direct contact with customers. It is therefore an essential part of any customer acquisition funnel.
The first step in email marketing is getting someone's email address and verified information. This can be done in different ways:
- create a useful offer that requires submitting a form requesting contact information;
- create a newsletter to which your visitors can subscribe;
- organize a contest on Instagram or Facebook with a form to retrieve the email address.
With email marketing, you can find out a person's interests by monitoring the open rates and click-through rates of the various links present in the email.
Even unsubscribes provide valuable information for your email strategy. By understanding which content drove which response, you can continually improve your strategy for better future performance. Just be sure to keep track of these numbers.
To effectively measure the success of a customer acquisition funnel in the context of Software as a Service (SaaS), there are specific metrics that can provide valuable insights. Here are some unique customer acquisition metrics for SaaS businesses:
Free Trial Sign-ups: For SaaS companies that offer free trials as part of their customer acquisition strategy, tracking the number of sign-ups can indicate the initial interest and engagement with the product. It serves as a starting point to measure the effectiveness of the acquisition funnel.
Conversion Rate: The conversion rate is a crucial metric that measures the percentage of free trial users who convert into paying customers. It provides insights into the funnel's effectiveness in driving conversions and can help identify areas for improvement.
Customer Acquisition Cost (CAC): CAC is the total cost incurred to acquire a new customer. It includes marketing expenses, sales efforts, and other costs associated with acquiring customers. Tracking CAC allows SaaS companies to evaluate the efficiency and profitability of their customer acquisition efforts.
Monthly Recurring Revenue (MRR): MRR represents the predictable and recurring revenue generated from customers on a monthly basis. It provides a clear picture of the revenue stream and growth potential of the SaaS business. Monitoring MRR can help determine the success of the acquisition funnel in driving sustainable revenue growth.
Churn Rate: Churn rate measures the percentage of customers who cancel their subscription or stop using the SaaS product within a given period. It is important to track the churn rate as it directly impacts the overall customer acquisition efforts. A high churn rate indicates potential issues with the product, customer experience, or onboarding process.
Customer Lifetime Value (CLTV): CLTV represents the total revenue a SaaS company can expect to generate from a customer throughout their entire relationship. Calculating CLTV helps in assessing the long-term value of acquired customers and justifying customer acquisition costs.
Time to Conversion: Time to conversion measures the average duration it takes for a prospect to convert into a paying customer. It provides insights into the efficiency of the acquisition funnel in moving prospects through the different stages and can help identify bottlenecks or areas for optimization.
Funnel Drop-off Rates: Tracking drop-off rates at each stage of the acquisition funnel allows SaaS companies to identify specific points where prospects disengage or abandon the buying journey. This information helps optimize the funnel and address any barriers or obstacles preventing conversions.
Customer Satisfaction and Net Promoter Score (NPS): Monitoring customer satisfaction and NPS can provide valuable feedback on the overall experience of customers acquired through the funnel. Satisfied customers are more likely to become advocates and refer others, contributing to the growth of the customer base.
Return on Investment (ROI): ROI measures the profitability of customer acquisition efforts by comparing the revenue generated from acquired customers to the cost of acquiring them. It helps in evaluating the overall effectiveness and financial viability of the acquisition funnel.
By tracking and analyzing these customer acquisition metrics, SaaS businesses can gain valuable insights into the effectiveness of their acquisition funnel and make data-driven decisions to optimize their customer acquisition strategy.
Acquiring customers is not a one-day job. To develop an effective strategy, careful planning and execution are important. You must also think about the best ways to attract and convert visitors into customers on your website and/or social networks.
Furthermore, the customer acquisition funnel is not an interchangeable concept. Today, customer journeys rarely go directly from notoriety to consideration and then to purchase.
You may not be able to predict the steps buyers take before buying your product, but a marketing funnel approach takes into account the different ways potential customers can interact with your brand. This can help you recognize engagement opportunities and reach customers where they are.
Acquiring customers is not a one-day job. To develop an effective strategy and build a customer acquisition funnel, it is important to have careful planning and execution. You must also think about the best ways to attract and convert visitors into customers on your website and/or social networks. You need to choose the right channel to make the product fit your needs, then test the content to convince customers to convert quickly. You also need to be rigorous about your speed of execution, the channels you use, and the long-term strategies that will keep your customer acquisition cost well below the value of your customers. Apply these techniques today to help your business grow significantly.
Customer Acquisition Funnel FAQs
1. What is a customer acquisition funnel?
A customer acquisition funnel is a marketing model that illustrates the journey from awareness to purchase.
2. What are the stages of a customer acquisition funnel?
The stages include awareness, consideration, conversion, and loyalty.
3. How can I optimize my customer acquisition funnel?
Optimize your funnel by improving awareness, enhancing interest, streamlining consideration, simplifying conversion, and analyzing and iterating based on data.