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What Is An Ecommerce Sales Funnel?

Creating an ecommerce conversion funnel can provide insight into the journey customers take on an ecommerce website or application as they move towards conversion objectives. A funnel is designed to educate visitors, qualify them as buyers, and convert them into customers - as efficiently as possible.

The funnel is a familiar sight to all of us. The "funnel" is a useful metaphor in ecommerce that illustrates the different stages of the buyer's journey. As potential customers move from the wide top of the funnel to the narrow bottom, their knowledge and needs are refined as they flow through the conversion path, learning more about your site and ultimately making a purchase.

Conversion tactics are sometimes referred to as upper, middle, and lower funnels. These refer to the level of education your potential customers possess about your product and their likelihood of making a purchase soon. There are clearly different product analytics strategies for reaching users at the top, who are kicking tires, as opposed to customers at the bottom, who are ready to commit.

Upper funnel users are just beginning to research and may not know exactly what they are looking for. They are primarily interested in general information and checking out a variety of brands to determine which might best meet their needs.

Mid-funnel users may be aware of popular brands and have opted in to receive information from them. They understand better what they want and are eliminating options that do not meet their expectations.

Lower funnel users have already selected their favorite brands and are eagerly reading reviews and customer testimonials to determine what they will receive as a result of purchasing from you. They have completed their preparations and are just about ready to make a decision.

A customer's purchase represents the ideal bottom of the funnel.

A series of micro-conversions usually precedes the primary conversion event. With product analytics tools, you can measure, test, and optimize a wide range of aspects of your ecommerce business. You can A/B test your ads, optimize your site to improve your search engine ranking, create more blog posts, and experiment with virtually every aspect of your online marketing strategy.

Having said that, some conversion rates tend to be tracked more frequently than others. Typically, these include the following:

  • An overall conversion rate represents the number of individuals who convert after visiting your website
  • The marketing channel conversion rate measures the return from different marketing channels. What is more effective, Google Ads or Facebook Ads?
  • The page conversion rate compares conversions on different pages of your site. This would make a great candidate for A/B testing.
  • The campaign conversion rate determines the effectiveness of your marketing campaigns
  • With the individual ad conversion rate, you can determine which ads generate the most qualified traffic and how well changes to them perform
  • In terms of keyword conversion rate, it tells you which keywords yield the best ROI

Dividing the number of conversions you receive over a specified period of time by the total number of visitors, then multiplying the result by 100, will give you the percentage.

Number of conversions / Number of total visitors x 100 = Conversion rate %

As an example, if your site had 500 visitors and 80 conversions last month, your conversion rate would be 16%. Your conversion rate can usually be viewed directly within the interface of most online advertising and analytics platforms.

It is a question that many product teams ask: if the same user converts multiple times, is that considered one conversion, or several? That is a good question. To capture this difference, companies often refer to this as a "Click Conversion Rate," distinguishing it from a regular conversion rate. Click Conversion Rate represents the number of visitors who convert, while standard conversion rate represents the number of conversions. Understanding CCR is essential to reducing churn.

Many businesses will find the two to be similar. Even so, this distinction may be useful in situations where you have a high number of repeat conversions and you wish to determine the conversion percentage of your actual visitors. If you wish to find out what percentage of visitors converted, regardless of how many times, you divide converting visitors by total visitors and multiply by 100.

Number of visitors who convert / total number of visitors x 100 = Click conversion rate

It may seem that the difference is insignificant, but clicks are only worth a certain amount. If they do not result in something valuable for your business, you need to make a change.

It is the percentage of shoppers who add items to an online shopping cart but abandon the cart before making a purchase. There may be a problem with your purchase flow, or you may be introducing new information at the very end of your funnel. (Perhaps a high shipping rate?)

1 – (x / x) x 100 = x%

Multiply the total number of completed purchases by the number of shopping carts created. Calculate the abandonment rate by subtracting the result from one and multiplying it by 100. The shopping cart abandonment rate would be 80% if you had 60 completed purchases and 300 shopping carts created.

The number of visitors who placed an item in their cart during the session. You can use these rates to gauge the success of your product selection, your marketing efforts, and the functionality of your site. You can also use them to determine whether you are showcasing your products in the most compelling manner, or if you are putting your most compelling products in the foreground.

In March 2020, Statista reported that 88.05% of online shopping orders were abandoned. Thus, it is clear that improving these rates can result in significant increases in revenue for your business.

Sessions with cart item viewed / total sessions = Add to Cart Rate

A business' LTV indicates how much revenue it can reasonably expect from a single customer. This indicator compares a customer's revenue value with the company's predicted customer lifespan. This metric is used by businesses to identify the most valuable segments of their customer base.

(Average purchase value x average frequency of purchases) x average customer lifespan = CLTV

To determine customer value, first calculate the average purchase value, and then multiply that number by the average purchase frequency rate. As soon as you calculate average customer lifespan, you can multiply it by customer value to determine customer lifetime value.

It is the average amount spent by a customer when he or she places an order on your website or app. The CRO strategy of many companies is to increase AOV either by getting people to add more items to their carts, or by enticing them to add more expensive items to their carts. You can also use AOV as a proxy for determining whether you are bringing the right customers to your site, since ideally you would like to attract more customers with a higher AOV.

Total revenue / Number of orders = Average order value

E-commerce retention refers to the frequency with which repeat customers return to your website and make additional purchases. This has a significant impact on LTV. There are a number of ways to improve retention, including offering more products, offering rewards for frequent purchases, making the site easy to navigate, elevating your brand's reputation, etc. In e-commerce, retention is often a key indicator of loyalty to a brand.

Number of users who make multiple purchases / number of users who make one purchase = Retention Rate

This is the number of people who return to buy a certain item or the number of people who return within a given period of time. Depending on the nature of your business, what kind of merchandise you offer, and whether you sell services or products, repurchase and retention may be identical.

You can define your repurchase rate by date—how many customers repurchased within 30/60/90 days—or by item.

Optimization of conversion rate (CRO) is the process of increasing the number of visitors who make a purchase on your website. CRO is all about understanding what your customers are trying to accomplish and how you can help them accomplish it. A lot of eCommerce businesses overlook CRO, but it can be a powerful way to utilize product analytics data to improve both user satisfaction and sales numbers, since even a small increase can have a significant impact. In the example above, if you are currently selling $1,000 per month in product, improving your conversion rate from 1% to 2% would result in an increase to $2,000 per month. You have doubled your sales!

The conversion rate optimization process is one that needs to be continually refined. It is a process of trial and error to determine what elements are effective for your ecommerce business. You can usually stick with a strategy once you have identified what works. To make it easier for you, we have divided it into seven easy steps:

  1. Describe your conversion event. What are your user's intentions? Ecommerce conversions are typically based on a complete purchase. It represents completion of a set of micro-conversions, such as adding an item to a shopping cart or completing a form. Conversion optimization focuses specifically on increasing the smaller conversions, as each can be a barrier to the complete purchase.
  2. Create a map of your big funnel. Once you have determined what action you intend customers to take, you need to plan out the steps. Generally, your conversion funnel should contain between four and six events. A common example is: Land on the homepage —> Browse products —> Add to cart —> Checkout —> Click "purchase."
  3. Establish drop-off points to highlight major opportunities. When tracking user behavior, you will see where your users are leaving or dropping off at the bottom of the funnel. In order to build a better funnel, these opportunities should be reviewed and improved. If your analytics platform automatically tracks your users' data, you will be able to identify where they left the funnel. However, if your analytics platform does not provide this functionality, you will have to manually track where people left your site.
  4. Look for quick and easy fixes that can have a significant impact. Examine each click at each drop-off point carefully. Which drop-off point results in the majority of users leaving? Are there any drop-off points where people become stuck? In addition to this, you should also examine funnels and paths. Analyze the actions users take when they do not convert. In general, you will want to understand how your target audience navigates your website.
  5. Divide users into two categories: successful and unsuccessful. By segmenting your users into two groups, you will be able to identify the actions taken for those who convert and those who do not. Next, you can examine the specific conversions and devise ways to predict the conversions of users. Then, your product can be designed to encourage more users to perform these conversion behaviors.
  6. Review your sources and optimize your messaging. Users can be categorized according to specific sources, such as a search engine, social media referral, etc. By doing this, you will adjust your marketing and landing pages accordingly to bring in higher amounts of traffic from each source.
  7. Make a prediction, test it, and repeat it. The key to efficient and effective CRO is to be creative and iterate. Create a hypothesis, measure the results, and test the results. You will then be able to learn the results of each test.

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