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Where’s The Leak in Your Customer Acquisition Funnel?

Consumer Marketing

The analogy of a customer acquisition funnel is ubiquitous within the digital marketing and web analytics community. Visitors go in and lifelong customers come out– it’s a simple visual representation of a slightly more complicated relationship between organizations and people and it gets the message across. While simplicity has its value, the idea of a perfect funnel actually paints an inaccurate picture of what’s truly going on.

The first step is to realize the simplicity of the funnel analogy and how it relates to the customer life cycle, which starts as soon as someone hears about your product or service. Whenever a person first engages with your business, whether by clicking a PPC advertisement, reading a syndicated blog or clicking a link to the website, they are indicating a desire and leaving clues. For instance, if someone was searching for “best marketing company in Boston” and clicked on a link to your website, it’s a strong signal that they’re looking for information or services related to marketing in Boston.Where’s The Leak in Your Customer Acquisition Funnel? image customer aquisition funnel 02
Starting on day one, there’s a breadcrumb trail being formed that grows into a full picture showing who the visitors are, what they want and why they’re interested. As a marketer, it’s invaluable to see where those leads are coming from, the problems they are trying to solve, and whether your information was satisfactory. 
When you begin looking into the data, you’ll start to categorize each relationship based on the familiarity and depth of the digital conversation. As the conversation progresses, it starts to mimic a predictable form. The concept of a funnel is a useful visual aid showing how people go through the steps of Awareness, Interest, Desire, Conversion, and Loyalty- the natural progression of a successful business relationship or the customer life cycle. To facilitate advancement on the path, you can take those simplistic groups and segment them into three actionable groups: Top of the Funnel (TOFu), Middle of the Funnel (MOFu) and Bottom of the Funnel (BOFu).

Each of the three groups has specific strategies and tactics for guiding a customer down the path. Ideally, you’d want to speed up the process from awareness to loyalty and grow the awareness over time. Through speeding up the process, you can build relationships faster and grow your customer base.  By increasing awareness, the benefits of speeding up the process become magnified. Think of the customers, or their investment in you, as the water going into the funnel. The larger the funnel, the more water it can carry, increasing your capacity for sales.

However, there are two fundamental problems with the customer acquisition funnel. For one, it’s not exactly a funnel. Acquisition marketing isn’t a linear process like an assembly line. It’s a myriad of twists, turns and changes over time. It’s up to marketers to group individuals as efficiently and effectively as possible because after all, most businesses simply can’t afford to create personal marketing materials for every prospect and lead.
The second issue is the fact that funnels are designed to transport 100% of what goes into them. For conversion marketing, that’s just not realistic.Though there’s no golden rule, consider the fact that companies like Amazon and eBay are only converting roughly 10% of their web traffic. The other 90% leaks out. As they are considered industry leaders, if you currently have a conversion rate higher than 20%, please quit your day job, start a marketing firm and teach us your ways.
Back to the model, a more realistic shape would be a funnel with many small holes that are consistently moving around and being plugged by duct tape. In this case, the tape would be marketing and analytics activities such as A/B testing, CTA’s and dynamic onsite messaging. The more tape that go into building and maintaining a stronger funnel, the less water will leak out.
Where are the marketing resources going? (warning: numbers ahead, click to enlarge)
Where’s The Leak in Your Customer Acquisition Funnel? image US Ecommerce Industry Revenue and Marketing and Analytics Spending in 2012 53

Relatively speaking, it’s surprising that in 2012, only $690 million was spent on web analytics in the US when it’s the tape holding together the funnel of a $226 billion ecommerce industry in the United States. That comes out to a paltry 0.301%. Granted in 2012 there was $41 billion spent on marketing activities in general- But even in that context, for every $100 spent on marketing, only $1.68 was spent on web analytics. That’s a dismal slice of the pie and the graph to the right does a great job at representing the disparity.
A question worth considering is: If marketing and analytics are the duct tape, supporting the funnel that carries ecommerce, why are the investments so low? 
Let’s share ideas in the comments below.
Leaking cup image provide courtesy of Flickr . Posted originally at Apptegic’s Customer Acquisition Blog.

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