Marketing Funnels Explained: Why They Matter & How to Build Yours

Marketing funnels are roadmaps companies use to plan the journey of how someone becomes a customer.

By building out your own marketing funnel, you can uncover: 

  • The stage at which most people drop off
  • Which marketing efforts map to each stage a customer is at 
  • The marketing tactics to double down on and where to pull back
  • How to thoughtfully grow your business 

We sat down with expert Amanda Tallon, Account Strategist at growth marketing agency Shoelace, to uncover how to build a more profitable marketing funnel. Let’s dive in. 

What is a marketing funnel? 

A marketing funnel visually represents the journey a person takes from the moment they have any interaction with your brand—like reading a blog post—to the moment they make a purchase. Marketing funnels include different stages that correspond to different points in that journey. 

The widest part of the funnel captures the biggest group of people who might be interested in what you sell. As you engage with these folks through marketing activities or direct communication, they move down the funnel until they either drop off or buy your product. 

A more simplified funnel might include awareness, consideration, and conversion. A more segmented funnel might include awareness, interest, consideration, intent, evaluation, and purchase. Others add on an inverse funnel that maps loyalty and advocacy. It’s up to you how you segment your marketing funnel: go the simple route with three sections or chop it up into 10, whatever works best for you.

A graphic of a marketing funnel that includes the sections acquisition and awareness, consideration, conversion, and loyalty

For the sake of simplicity, we’re going to focus on three distinct phases: acquire, consider, and convert, as well as post-purchase loyalty. This will cover your top of funnel (ToFu), middle of funnel (MoFu), and bottom of funnel (BoFu).

Why ecommerce businesses need marketing funnels

📈 Funnels encourage more meaningful growth. Funnels give you a clearer way to organize marketing tactics and make it easier to understand which tactics work for each stage of the funnel. For example, you might learn that TikTok videos work wonders to increase awareness about your business, but they do little to drive actual conversions. This allows for more strategic growth: you’ll double down on what works and pull back on what doesn’t. 

❤️ Develop better customer relationships. Who are you marketing to? What do they like? What types of marketing do they respond well to? Establishing a funnel helps you better understand your target audience and what they need to feel excited about making a purchase from you. 

💵 Master your purchase cycle. How long inventory takes to sell depends on your average order value. If you sell heirloom quality diamond necklaces for $15,000 a pop, they’ll take longer to sell than a piece of costume jewelry that retails for $39. But how many weeks does it actually take, on average, for the costly and affordable items to sell? Once you have those numbers, the marketing funnel gives you insight into where to put your money (and when) in order to get those products to sell within the average timeline. 

A photo of someone making pour over coffee in a Chemex
The stages of a marketing funnel are similar to the stages water goes through to make a cup of pour-over coffee. Najib Kalil via Unsplash

How business stage impacts your marketing funnel

Your marketing funnel will grow and develop over time based on cultural trends, the products you sell, and the stage your business is at. It’s an evolving model. Like a house, you’d never build one and just let it stand—a structure requires maintenance, care, and attention in order to thrive. 

Brand awareness and revenue are the two main factors that differentiate the marketing funnel for an established business versus one that’s just starting out. 

The level of brand awareness your business has determines how easy it is to attract new customers. If you have high brand awareness, you’ll spend less money on the awareness and acquisition leg of the funnel and more on consideration and conversion. Lower brand awareness means you’ll need to drive hype and spread the word earlier on, meaning that your time and resources will go toward getting new eyes on your products.

The amount of money you bring in determines how much you can spend on marketing activities. The more revenue you bring in, the more you have to spend on paid acquisition and acquiring new inventory. If you’re just starting out and have little to spend on marketing, your tactics will look different. Think: more email marketing, organic blog posts, and social media.

How to develop a marketing funnel 

Together, we’ll build the marketing funnel that makes the most sense for your business. We dive into the tactics for acquisition and awareness, consideration, conversion, and the inverse side of the funnel—loyalty.

An image of an architectural funnel
Marketing funnels outline a straightforward path to conversion. In reality, most customer journeys aren’t as linear. Unsplash

Get to know your target audience 

The first step, Amanda says, is to understand who your customer and target audience is. If you haven’t yet established a target audience, she recommends doing a customer persona analysis. 

You can gather the quantitative data for an analysis like that via Google Analytics or through a third-party data platform. You’ll want to look for data points like geography and demographics that better pinpoint who your customers are. 

Gathering qualitative data as well will give you a richer insight into your target audience. You’ll get this information by having one-on-one conversations with the people who have already purchased your product. 

Then, you’ll start to make inferences from that data. What you learn will inform the channels and style of marketing you’ll use. For example, if you sell primarily to teenage girls between the ages of 15 to 20, chances are you’re not going to have to do LinkedIn ads. 

Hopefully, this exploration will help you understand what your audience’s buying process looks like and the platforms they most often frequent. 

Here’s a list of the different activities you can do to uncover your target audience: 

  • Look at cumulative purchase history across all customers. 
  • Use digital analytics tools to gather quantitative information.
  • Run an online survey through a tool like SurveyMonkey.
  • Conduct one-on-one interviews with past customers.
  • Do industry research to explore consumer trends and behavior. 
  • Complete a competitive analysis by looking at competitors’ audiences.

From this information, create buyer personas that detail the common characteristics of the main types of customers that frequent your shop. 

Establish average order value and a consideration timeline

Your average order value (AOV) is the average value of your customers’ purchases. For example, if your shop’s revenue is $2,000 and you’ve had 100 orders, your AOV is $20. 

AOV determines how much focus you put on each part of your marketing funnel. If you sell fine jewelry and your AOV is $1,000, the consideration phase of your funnel is going to be much longer than a shop that has an AOV of $20. Chances are a customer is going to think longer about making that large purchase than they would a smaller one.

We can think about how this relates to the marketing funnel in this way: 

  • High AOV = Long consideration timeline. You’ll want to spend more energy and money on developing content that nurtures people throughout the consideration phase. 
  • Low AOV = Short consideration timeline. You’ll focus more on acquiring new customers and spend your marketing dollars there. 

Amanda notes that this model helps differentiate where you place your budget and the emphasis you put on the different parts of your funnel. 

Phase 1: Acquisition and awareness 

The broadest part of the funnel represents anyone who hears about your product and business. This might be through your own marketing efforts, a recommendation from a friend, a roundup article on Google, or a social media post. These folks are aware your business exists and may or may not have a need for one or more of your products. 

The strategy for each stage of your funnel depends on your target audience and AOV. But, there are a couple of activities that generally make sense for acquisition and awareness. Yes, you can run paid ads, but developing organic content and working with influencers for this stage in the funnel sets you up for longer term success. 

Contributing to a blog on your site not only helps you get traffic via SEO, it further nurtures customers who want to learn more about your products, your business, or your industry in general. 

A presence on social media does similar good. It allows prospects to learn more about your products, get a sense of your brand’s personality and voice, and engage with you by asking questions, posting comments, or sharing content with friends. 

Sometimes you fail to get traffic. Sometimes you succeed with traffic but fail to get conversions. You have to put both of them together in order to grow and grow profitably.

John Hart, VP of Operations & Ecommerce for Peepers

Inviting someone to join your email list is another great way to engage with consumers and teach them more about your products. Many businesses offer a discount code to convince people to join; others simply promise compelling content. Whatever you decide, providing the option to subscribe gives you a way to stay in touch with someone, even if they haven’t made a purchase yet. 

When you need to expand your reach further, try partnering with micro-influencers. 

“What I really recommend to brands right now,” Amanda told us, “is to work with micro-influencers or use the audience that they already have built out, because it’s getting very expensive to acquire new audiences through paid search and social platforms.” 

Micro-influencers have between 10,000 and 50,000 followers on social media. “If your brand is in line with that micro-influencer,” Amanda says, “chances are their followers are also going to be in line with your business.”

⚠️ Choose your acquisition tactics carefully 

Though we’re talking about awareness and acquisition right now, the methods you use to drive traffic to your site should target prospects that will eventually convert. For example, you might drive a lot of traffic to your website via a podcast. But the listeners aren’t in your target audience, and while they’re curious about your product, they never actually convert. 

Peepers, a brand that sells trendy eyeglasses, ran into a similar issue. The business, like many other ecommerce stores, is trying to diversify how it’s finding customers and getting traffic to its store. The team experimented with some nontraditional routes, and though they had great ads and strong content, they drove traffic—but not conversions.

As John Hart, Peepers’ VP of Operations & Ecommerce told us, “Sometimes you fail to get traffic. Sometimes you succeed with traffic but fail to get conversions. You have to put both of them together in order to grow and grow profitably.”

A a screenshot of two people styling a pair of Peepers reading glasses
Peepers makes trendy eyeglasses. Peepers

Phase 2: Consideration 

Consideration is all about developing and nurturing the relationships you have with the people you acquired during the awareness phase. When a prospect reaches the consideration stage, they’ve identified a need for your product. They might need it to solve a problem, spark joy, or give as a gift. When someone reaches this stage, they’re aware of your business, what you do, and the types of products you sell. They might be on an email list or follow you on social media. 

Amanda cites email marketing as the best tactic for prospects in the consideration stage of the marketing funnel. The benefit? These individuals have already bought into your brand at some level because they’re on your email list. 

“You can develop a strong personal story with email marketing,” says Amanda. “You can do quite a bit of brand building in someone’s personal inbox.”

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⚠️ Don’t leave consideration out in the cold

It’s easy to ignore consideration and focus on the bookends of the funnel—awareness and conversion. Amanda warns that though some customers will convert right after you acquire them, oftentimes they need more pull to actually make a purchase. 

Phase 3: Convert 

This is the big moment—you’ve posted some great social media content, sent emails that were on point, maybe even worked with an influencer or two. Now, it’s time to drive home your product benefits, business ethos, and unique value props to get that prospect to make a purchase. 

If you don’t have a lot of money, run ads at the purchase stage to get the most revenue for your ad spend.

Amanda Tallon, Account Strategist at Shoelace

Two tactics are particularly effective at this stage:

💬 Customer conversations. A customer will likely reach out to you only when they’re actively looking to make a purchase. They’ll look to you to remove any obstacles in their path. Questions might include product clarifications (Can I see a photo of the earrings on?), shipping concerns (Will you ship to Canada from England?), or custom requests (Can you make this in blue?). Speaking directly to a customer builds trust, gives them a sense of who you are and what you’re like to work with, and can quell any remaining concerns they have.

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📰 Paid ads. “You can run paid ads at any stage of your marketing funnel,” says Amanda. “But if you don’t have a lot of money, run ads at the purchase stage to get the most revenue for your ad spend.” Paid ads can go farther at this stage in the funnel because prospects already know who you are, what you do, and the products you sell. Ads serve as reminders and should include copy that drives home the things that make your products and brand better than any of the other choices out there.

An image of a woman shopping for clothes in a retail store
Arturo Rey via Unsplash

The inverted funnel: inspire loyalty and get customers to return 

Enticing past customers to return is one of, if not the most, cost effective way to increase your average order value. “It can get really expensive for a business to acquire a new customer. The best case scenario is for a customer to return and make a second, third, fourth, etc., purchase and increase their lifetime value,” says Amanda. 

The Peepers team thinks about driving repeat sales at every point in their business plan, starting with product development. The team creates products with great designs that set them apart from competitors, uses high quality materials, and sells items at a very competitive price point.

“The next step of that, and something that we’ve tried to be even more focused on,” John says, “is delivering the best possible customer experience.” 

Aside from delivering top-notch customer service, here are three marketing activities we recommend for the loyalty section of the funnel. 

Try out a direct-mail campaign. The Peepers team sends direct mail to drive more traffic to their website. There’s so much to experiment with here. Send a postcard with a unique coupon code, a fun branded sticker set, a handwritten note—sky’s the limit. 

Ask for user generated content. After a customer makes a purchase, Amanda recommends sending an email asking for a photo of their purchase and a review. After customers provide the content, you could send a discount code to use on their next purchase. This gives you new content for the awareness stage of the funnel, brings people back to the website, and prompts them to use their discount code. 

Create a loyalty program. Another way to encourage repeat customers is through loyalty programs. Loyalty programs reward customers for making repeat purchases. Girlfriend Collective runs a loyalty program that offers perks based on the lifetime value of a customer. As a customer spends over time, they unlock benefits like free shipping and returns and early access to sales.

A screenshot of Girlfriend Collective's loyalty program
Girlfriend Collective

Tracking attribution through data and surveys

Now that you’ve completed your marketing funnel, the final step is to ensure that you know exactly where your traffic actually comes from. This tells you where to double down on efforts and where you can pull back.

Because analytics tools don’t take into consideration content that’s nurtured customers to the point of purchase, relying on them solely for attribution doesn’t provide the full picture. To solve for this gap, Amanda recommends setting up post-purchase surveys.

One client, she recalls, was ready to give up on TikTok as a marketing channel after both the platform and Google Analytics showed few conversions. But when they ran a post-purchase survey, TikTok was the third leading platform for new purchasers. 

“We thought the average order value was significantly lower than other channels in the business in general, and it was the second highest,” Amanda says. “So after that, we doubled down on our TikTok ad spend and realized that it was opening up an entirely new market for us.”

If you run a post-purchase survey, include the question, “How did you find out about us?” Be sure to leave a comment box alongside an “Other” option so that respondents can provide an accurate response. 

Unlock new opportunities with a marketing funnel

For some, the journey to becoming a customer is short and direct. For others, it’s a meandering path that winds through many obstacles before they finally commit.

The marketing funnel, while a clear framework for marketing activities, won’t be a true depiction of many customers’ journey. That’s to be expected: some customers will flow through acquisition, consideration, and conversion. Others will bounce back and forth before committing. 

Ultimately, marketing funnels help you clearly map your marketing efforts for any person, from raving fans to newcomers.

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Illustrations by Justin Rodriguez