What is a sales funnel and what is it for?

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Understanding exactly what it takes to convert a prospect into a customer can help increase sales. Marketers structure the customer journey using a sales funnel model and then study the key performance indicators at each stage of the journey in detail. This article explains what a sales funnel is, what stages it consists of, and what metrics to track.

What is a sales funnel
The sales funnel is a marketing model that shows the paytm database process of a customer's transition from the first contact with a product to the completion of a purchase. This model includes a number of successive stages at which potential customers are screened out.

The sales funnel stages are based on the AIDA model – a universal model for any type of business and the basis for all other funnels, which consists of four stages:

Attention. A potential client learns about the existence of a product. Tools used: contextual advertising, banners, social networks. For an offline store, a sign and leaflets are used.

Interest. The potential client shows interest in the product. The client asks questions and studies the information. The following are used: sales texts, attractive images and videos, customer reviews.

Desire. Making a decision to buy by a potential client. You can use: bonuses, discounts, promotions that are limited in time.

Action. Potential customer makes a purchase and becomes a real one. Different payment methods, guarantee, free or fast delivery are added.

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Sales Funnel Example
A potential client gets to the site through contextual advertising.

He views the product and agrees to receive emails with promotions.

Receives an email with a great offer. Follows the link and adds the product to the cart, but does not place an order.

The company sends an email reminder about a forgotten product in the shopping cart, and the user makes a purchase.

Why Work with a Sales Funnel
Find ineffective communication channels.

Evaluate results accurately.

Overtake the competition.

Adapt to the interests of clients.



What metrics should you track?
NPS
The Net Promoter Index helps to assess the audience's loyalty to a product.

Formula:

(Number of promoters – number of critics) / total number of respondents * 100%

LTV
Customer lifetime value reflects the revenue a company generates over the entire duration of its interaction with a particular customer.

Formula:

Average sales price * average number of sales per month * customer retention period in months

ARPU
Average revenue per user should be compared with the cost of user acquisition in order to understand how much more income the company receives than it spends on increasing traffic.

Formula:

Revenue for the period / number of users for the period

Conversion to application
Reflects the level of interest of the target audience to the product. Conversion can be included not only in successful orders, but also in any other significant actions on the site.

Formula:

Number of applications for the period / number of users for the period * 100%

Conversion to sales
It can reflect how convenient or inconvenient the in-product payment process is for users. Conversion per sale can vary depending on the number of incoming leads, and growth is often associated with qualitative changes in the sales department.

Formula:

Number of payments per period / number of applications per period * 100%

Average bill
Shows how much money a client spends on one transaction and how effectively it is possible to motivate him to buy related products.

Formula:

Revenue for the period / number of payments for the period

Retention
Shows how often customers return for repeat purchases. It is important to collect feedback if the indicator drops.

Formula:

(All clients at the end of the period - new clients for the period) / all clients at the beginning of the period * 100%



Conclusion
A sales funnel helps structure the process of interaction with potential customers, from the first contact with the product to the closing of the deal, and even further interactions. A sales funnel gives companies insight into how to better understand the needs of their customers, optimize marketing and sales efforts, and improve the efficiency of the sales department.