You may have heard the term sales funnel before and have been extremely confused by its meaning or how it works.
A sales funnel is what every successful business needs and in today's article I'm going to walk you through each step.
What is a sales funnel?
A sales funnel is a path someone takes before they become your customer.
Let's use an Amazon customer as an example.
I search for a product on Google and I'm redirected to Amazon in their search results. I create an account and place an order for the product I was searching for. The order arrives and everything was perfect. I now tell my friends about Amazon and I continually open their emails and buy from them on a regular basis.
Their sales funnel would look something like this:
Regardless of the industry you operate in, you too will have a sales funnel and it will look very similar to the above. Now I'll break down each step to simplify the process.
1. Traffic source
To become a successful online business you need traffic. Traffic can come from:
- Facebook ads
- Twitter organic reach
- Bing Ads
- Forum posting
- Blog posts
- Any online medium
There is no right or wrong method and the channels you use completely depend on your budget, goals and industry. Every sales funnel starts with a new prospect finding your website.
Your website doesn't magically appear when they turn on their laptop, they must find it.
When a prospect lands on your website they have a few actions they can take. They are:
Go to any website that is trying to make money and these are your options.
Having an opt-in form is optional but you'd be crazy if you didn't have one. At this level of your sales funnel is where things get interesting. The prospect has landed on your website and you want them to make action #2 or #3.
If you've got their email address you can nurture them via email marketing and send offers, if they convert right away then great, you've got yourself a customer.
But what if they do neither?
Do you see the retargeting bubble in the image above?
Not all your website traffic will take action #2 or #3.
Most will leave and you'll have the option to loose them forever, or retarget them. If you're running paid ads, your conversion rate will increase if you retarget them by serving adverts on other platforms to bring them back.
In a perfect world every website visitor will convert into a customer.
In reality around 3% of all traffic on average converts. Customers are 7x more likely to reorder again than a new prospect so it's imperative that you keep them happy and spending money with your business.
Have you ever ordered a laptop online and when you get to checkout they ask if you would like to buy anti-virus software, a carrier case or mouse? This is one example of online businesses trying to up-sell you with products.
Once a prospect turns into a customer, your want to have more products to sell them. This is why Amazon and other big businesses send you emails everyday about items you may be interested in.
Every customer has a lifetime value (LTV) which is the amount they spend at a business during their relationship . The higher your customer LTV the more revenue you will make. If your business model only has one product for sale, see if there's other things you can up-sell after they convert to further increase the LTV of your customers.
4. Refer a friend
Once a customer has bought everything they want, you can still leverage them by asking them to refer-a-friend and incentivize them for doing so. If your online business is new and lacks social proof, getting customers to refer their friends will convert at a much greater rate than any paid ad or blog post. Refer-a-friend schemes are perfect because they cost you $0 to promote and bring you highly targeted traffic.
This also makes a business more sustainable long-term.
To run a successful online business you need a sales funnel. Without one you potentially cap your profits and what your business can achieve. Having one in place also allows you to measure different parts of your business and makes testing and optimisation much easier.