Is your funnel leaking?
A healthy funnel means that your marketing strategy is working. Your marketing tactics are all performing well, and each stage of your funnel is optimized to move as many customers to the next stage as possible.
While some drop-off is normal (it is a funnel, after all), too much drop-off between stages can mean that a part of your strategy is not working well. In digital marketing, we call funnels that experience outsize drop-off at any stage ‘leaky funnels’.
In this lesson, you’ll learn how to use key performance indicators to track the health of your funnel at each stage, determine whether your funnel is healthy or leaky, and take steps to plug the leaks and improve funnel performance at each stage.
Track key performance indicators for your funnel
You can measure the overall success of your marketing tactics at each funnel stage by tracking 5 long-term key performance indicators (KPIs). A KPI is a metric that has a significant amount of impact on your long-term business performance - here they are broken down by funnel stage:
- Awareness and Interest: Web traffic and list growth
- Desire and Action: Conversion rate and average order value
- Retention: Repeat purchase rate
These KPIs measure the success of any ecommerce funnel at a high level. If you think about it, every single marketing tactic you employ, despite the fact that they have their own success metrics (reach, opens, clicks, leads, return on ad spend, etc.), ladders up into 1 of these 5 KPIs. They are the overarching goals of your marketing strategy, and when all 5 are tracking well, that means your funnel is healthy.
Web traffic
What does it measure? The amount of people who visit your website within a given timeframe.
Where can I find it? Your ecommerce platform.
What are some marketing tactics that impact it?
- SEO
- Social media ads
- Email campaigns
- Email flows
List growth
What does it measure? How much your email or SMS list grows within a given timeframe.
Formula: (List members gained) - (list members lost)
Where can I find it? Your email service provider should provide this report.
What are some marketing tactics that impact it?
- Lead ads
- Sign-up forms
- Giveaways
Conversion rate
What does it measure? How many of your website visitors make a purchase within a given timeframe.
Formula: (Number of conversions / Total number of visitors) x 100
Where can I find it? This KPI should be front and center of your ecommerce platform.
What are some marketing tactics that impact it?
- Abandoned cart email
- Reviews
- Promotional SMS
Average order value (AOV)
What does it measure? The average amount of money that a customer spends in a single transaction on your store.
Formula: Total revenue / number of orders
Where can I find it? Your ecommerce platform.
What are some marketing tactics that impact it?
- Free shipping threshold
- Discounted bundles
- Cross-sell product recommendations
Repeat purchase rate
What does it measure? Out of all orders in a set time period, how many of them were repeat orders.
Formula: (Number of repeat orders / Total number of orders) x 100.
Where can I find it? Your ecommerce platform.
What are some marketing tactics that impact it?
- Loyalty program
- Post-purchase email follow-up
- Retargeting ads
Give your funnel a health check
Now you know what KPIs you need to track and where to find them, follow the steps below to perform a full ‘funnel health check’. This will give you an idea of where your funnel is at before you embark on improving your marketing performance using the strategies covered in the rest of the certificate.
Record your recent KPIs
Locate your full funnel health KPIs using the tools mentioned in the section above. Then, open your workbook.
If you haven't already, record your most recent performance (or a 3-month average), your baseline (based on industry benchmarks), and your own brand's goals for these metrics across each stage of the marketing funnel.
Benchmark your performance for each KPI
Analyze your previous performance or use a benchmarking tool to determine the ‘health’ of each KPI. Benchmarking can be the most challenging part of performance analysis, so here are some tips:
- Benchmark against your own past performance
Your chief point of comparison should always be your own business. Measuring your performance month-over-month (MoM) and year-over-year (YoY) is a very useful way of measuring performance change over time. For example, if you can see that your web traffic has grown by 20% from the previous year, but your conversion rate has taken a significant nosedive, that implies that the middle of your funnel may be leaky, and that you need to take steps to improve your conversion rate. - Access industry benchmarks
- Tools you may already use, like Shopify and Klaviyo, often provide benchmarks for you to compare your store’s performance against other, similar stores.
- Use sites like Similarweb to compare yourself to your chosen competitors for web traffic (including SEO and ad performance).
Set goals against your current performance
Based on what you discovered in the above steps, set goals for the KPIs that need improvement. Use the SMART framework to set realistic goals:
- Specific: Focus on a single goal.
- Measurable: Ensure you can track your progress.
- Achievable: Set a goal that stretches you but is still within reach.
- Relevant: Make sure it aligns with your business objectives.
- Time-bound: Set a realistic deadline for achieving your goal.
Find leaks in your funnel
Now it’s time to go deeper to pinpoint exactly where the leaks in your funnel are. Perform a quick analysis of the funnel-stage tactics that correspond to any KPIs that you’ve flagged as ‘needs improvement’.
For example, if you’ve marked your conversion rate needs improvement, examine the performance of the tactics in your ‘desire’ and ‘action’ funnel stages, such as your promotional campaigns, new customer offers, social retargeting, abandoned cart emails, etc.
Ask yourself:
- Which of these tactics are actually driving conversions?
- Which of them needs optimizing to get you where you want to be?
Use Klaviyo's funnel analysis report
If you are a Klaviyo customer who invests in Marketing Analytics or Advanced KDP, then you'll unlock a tool that helps you monitor your funnel performance more easily.
The funnel analysis report allows you to build and analyze a custom funnel, using the metrics that make the most sense for your brand. Once you set up your funnel, you can more easily pinpoint where dropoff occurs in the average customer’s journey at each core stage or action, as shown in the example below.
Learn how to get started with funnel analysis.