What is a Marketing Funnel: Step-by-Step Guide

TOFU, MOFU, and BOFU – three acronyms every marketer should know when creating a customer journey. In this article, you will learn everything there is to know about creating marketing funnels and lead generation.

Marketing funnels are powerful tools that businesses can use to understand and track the progress of potential customers as they move through the buying process. A marketing funnel is a series of stages that a potential customer goes through in order to become a customer, including awareness, interest, desire, action, and loyalty.

Today, I’ll dive deeper into the concept of marketing funnels and how businesses can use them to optimize their sales and marketing efforts. I will discuss the different stages of the funnel, how to measure the effectiveness of your marketing funnel, and strategies for improving the performance of your creations.

Whether you’re a small business owner or a marketer at a large corporation, this article will provide you with valuable insights and actionable tips for improving your marketing funnel.

Table of contents:

• What is a marketing funnel?
• Marketing funnel stages and conversions
• How does the marketing funnel differ for B2C and B2B brands?
• Why are marketing funnels important?
• How to measure the success of a marketing funnel
• Optimizing marketing funnels for the customer journey
• Marketing funnel vs. sales funnel
• What’s next?

What is a marketing funnel?

A marketing funnel is a series of stages that a potential customer goes through in order to become a customer. The stages typically include awareness, interest, desire, action, and loyalty.

At the top of the funnel, your business should aim to generate awareness and interest in your products or services. As the potential customer moves through the funnel, you should build desire and ultimately drive the potential customer to take action and make a purchase.

The final stage of the funnel is loyalty, where you need to retain the customer and encourage repeat purchases.

A marketing funnel is a tool that businesses use to understand and track the progress of potential customers as they move through the buying process.

Marketing funnel stages and conversions

The three traditional stages of a marketing funnel are:

1. Awareness: The first stage of the funnel is where a potential customer becomes aware of a business’s products or services. This is the stage where a brand will aim to generate as much interest as possible.
2. Consideration: In this stage, the potential customer is interested in the product or service and is considering making a purchase. At this stage, the brand should provide more information to build desire.
3. Conversion: The final stage of the marketing funnel is where the potential customer takes action and makes a purchase.

It is worth noting that depending on the industry, company, or specific product, the funnel can vary in the number of stages and the name of the stages.

Let’s dive deeper into each stage and discover what your role is as a marketer at each.

Read more: Brand awareness strategy

Top of the funnel stage (TOFU): awareness phase

The top of the funnel (TOFU) is the first stage of the traditional marketing funnel, where the potential customer becomes aware of a business’s products or services. The goal of this stage is to generate interest and make the brand known to potential customers. This is usually the widest part of the funnel, where a large number of people are introduced to the business and its offerings.

Activities that businesses engage in at this stage include brand awareness campaigns, content marketing, social media advertising, search engine optimization, and other forms of outbound marketing. The main objective of these activities is to reach a broad audience and make them aware of the business and its products or services.

It’s important to note that the top of the funnel is not only the starting point of the customer journey but also the point where the business can collect the most data about their audience to help them optimize their marketing efforts in the next stages.

Middle of the funnel stage (MOFU): consideration stage

The second stage of the funnel is MOFU (middle of the funnel). At this point, the potential customer has shown an interest in a business’s products or services and is considering making a purchase. The goal of this stage is to provide more information and build a desire for the products so that the customer is more likely to make a purchase.

At this stage, businesses will engage in activities such as lead generation, lead nurturing, and targeted advertising with prospective customers. The main objective of these activities is to convert leads by providing them with more information about the products or services, answering their questions, and addressing any concerns they may have.

Read more: 10 proven social media lead generation strategies

Marketers also use this stage to segment and qualify their leads into different groups based on their level of engagement and readiness to buy, which will allow them to tailor their message and communication to each group and increase their chances of converting them into existing customers.

It’s important to note that this stage is narrower than the top of the funnel, as many people who were initially interested might drop off due to a lack of interest or not being ready to make a purchase.

Bottom of the funnel stage (BOFU): conversion

The BOFU (bottom of the funnel) stage is the final part of the digital marketing funnel. This time, the potential customer takes action and makes a purchase. The goal of this stage is to convert leads into customers and encourage repeat purchases.

At this stage of the customer journey, the brand should engage in activities such as sales, account management, and customer service. The main objective is to finalize the sale and provide excellent service to retain prospective customers and encourage repeat purchases.

Businesses also use this stage to measure the conversion rate of the leads and to track the customer’s behavior and preferences. It helps to optimize marketing strategy and improve customer retention.

This is the last and narrowest part of the marketing funnel. Unfortunately, the majority of people who were interested in the products or services might not make a purchase. This is why businesses should put extra effort into this phase to close the sale and ensure that the customer is satisfied with their purchase. A happy customer is more likely to repeat the sales cycle.

How does the marketing funnel differ for B2C and B2B brands?

There are many ways in which you can measure the success of a marketing funnel. Below you can find examples of what you could track within your marketing funnel strategy.

• The complexity of the buying process. B2B purchases tend to be more complex and involve multiple decision-makers, while B2C purchases are usually made by individuals. This means that B2B marketing funnels may include additional actions. For example – an evaluation stage where different decision-makers review and compare the product, and a negotiation stage where the final terms of the sale are negotiated.
• Length of the sales cycle. B2B sales cycles are generally longer than B2C sales cycles because they tend to be more expensive and require more research and decision-making.
• Content marketing. B2B companies tend to focus more on creating informative and educational content, such as whitepapers, case studies, and webinars. B2C companies, on the other hand, tend to focus more on emotional and visually appealing content, such as videos, images, and social media campaigns, to generate brand awareness and drive sales.
• Lead nurturing. B2B companies focus more on lead nurturing, as the sales cycle is longer and more complex. Lead nurturing is the process of building relationships with potential customers by providing them with information and resources that will help them make informed purchasing decisions. B2C brands usually don’t perform lead nurturing as they focus more on lead generation and conversion because of the shorter and less complex sales funnel.

Of course, these are just general tendencies, and there may be a lot of variations depending on the specific company, product, and industry. Your sales process should always be tailored to your market niche.

Why are marketing funnels important?

There are several arguments for why you should use a marketing funnel in your business strategy.

• Marketing funnels provide businesses with a clear and visual representation of the different stages that a potential customer goes through in order to become a customer. This allows businesses to understand the customer journey and identify where potential customers are dropping off, which can help them optimize their marketing efforts.
• Marketing funnels allow organizations to track the progress of potential customers through the funnel and to measure the effectiveness of their marketing strategy. By analyzing the conversion rate at each stage of the funnel, businesses can identify which marketing activities are working and which are not, and make data-driven decisions to improve the performance of the funnel.
• Marketing funnels allow businesses to optimize the customer experience by tailoring their message and communication to each stage of the funnel. By providing potential customers with the information and resources that they need at each stage, businesses can help them move smoothly through the funnel and increase their chances of making a purchase.
• By understanding the different stages of the funnel and the behaviors and characteristics of customers at each stage, businesses can identify and target the right audience more effectively and efficiently.
• By optimizing the customer journey and measuring the effectiveness of their marketing efforts, businesses can improve their return on investment (ROI) by focusing on the most effective marketing activities and targeting the right audience.

Overall, a marketing funnel is a powerful tool that your brand can use to understand and track customer journeys. Watching closely how a prospective customer behaves in the purchase funnel can help you optimize your marketing and sales efforts to increase revenue.

How to measure the success of a marketing funnel

There are many ways in which you can measure the success of a marketing funnel. Below you can find examples of what you could track within your strategy.

Conversion rate

One of the most important metrics to track is the conversion rate at each stage. This is the percentage of visitors that move from one stage to the next. By analyzing the conversion rate at each stage of the funnel, you can check if your marketing activities work or not. The higher the conversion rate, the better your marketing funnel works.

Customer lifetime value

This metric measures the total revenue generated by a customer over their lifetime. It helps companies understand the long-term value of a customer and the effectiveness of their retention efforts.

Return on Investment (ROI)

ROI is measured by comparing the costs of the campaign to the revenue generated. With this metric, brands can understand the effectiveness of their marketing spending and identify which activities are providing the best return on investment.

Lead-to-customer ratio

To understand how effective the lead nurturing efforts are, brands can measure the lead-to-customer ratio. Basically, to follow this KPI, you should count what percentage of leads turn into new customers.

Optimizing marketing funnels for the customer journey

There are several strategies that businesses can use to optimize their marketing funnels for the customer journey:

Segment and qualify leads

You can segment your leads into different categories by their level of engagement and readiness to buy.

The most popular categories are Marketing Qualified Leads (MQL), and Sales Qualified Leads (SQL). In the first group, there are leads who are yet undecided but are likely to become customers. They still need additional efforts to become SQL. Sales Qualified Leads, on the other hand, are people who are the most likely to make a purchase and are ready to talk with the sales team.

Personalization

By personalizing the customer experience, your company can make the customer feel valued and understood. Personalization can be done through targeted messaging, customized content, and carefully tailored offers.

Optimize the user experience

To optimize your customer’s journey, you should implement a seamless and user-friendly experience. This includes (but is not limited to) things like having a clear and easy-to-navigate website, providing clear calls-to-action, and ensuring the website is mobile-friendly.

Lead nurturing

By providing potential customers with the information and resources that they need at each stage, organizations can help them move smoothly through the funnel and increase their chances of making a purchase. Lead nurturing can be done through email campaigns, personalized content, and target audience messaging.

A/B testing

You can make data-driven decisions based on A/B testing different elements of your marketing funnel. Fix the elements that are not working and focus on solutions with the highest conversion rates.

Analyze customer feedback

You can identify areas where you can improve the customer journey and adjust the marketing funnel accordingly by analyzing the customer feedback.

Use data to understand customer behavior

You can use various marketing analytics tools to track and inspect customer behaviors. With good analytic skills, you will be able to optimize your conversion funnel and improve the user experience.

Marketing funnel vs. sales funnel

A marketing funnel and a sales funnel are very similar in concept, but they have different focuses and goals.

A marketing funnel is a series of stages that a potential customer goes through in order to become a satisfied customer. The stages typically include awareness, interest, desire, action, and loyalty. The main goal of a marketing funnel is to generate interest in a business’s products or services and make the brand known to potential customers.

A sales funnel, on the other hand, is a series of stages that a potential customer goes through in order to become a paying and, hopefully, repeat customer. The stages typically include lead generation, lead nurturing, closing the sale, and post-sale actions. The main goal of a sales funnel is to convert leads into customers and encourage repeat purchases.

In other words, a marketing funnel is focused on generating leads and creating awareness of a business’s products or services, while a sales funnel is focused on converting leads into customers and generating revenue.

The two funnels are interconnected, but they have different stages and goals. A marketing funnel is a broader concept that includes the entire customer journey, while a sales funnel is more specific and focused on closing the sale.

Marketing funnel vs. customer journey

The marketing funnel and customer journey are two frameworks often used to understand and map out the customer’s path from initial contact with a brand to final purchase, and even beyond. While they share similarities, they also have distinct characteristics and offer different perspectives on the customer’s interaction with the brand.

Marketing Funnel

The marketing funnel is a model that depicts the theoretical customer journey towards the purchase of a product or service. It’s generally seen as a linear path with various stages. Each stage of the marketing funnel corresponds to a specific phase in this journey:

1. Awareness Stage: Potential target customers first learn about the brand or product.
2. Interest Stage: These potential customers start seeking more information about the product or service.
3. Consideration Stage: They consider your product among their viable options.
4. Intent Stage: Potential customers show a clear intent to buy.
5. Evaluation Stage: Prospects make a final decision, weighing all factors.
6. Purchase Stage: The prospect becomes a paying customer.
7. Post-Purchase Stage: The customers evaluate their satisfaction and may become brand advocates. This stage often includes referral programs to bring new customers into the funnel.

Customer Journey

While the marketing funnel offers a straightforward, linear representation of the customer’s path, the customer journey provides a more holistic view. It considers the various touchpoints, experiences, and emotions the customer encounters when interacting with a brand, which might not always follow a simple, linear sequence.

It recognizes that customers may move back and forth between stages, or skip stages entirely, reflecting a more realistic, complex decision-making process. It emphasizes personalizing the experience based on the customer’s unique path and needs.

Comparison

The former focuses primarily on guiding prospects from one marketing funnel stage to the next, which is vital for structuring marketing strategies. On the other hand, the customer journey is more customer-centric, focusing on their experiences, needs, and emotions throughout the process, thereby informing customer service and product development.

Both models are critical and complement each other. Understanding the stages of the marketing funnel helps businesses develop effective strategies for moving customers towards a purchase. At the same time, understanding the customer journey can enhance those strategies by providing a more comprehensive view of the customer’s experiences and needs.

What’s next?

Now that you know how a marketing funnel works, it’s time to plan your next marketing campaigns that will include this framework.

Think of your available marketing channels and where are they positioned in the funnel model. Which of your actions will be great for TOFU? Which ones should be reserved for BOFU?

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