As long as a sales funnel is just a triangle diagram on paper, it does nothing for you, because it doesn’t tell you which stage of your own business is losing customers. In this piece I want to take the funnel off the poster and show you how one simple number per stage tells you exactly where along the path to purchase you’re losing people.
What Is a Sales Funnel, and Why Is It Called a Funnel?
A sales funnel is the path a stranger travels to become a buyer, from the moment they first hear your name to the moment they pay. It’s called a funnel because at every stage there are fewer people than at the one before. In an online shop, for example, plenty of people see the ad, fewer click it, fewer than that put something in the cart, and in the end only a small share complete the payment. That step-by-step narrowing is what gives the funnel its shape.
If you look at a business like a body, the mouth is marketing and sales, the organ that brings customers in. The sales funnel is nothing more than a detailed map of that same mouth, showing where the customer enters and what happens to them at each stage on the way to buying. The funnel ends at the first purchase, and from there the heart takes over, meaning loyalty, which keeps the customer coming back.
The Four Stages Every Purchase Passes Through
There are plenty of funnel models out there, but they all share the same four stages and simply give them different names. It doesn’t matter what you call the stages, you only need to know what each one measures for you:
- Being seen, meaning how many people even know you exist, measured by site visits, page reach, or ad impressions.
- Interest and entry, meaning how many of those people take a step, like clicking a link, sending a DM, or adding an item to the cart.
- Decision, meaning how many actually reach the buying stage, like landing on the checkout page or asking for a quote.
- Purchase, meaning how many of the people who got that far actually paid and became customers.
There’s a fifth stage that comes after the funnel, the customer returning for a second purchase, but that’s the heart’s job and a separate discussion. What these four stages do for you is break one final number, like total sales, into four pieces so you can see where the problem is, because as long as you only look at the last number you’ll never know which stage is losing you customers.
The Number That Turns the Funnel From a Poster Into a Tool
The whole value of the funnel sits in one simple calculation called the conversion rate between two stages: the number of people at the next stage divided by the number at the previous one. Work that ratio out for every consecutive pair of steps and you get a chain of percentages that shows you exactly how many people you kept at each step and how many you lost. Those percentages are what turn the funnel from a decorative shape into a diagnostic tool.
Say you run a clothing page on Instagram where 100,000 people see your posts each month, 2,000 of them tap through to your site, 300 of those add something to the cart, and 60 complete the payment. Now work out the conversion rate at each step: 2 percent from being seen to entering, 15 percent from entering to the cart, and 20 percent from the cart to purchase. Before you laid those numbers side by side, all you knew was that you make 60 sales a month. Now you can see the weakest step is the very first one, because only 2 percent of those 100,000 people make it onto your site.
Which Stage Has the Biggest Drop-Off?
Once you have the percentage for each step, finding the main drop-off is easy, because you just look for the step where the biggest share of people disappears. But there’s one thing many people miss: the lowest step of the funnel, the moment of payment, usually has the biggest drop-off of all. According to research from the Baymard Institute, around 70 percent of online shopping carts are abandoned before checkout, meaning 7 out of every 10 people who put an item in the cart and came within one step of buying end up walking away.
That number tells you the problem often isn’t a shortage of traffic but a drop-off at the bottom of the funnel, where someone was ready to buy and one small obstacle pushed them out, like high shipping costs, a forced sign-up, or a complicated checkout. So before you spend a pile of money on ads to pour more people into the funnel, go first to the step that’s losing the largest share, because repairing that one step is usually cheaper than doubling your traffic and pays off faster.
A sales funnel speaks about the present, about the drop-off happening right now across the different stages of your sales. That’s a different question from sales falling compared to the past. If your sales have been sliding for a few months and you want to know when and why it started, you need to compare today’s number with the old one, which I covered in full in why your sales dropped.
The Common Mistake That Eats the Whole Budget
The most common mistake is that the moment sales fall you go straight for the top of the funnel, meaning more ads and more traffic. But if your biggest drop-off is at the bottom of the funnel, the new people you buy with ad money leave at that exact same step, and all you’re doing is repeating the same weak conversion rate at a higher cost. Put simply, when one step turns away 70 percent of people, doubling the input just doubles the number of people turned away.
The right order is the opposite: first work out the percentages in your own funnel, then find the step with the biggest drop-off and fix only that one, and only once that step improves go after more traffic. Then the same ad budget you had before produces more, because this time the people you pour into the funnel reach the end at a better rate.
Wrapping Up
A sales funnel is the path from stranger to buyer, and its real value isn’t in the pretty diagram but in the numbers you get when you calculate the conversion rate between each pair of stages. Those numbers tell you where along the path you’re losing the most customers, and that point is usually down near the payment, where someone was ready to buy and one small obstacle pushed them out. Until you’ve worked out the percentages in your own funnel, every decision about ads and budget is a blind guess, but once those four or five numbers are in front of you, you know exactly which step to fix first.