How to Reverse Engineer Your Funnel KPIs

How to Reverse Engineer Your Funnel KPIs

Check out the video below to see how to reverse engineer your funnel KPIs.

Get your free FunnelCalc here: FunnelCalc

Video Transcript:

How to Reverse Engineer Your Funnel KPIs

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Jordan: Now we’re going to talk about an incredibly common question and probably one of the most valuable things that you can learn because by understanding this, you’re going to be able to come across as just a wizard at Facebook ads. That’s really understanding how to reverse engineer your funnel KPIs so that you know, regardless of the funnel, regardless of the product, regardless of the industry, you know where you should be at, at each stage of that funnel in order to give you the best likelihood at achieving the end result that you want. Whether that’s breakeven ROI, whether it’s two X three X four X ROI, it’s going to give you the metrics that you need to make sure that you’re on pace for that.

David: Yeah, and this is really … I mean in a lot of ways this is really the guts of what this whole module is about because as we’ve talked about … We want to be Facebook advertisers, we want to be top 1% Facebook advertisers, but at the end of the day, clients do not pay for Facebook advertising. They pay for client acquisition. In order to be able to show and understand and prove your value in client acquisition, you can’t be limited to just understanding the metrics that exist inside of Facebook. This is really the crux of how do you understand the rest of the funnel and how do you use that understanding to work backwards to really inform great decision making. Jordan, to your point, it is kind of a little bit of wizardry. Most local entrepreneurs and even a lot of bigger business entrepreneurs don’t understand these things. As you start to to uncover these things and help them put this map together, they’ll be blown away by it and it will really increase the trust that they feel for you in terms of running their ads, but also advising them in other areas of their business.

Jordan: Yeah and so after you map out your funnel for your client, the next step that you’re going to take is to go in and reverse engineer your funnel KPIs at each step of your funnel. Before I get going, KPI stands for key performance indicator. Basically, it’s just the benchmark number that you’re shooting for, which says that, okay, if based on the goals that we set client, if I hit these lead numbers, these appointment numbers, whatever that number looks like, if I hit this, then I’ve upheld my side of the bargain. I’ve done what I need to do. The rest is in the hands of your sales team, your website, whatever that looks like, but it says, okay, I’ve done what I’ve committed to doing for you. Now obviously you client need to uphold your side of the funnel as well. What this will allow you to do is it will allow you to build a profitability roadmap along your funnel so that you know at every stage of your funnel, based on what your KPIs are, you know whether or not you’re on track to hitting your goals, you’re way off track.

Jordan: You need to make corrections accordingly. If your actual KPIs are underperforming, you’ll know the exact stage of your funnel that needs to be optimized. This is a really great point that I didn’t mention is let’s say you’ve been running a campaign for two weeks and it’s not profitable. There are 700 things that could be causing that funnel to not be profitable. If you don’t understand and know what your KPIs roughly need to be at each stage of the funnel, you’re not going to know where to start, right? The issue may be an ad to landing page problem, but if you don’t know, okay, roughly I need to be at a $7 cost per lead for this funnel to work and I’m actually at a $24 cost per lead that tells me immediately it’s either an ad problem or a landing page problem or a combination of both.

Jordan: It has nothing to do with the rest of the funnel, no matter how optimized this is. If I needed to be at $7 up here and I’m actually at $24 there’s just no chance it’s ever going to be profitable and so it helps you make sure problem solving decisions as well. Most importantly, when you understand how to do this, you’re going to have an instant realtime view into the projected profitability of a funnel as opposed to like in the example before running traffic for one week, two weeks, and then only after that two week period of time do you find out, oh, it turns out I actually lost a bunch of money. You’re going to be able to correct and optimize your funnel in near real time once you understand how to do this. Initially when David and I were putting this module together, we were going to whiteboard this all out. Then I realized that in the past, every time I’ve kind of walked through this white boarding exercise, everyone is like, their minds are blown. They’re like, “That’s amazing. Now how do I actually do that for my business, for my funnel?” Right?

Jordan: What David and I actually did was we went a step further and we just built you out a calculator that you can use for any funnel that you’re running traffic for. David, do you kind of want to give an overview of this calculator?

David: Yeah, for sure. The first thing that I want to say is like for those of you that are not spreadsheet people and you just saw this and you like, threw up a little bit in your mouth, we tried to really limit this so that the number of inputs that you have to focus on in this calculator are as limited as possible. All the math is already done. You’re not going to have to do calculations. You’re not really going to have to think about any of that stuff. You’re going to be able to match your funnel up, plug in a few of these numbers that are in gray, and it’s going to be able to tell you what your estimated costs are, what your costs need to be at every stage of the funnel. Let’s start with the first one.

David: We’ve got a webinar funnel and this is a five step funnel. The first step that we’re talking about is, okay, we’re going to run an ad. The second step of the funnel is the number of people that are opted in or what’s our opt in rate? Step three is going to be web attendance. The number of people that actually show up and watch that webinar. In this funnel, the next stage after watching the webinar is to schedule a call with a salesperson, so that’s step four. Then step five is the number of people that are actually purchasing the product. Okay, so those are the five steps of the funnel. Then we’ve got a couple of things out to the side as variables. The first variable would be the product price. We’ve got to know that, right?

David: Because there’s a big difference between a $3,000 product and a $300 product. In this example, we’re using a $3,000 product. Then the other variable is CTAC and that’s cost to acquire a customer. There’s really two different ways to look at this number. It’s also sometimes called return on ad spend. It just depends on which way you do the math, but CTAC is basically what, what does a client willing to pay to acquire a customer? We’re entering this as a percentage, not as a dollar amount. The important thing here is that regardless of whether it’s a $3,000 product or a $300 product, there is an acceptable cost that every business is willing and able to pay to acquire a new customer. Interestingly, we’ve listed all of these at 100% and that is not on accident at all. A lot of times customers, when they want to start running Facebook ads, they have a dream that’s not necessarily realistic, which is, okay, I’m doing, let’s say a local business is doing $300,000 in business a year and they spend $0 on marketing.

David: Well, they look at that and they go, well, it basically cost me nothing to get these customers. Now if I’m going to go on Facebook, I’m going to start running ads, I should be able to make a 10 times return on ad spend, right? Or for every dollar I put in, I want to get $10 out because they have unrealistic expectations. What I want to lay out for you at this point is that a good starting point for all of your conversations related to cost to acquire a customer is one-to-one. It’s 100%. Most businesses that are mature businesses in mature industries should both be willing and are probably going to be required to be able to spend up to a 100% of the first sell to get a new client. Okay, so with that Jordan, I’m going to stop and let you kind of take the next pass at this in terms of like, okay, webinar funnel.

David: We’ve talked through what the different steps are. Of course you’re going to map that to your own funnel. Now let’s talk about how we actually take this through and do the math.

Jordan: Yeah, totally. So you know, just to, to touch on this cost to acquire a customer number again, so this percentage here is the percentage of the product price that your client is willing to spend. In this case, this is 100% which also is 100% return on ad spend. The client is willing to spend 2,997 to get a 2,997 purchase. Assuming the client wanted to be at, let’s say a 200% ROI, that would mean that the clients were willing to spend up to 50% of that order value, so you’d drop in 50% here and you can see that all of these numbers change. These gray numbers are the inputs that you’re going to want to fill in for your funnel. For the sake of this, we’re just going to say, “Hey, we’re fine being breakeven on acquiring that customer because we know that we’re going to be able to sell them additional things down the road.” That’s how most businesses are run. In fact, many businesses, especially in the eCommerce space are willing to spend upwards of 200% to actually acquire that customer just because the long tail is so important there. That’s cost to acquire a customer.

Jordan: Now for these steps, we’ve put in some general benchmarks here. You’re going to want to have a conversation with your client around what these benchmarks look like. If your client has no idea what these look like, that’s a red flag. If your client doesn’t have a funnel in place, that’s probably almost a deal breaker. We’ll get into that later, but ultimately your client should have a decent idea at what these benchmarks look like for them.


They should have some sense of, you know, if they’ve ever run a webinar in the past, they should have a sense of, okay, how many people on your webinars actually scheduled calls? How many of those people actually purchase the product? We put in those benchmarks here. Really what you do is you work your way backwards. We started this to $2,997 product. Then if 25% of those people purchase that 2,997 products. If 25% of the people who get on a call actually purchase, that means that we can afford to spend up to $450 per call scheduled, right? If 15% of the people who attend the webinar actually schedule a call, that means that we can afford to spend $135 per webinar attendee. If 30% of the people who opt in actually attend the webinar, that means that we can afford to spend $40 per opt in.

Jordan: Now, as a Facebook advertiser, primarily in most client relationships, you are going to be responsible for the lead gen. It’s important to be able to speak to these other metrics that’s going to separate you from everyone else. But unless you’re having a higher ticket, more engaging client relationship, you’re typically going to be responsible for steps one and two of any given funnel, which means you’re going to walk through this process with your client and you’re going to get them to agree to these numbers. If that’s the case and they agreed to this, then you are responsible as a Facebook advertiser for driving leads that are less than $40.

David: Yep.

Jordan: I mean I’ve run into this scenario, I’m sure you can speak to this as well, David. There will be times when you’re driving leads at significantly less than $40 a lead. Maybe it’s $10 a lead and it turns out that the client is actually extremely over confident in how well they can actually close those clients.

David: For sure.

Jordan: [crosstalk 00:11:34] are going to get pissed at you, but this gives you insurance that allows you to say, okay, if we need to reevaluate this funnel, that’s fine. We can, but just understand that I am delivering on what we agreed upon.

David: Yep. This can be just super powerful to walk your clients through, so let’s just play with some of these numbers, Jordan, just so that people can get a sense of it. Let’s say, okay, right now based on this funnel, $3,000 price point and these opt in and attendance rates, we can spend about $40 per opt in, right?

Jordan: Yep.

David: What if we work on our opt in rate and we get that up to 40% how does that change? Okay, we went from 30 to 40 now we can spend $54 per opt in, right? What if the client comes back and says, “I can’t sell this product. I’m going to cut the price down to 1997.” Well you just went from being able to spend $54 to now you can only spend $36, right? You can just get a real fast sense just using this calculator coming in here and you know also start to realize how stinking important the rest of the funnel is to you as an advertiser, you’ve got to have an understanding of the rest of this funnel.

David: You’re going to at least speak intelligently to it because there’s a lot we can do to change that opt in rate and that costs upfront, but so much of that is based on what are they willing to spend CTAC. Another thing here would be like it is a really common thing is what if a client says, “Well, I only want to spend … I want a five to one return on ad spend.”

David: You would put 20% in CTAC. Okay, well now we can spend $7 okay? You may be able to buy leads for $7 but you may also not even be able to buy $7 leads, in which case you would basically tell somebody if this is all you’re willing to spend, if your CTAC has to be 20% I don’t think I can get you results because I don’t think I can buy leads in your industry for $7, right? That’s why this can be a super powerful conversation.

Jordan: Yeah, exactly. I mean that’s a webinar funnel. Let’s drill down into some other funnels. We can take a look at a gym funnel here. This is a gym funnel where it’s an ad to an opt in for some sort of free personal training session with the intent to have someone have a great personal training session and ultimately enroll them into the gym for a year long membership.

Jordan: Now it’s really important here that for a gym specifically or really most subscription products you’re never going to be … I shouldn’t say never. You will almost never be profitable on the first month. Really what you need to understand is that if this company, whether it’s a gym, software product, whatever, if they want to drive traffic via ads, they have to be willing to at least look at a one year LTB because there’s really just no way to subscribe people into a low ticket monthly offer, subscribe cold traffic into a [inaudible 00:14:29] to get monthly offer via ads profitably, just not possible. What we have for the product price here is the gym one year value. Obviously if the individual remains a member for longer than a year, then that’s pure profit and pure upside, right? We’re assuming that the gym is fine being breakeven over the first year of a membership.

Jordan: We just did same thing as the webinar up above. We assume that of the people who click on the ad, 30% opt in. Of those people, 20% actually show up and of the people who actually show up and go through the personal training, 45% sign on to be members in the gym. You can see what that does to … You can afford to pay $113 per show up, $564 per membership signup, which is the same as the one year value, and you can pay $34 per lead. Now let’s say the gym really sucks at converting people from a free personal training to members and they’re only closing at 20%, then-

David: Google sheet did not update.

Jordan: Google sheet did not update, so we’ll take a look at that. You are able to spend significantly less as an opt in.

David: Yep, for sure. Then this is really … I just got to say one more thing before you jump into the econ funnel. This is really exciting to me. One of the things that I love about seeing these numbers is it actually shows you how big the levers are down funnel, and so you can really end up becoming a trusted advisor for your clients. Even though you’re running Facebook ads, you can be like, “Hey guys, do you realize that every in-person show up that comes into your gym is worth $113? Do you think it might be worth staffing just a little extra during your busy hours? Because I’m sending you five people a day, and some of those … ” It’s like when you help a business understand every person that walks in is worth $113, that can actually create business operations change, not just advertising change.

Jordan: That is really how you become more sticky and how you really embed yourself with a client is being able to offer those little insights. Because those little insights, you can’t sell those as standalone. It’s like, “Oh, I’m going to give you all sorts of little insights throughout our working relationship.” That’s never going to close a client, but that will maintain the relationship with the client over the long term and I know that’s something that really differentiates you and your agency, David, and that’s something that you’re really good at.

Jordan: Taking a look at the eCommerce funnel, this is a very simple funnel, right? Low ticket product for 150 bucks, so someone sees an ad of the people who click the ad, 15% of the people who see the landing page are actually going to add that to their cart. Typically, in the average eCommerce sales funnel, you get a 60% cart abandonment rate and so 40% of the people actually complete the purchase. Based on that, again, we’re assuming we’re fine being break even. That means that we can afford to pay $23 per add to cart and $150 per purchase.

Jordan: Now, this is actually a really important metric if you’re running eCommerce ads because typically when you’re just starting out, that first optimization you’re going to make is for an add to cart. If you don’t do this math ahead of time, you’re going to have no idea whether or not your add to cart numbers is within KPI or not. This is really powerful for any eCommerce funnel that you decide to run.

David: You can take this and we wanted to make sure that we give you a five step example, a four step example and a three step example with the hope that you can use this and you’ll be able to match that to your funnel. All you got to do is go in and change okay, is it an opt in, is it a web attendee or whatever, but you don’t actually even have to change the math. You really literally can change the labels to match whether you’re working a one or a three step, a four step or a five step funnel. You come in, you’re able to fill in just simply the numbers in gray, which is four, five, six numbers, and you’ll have a very accurate picture of how your funnel needs to perform and how you fit into the overall funnel with the traffic and the ads that you’re driving.


How to Create Facebook Ads That Convert

How to Create Facebook Ads That Convert

Regardless of what business you are in, Facebook offers the best solution for creating low cost and high converting advertisements as long as you are doing it correctly. According to Pew Research Center, 68% of the U.S. adult population are using Facebook and 74% of those users check the platform every day. That means there is a ton of opportunity for getting your ads in front of people.  

However, creating Facebook ads can come with its challenges. 

Perhaps you don’t consider yourself to be much of a copywriter and the thought of writing an ad is nauseating. Or maybe you are a fairly decent copywriter and you already have some Facebook ads running, but they are not converting no matter how great your copy is.

Don’t fret, there is a solution to your Facebook ad woes. Creating Facebook ads that convert isn’t as difficult as you might think. You just need to have a grasp on the following: 

Understanding Your Target Audience

Facebook advertising all starts with understanding exactly who your target audience is. If you haven’t identified who your target market is, you will need to start by creating your customer profile

Creating ads for your target audience holds a lot of power because these users will resonate with your offer and lower your ad costs. If you are targeting the right people on Facebook, they will be significantly more likely to engage, click, or even share your message. 

To give you some better data on who your audience is currently, you can check out your Facebook Audience Insights. This gives you some great information on exactly what kind of people are already interested in your page. 

The Purpose of Your Ad

If you didn’t already know, your Facebook ad serves one purpose, and one purpose only. That purpose is simply to get your prospect to click through to the landing page and convert on that page. Your ad does not need to sell your product, talk about yourself, your business, or your brand. The number one purpose is to get your prospects to click through to the landing page with the intention of converting. 

In this case, a conversion could mean a number of things. It could mean making a sale, but it doesn’t have to. It could just getting them to read an article and pixeling them for retargeting purposes. 

Conversion = DOING the action you are optimizing your ad for. It doesn’t always mean making sales. 

What does this mean?

As we are creating our ads, it is very easy to get caught up in all of the features and benefits of our products and services. However, none of those things matter. The only thing that matters is getting our prospect to click on the ad and convert on the landing page. It almost seems too simple, right?

In order to achieve this, you will want to refer back to your ideal customer (or customer profile). The idea is to twist the knife of their biggest pain, and emphasize how great their life will be after they purchase your product. This helps you hone in on why your product or service will benefit them and help solve their problems. You can think of this in terms of pain versus pleasure or anxiety versus ease. 

Elements of a Facebook Ad That Converts: 

  • Compelling copy that gets the click and pre-frames the prospect for the landing page (tells them what to expect once they click) 
  • Continuity between the ad and the landing page (same headline / similar messaging) 
  • Ad creative (image or video) that catches the prospect’s attention and looks native to Facebook (ie: stay AWAY from stock images of people… usually) 

The ad creative typically has the greatest impact on your click through rate. Changing and testing the CREATIVE is generally the biggest lever you can pull when creating ads. 

The ad headlines and post text are the second most important elements in an ad. These elements should serve to “call out” the prospect and give the prospect something he/she wants, as well as telling the prospect what to expect on the landing page. 

Split Testing

The best way to create Facebook ads that convert is, without a doubt, by split testing your ads. Ad performance is extremely data-driven and takes out all of the guessing of which ad will perform better than the rest. With low spend, you can find out which ad is the winning one with a split testing service like Adespresso

Split testing is a marketing strategy where you take two ads of a marketing campaign and test them against each other to analyze which one will deliver the best results.

When you split test your Facebook ads, it is important that they each generate a good amount of data before you make any decisions on which ones to delete. The data can be in the form of likes, comments, clicks, conversions, or other. It is best that you do not immediately start testing ads with multiple elements. Instead, start with a headline variant or just a different image. You can optimize your ads little by little, slowly eliminating those that have very low performance. 

By using data and split testing, you can continually optimize your ads for better performance. It doesn’t even matter if you’re the best copywriter in the world. If you aren’t testing your ads, you won’t be able to improve them. Data always wins the race in the world of Facebook advertising.

The 7 Lenses to Look Through When Creating Your Customer Profile

The 7 Lenses to Look Through When Creating Your Customer Profile

Regardless of what type of business you’re in, having a customer profile identified early on is the single most important element you need to properly market your product or service. A marketing campaign without a customer profile is arbitrary in nature. It’s essentially taking a giant (and expensive) wild guess. In order to effectively advertise, you need to know exactly who your audience is. 

When you have a clear and definitive understanding of just who your audience is, it will make a world of difference. You will be able to effectively target the right people to see your ads so that more sales are made and your business can grow. 

In order to determine who your audience is, we’re going to discuss the 7 lenses to look through when creating your customer profile. We are breaking these down into two groups:

A.) The Customers

B.) The Product or Offering

The Customers: Demographics and Psychographics 

1. Who They Are

The first step to creating your customer profile is to figure out the demographics of your audience. This is one of the easiest ways to hone in on what your audience looks like. You can start by asking yourself questions like “Where does my target customer live?” “How old are my customers?” “Are they primarily male or female?” “Do they own their home or rent?” “What is their annual household income?” 

By asking these questions and narrowing in on what your target customer looks like, you will be able to easily refine your customer profile. 

2. What They Love/What They Hate

When determining who your audience is, it’s important to ask yourself “What does my ideal customer love?” Along with figuring out what they love, you’ll also want to ask “What does my ideal customer hate?” 

For example: Let’s say a tattoo removal company is looking to advertise on Facebook. They need to consider what their audience loves and hates.

They most likely love:

  1. To show off new tattoos
  2. When people say “what is that tattoo?”
  3. Being a part of a normalized subculture
  4. Creativity and self-expression

They most likely hate: 

  1. Ugly tattoos from 1979
  2. Their ex’s name on their arm
  3. Faded, cheap looking tattoos

By getting inside the mind of your audience and figuring out what they love versus what they hate, you will be able to come up with brilliant and effective ad copy for future advertising campaigns. 

3. Before State/After State

The next thing you’ll want to think about in terms of your audience is what their state of being is before using your product and what their state of being is after using your product. This helps you hone in on why your product or service will benefit them and help solve their problems. You can think of this in terms of pain versus pleasure or anxiety versus ease. 

Let’s use a lead generation client as an example for this one. 

So, their before state would look something like this: 

  • They’re in a constant anxiety, wondering where your next sale is coming from
  • They don’t have enough money at the end of the month to pay the bills
  • Their wife is supportive, but she’s starting to resent the late nights and cheap dates

And their after state would look something like this: 

  • They don’t worry, they just get up in the morning and do what they want to do
  • They don’t have to check their bank account balance anymore
  • They take their wife on the vacations that she deserves 

Can you see the distinction? By digging deep and understanding what the before and after state of your customers will be both before and after they use your product can help you become a better advertiser. 

4. The 5 Whys

The next lens we’re going to look through to determine your customer profile is the lens of 5 Whys. It starts by you asking yourself “Why do they want (or need) your product? Then it is followed by asking “Why do they need that?” 

This step is basically giving yourself permission to act like an annoying 4-year-old who asks the “Why” question for literally everything. If you can answer the question of why someone needs your product, then you can continue going down the rabbit hole of asking “Why?” 4 more times to get to the good stuff. 

Not sure what I mean? Here’s an example: 

Let’s say you own a lawn care service. You start by asking the initial question of “What do they want (or need)?” Well, that’s easy. They want their lawn mowed. The follow-up question to ask is “WHY do they want their lawn mowed?” Then you can answer that with a little extra thought. They want their lawn mowed because they don’t want to do it themselves.

“Why?” Because they want the spare time.

“Why?” Because they want to feel like they earn enough money to have people do things for them. 

“Why?” Because paying people to do things for them makes them feel good about themselves. 

And finally, the fifth question… 

“Why?” Because they want to see themselves as successful and having “arrived.” 

The Product or Offering

We’ve covered the lenses about your audience. To continue to determine your customer profile, now we’re going to look through the lenses that are about the product or the offering. 

5. Features

So now that we know more about what our audience looks like from asking important questions about who they are, what they love/hate, what their before and after state is, and the 5 whys, we can dive into the product itself. First and foremost, let’s discuss the product features. 

The features are about describing what it is you are selling. You have to ask yourself “What is the product?” This is literally all about what the product is and what it does. 

Your product could be a coffee maker. Going a little deeper, the features of your product could be that it’s a coffee maker with a stainless steel carafe and 3 different settings for making coffee. 

Again, this is just talking about the physical features of your product (or service). This is different from what comes next.

6. Benefits

A very important thing to understand is that determining the benefits is different from describing the features of a product or service. Features are describing the “thing”, while benefits describe what makes the “thing” great and useful. What does the “thing” do for you? The benefits are all about what the product or service does to make the users lives better. 

Let’s use the same examples given in the previous section. If what you’re selling is a stainless steel coffee maker with 3 different settings for making coffee, then the benefits could be: 

  • Time and energy efficient 
  • Gives you the boost you need to get through the day 
  • Affordability
  • Sustainability/Eco-friendly 

7. Unique Points of Differentiation

Finally, the last lens to look through when defining your customer profile is the the unique points of differentiation. These points are determined by asking yourself “How is this product or service notably different from other things that are like it?” 

To figure this out, you’ll want to pinpoint your core strengths and capitalize on them. Figure out what makes you different from everyone else in your industry and use it to your advantage. Perhaps your business is better at storytelling. Or maybe you appeal to peoples’ benevolence because you’re a nonprofit that is solving the poverty problem in developing countries. Whatever your unique points of differentiation are, be sure to highlight them.  

So now it’s time to get into the mind of your customer. Once you are able to answer all of the questions from these 7 lenses, you will have some really great material for creating highly effective ad copy and creative that will convert into sales. 

Why Does My Business Need a Sales Funnel?

Why Does My Business Need a Sales Funnel?

Sales funnels are one of the most important things your can build for your business. 

If you aren’t sure whether or not your business needs a funnel, you’ve come to the right place. Let me first start off by answering the question of whether or not you need one. YES. If you are a business, you need a funnel. 

Who needs a sales funnel? Everyone. 

Why does your business need a sales funnel? That’s easy: to make sales. If you are not collecting leads online, you need to be doing so. If you are collecting leads online but don’t know what to do with them, you need a funnel in place to engage with those leads, and essentially, make sales. 

Here are the top reasons you need a sales funnel for your business:

1. Sales funnels exist to help people move through the customer awareness timeline.

The customer awareness journey goes like this: 

Customer Awareness Journey

This customer awareness timeline is applied to the sales funnel with a corresponding stage for each step. 

So let’s start with the basics. If you don’t know what a sales funnel is, it’s a lot like the traditional kitchen gadget you’re familiar with. It starts off with a wide mouth at the top of the cylinder that collects whatever substance you are pouring into it. From there, it continually gets more and more narrow until the substance drips through a skinny point at the bottom. 

If you apply that visual to the sales process, it goes like this: 

At the top of the funnel, numerous visitors can enter in. This part of the sales funnel is referred to as the Awareness Stage. Potential customers will start to become aware of your product, whether they came from an enticing promotional offer, free download, or something else that caught their attention and brought them into your funnel. However, they are still unaware that they have a problem and that you could potentially solve that problem. 

In the upper-middle section of the funnel is the Interest Stage. The people who progressed on from the Awareness Stage that become interested in your product or service are now here. The potential customer is now problem aware, meaning that they now understand they have a problem and that your product or service offers a viable solution. 

In the lower-middle section of the funnel is the Decision Stage. The people who’ve moved on from the Interest Stage have now dropped into this section after becoming solution aware. These people are the ones who found your product and realized that they have a problem that you can solve and are now making a decision of whether or not they will purchase it. 

If those prospects have moved into the bottom of the funnel, they’ve made it to the Action Stage. This is where they have become product aware and they actually purchase your product in order to solve their problem. If you have successfully brought people all the way through to the bottom of your funnel, you have achieved the goal of the sales process. 

If you’re really, you’ll have customers who are considered most aware. These are the ones who know about your product or service, have purchased before, and are likely to keep coming back for more. They are your brand advocates. 

A sales funnel incubates people through this entire customer awareness journey. It also gives you the ability to create multiple touch points that are relevant to the place people in.

For example: if a prospect is in the Interest Stage and they are problem aware, that means they have realized they have a problem and that your product could be a solution. So, your messaging should include things that twist the knife on their pain points. 

2. Having a sales funnel means building an asset that your business owns.

In this case, the asset is the attention of the people on your list. Whether it is through email, chatbots, social media, SMS, or something else. All of these people on your lists have given you permission to market to them, and there is a lot of power in that. You audience is your company’s most valuable asset, and owning that asset is priceless. 

By having an audience of people who have opted into learning more about your business, you’ve been given permission to communicate and engage with them as they navigate through the customer awareness timeline. Throughout this process, you will be able to convince them that your product is the best solution to their problem. 

For example: 

Let’s say that you have someone that downloads a lead magnet from your website. Ideally, you want that person to eventually lead into your coaching program. So, they go through the lead magnet, and then later on you make an offering and they don’t purchase. With an online funnel, you can continue to communicate with them. So, the fact that they didn’t buy your product means they’re not at that stage of the customer journey yet. On the bright side, you can now continue to nurture them for as long as you need to, until they either decide, “Hey, this offering is not for me and I don’t want to engage with this brand anymore.” Or, eventually they will purchase your product. 

Having the ability to engage and communicate with your subscribers at all stages of the customer awareness timeline had several advantages. 

According to a Salesforce and LinkedIn study, the average B2B company has a database of 50,000 individuals and spends an average of $150 to acquire a single email address. This means the email database (the owned audience) alone is worth $7.5 million, likely making it the largest asset under a marketer’s control, and possibly the company’s largest asset.

The cost of building this audience shouldn’t be looked at as an expense, but rather an investment. Nurturing that audience is important for building brand your credibility and authority. By having an online sales funnel, you will build an asset that will continue to help your business grow. 

3. Sales funnels make it easier to stop chasing bad leads, and to go after quality leads.

Having a sales funnel setup means that you’ll be able to score your leads in terms of quality. Lead scoring is the method of assigning value to leads based on their engagement behavior and demographics. You can score your leads based on various attributes like the information they’ve submitted in a survey, if they are a recent website viewer, or if they’ve made a purchase in the past. 

By having a sales funnel set up, you are giving yourself the ability to focus on higher quality leads that are more likely to purchase from you. You will have the opportunity to ask the customer to commit to a higher level of interaction if you include steps that offer things like phone consultations or product demos.

For example: 

If you’re a software company and a prospect is willing to set up a 30-minute demo walkthrough with your business, they are more likely to buy from you than someone who downloaded a PDF about the features and benefits of your software. 

There are numerous reasons why your business should have an online sales funnel. Having one in place is important for success in both the B2B and B2C spaces.