The Conversion Funnel

By Javier Cristóbal Gutiérrez Comments

Uncertainty lies everywhere, especially in business. As a startup, besides change the world, your main mission is to survive.

Even after you have validated your idea (i.e. confirm that someone is willing to pay you for your product/service), you still have a lot of work to do in order to reduce your risks and increase your chances of success.

There are tons of metrics that can help you out to understand how your startup works (more on that here) and how you are doing it. I want to talk you about one of the most interesting and powerful metrics I know:

The conversion funnel

Conversion funnel

A conversion funnel is a concept in e-commerce that refers to the process whereby a user becomes your client. Once you’ve understood it, you will be able to redefine your product/service and marketing approach, in order to get more sales.

The first thing you need to know is:

There is no magic formula for a perfect conversion funnel. You need to understand the basis, set up your own, and adapt it to your startup and business model.

Let the fun begin! To understand the process, imagine you run an online t-shirt store.

1. Acquisition

How do users find you? Social networks (Facebook, Twitter…)? Referral (other websites)? Organic search (Google, Yahoo…)? Here you have to differentiate potential customers (they spend more than 2 minutes in your store, check out 2-3 t-shirts…) from people that leave your webpage very quickly. If many of your visitors leave the website quickly, you need to find out why.

Possible causes ➢ Your website is not loading fast enough, the home page of your store is very confusing, they cannot change the language easily…

2. Activation

Do users have a great experience in your website or online store? If so, they are more likely to register in your platform, or sign up for your newsletter. If they are not doing that, think about why, and how you can fix that.

Tip ➢ make something stunning to convert passive people into active users, for instance, use high quality pictures of your products so they see you as a professional store, offer them the first shipping for free if they sign up today…

3. Retention

Do users come back to your store to look for products? Are they opening your emails? For instance, if your stock is always the same they will probably stop coming back to you.

Note ➢ retention varies a lot, depend on the business model you are using. Just be very aware that almost no one will buy from you on the first visit. So make a good strategy to make them come back!

4. Revenue

Do you make money? Your clients may be even adding t-shirts into the cart, but not buying.

Why not? ➢ It could be that you don’t accept common payment methods (PayPal), shipping costs are expensive, return policy is not clear enough…

5. Referral

Do users tell others about your product/store? This would help you to reduce customer acquisition cost. If they don’t, you might need to make it easier or offer incentives for referrals.

Ideas to consider  ➢ Change social networks (For our case, Pinterest is more effective than LinkedIn), offer discount referral codes, make affiliate programs…

Stop planning, let’s do some work!

Once you’ve understood and set up your particular conversion funnel, you’ll want to improve it, right? You have two basic ways to do that:

a) Increase traffic rate:

Make your funnel bigger = Expose more people to your product/service.

But driving more traffic to your website takes a lot of time, it can be expensive and complicated, and it’s often unpredictable.

Start with the basics:

  • Write more blog posts.
  • Participate more in social networks.
  • Increase advertising

Have you noticed? Almost every marketing tool only produces results when you are actively working on them. If you stop, your traffic will probably slow down again.

b) Improve your conversion rates:

Make your funnel straighter = “fix” the parts most users “don’t like”.

For me, this is where you should start. The consequences of these actions are more predictable, and they tend to work faster than the ones aimed at increasing traffic rate.

Some suggestions:

  • Optimize your site for the mobile experience.
  • Offer incentives, i.e. give away an interesting e-book if they subscribe to your mailing list.
  • Increase trust, i.e. improve the money back guarantee (or make it more visible!)
  • All the examples you have seen in the first part of this article.

Imagine you were putting water through a funnel full of holes. To get more water at the bottom, would you fix the holes first? Or would you throw more water into the top?

“It makes no sense to drive traffic until you are capturing traffic.  - Tim Ferriss

Whatever you decide, remember: these two techniques to increase sales need each other! Focus on one at a time, but don’t forget the other one.

I hope these ideas may help you to get a clear vision and take you and your team to the next level!

Good luck in your journey!


About the author

Javier CristobalJavier Cristobal is an aerospace engineer living in Leon, Spain. Besides his love for airplanes, he is the co-founder of Brainy Octopus; technology and startup addict who lives trying to build a useful product that may help people out achieve their goals.


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