In this guide, I will be talking about user acquisition funnels. The most common thing for a new client to ask me is, to create a digital marketing campaign. This is perfect if we are trying to put the campaigns inside the current strategy, however a lot of businesses are focused on campaigns not long term goals. What I advise is to first of all create a strategic approach to digital marketing building and build a sustainable acquisition channel. Funnels as they are often called in the digital marketing world are another name for User Acquisition Channels. Since I had a client ask me to design their strategy, I wanted to use this opportunity to explain the big picture behind funnels.
The first thing, what we need to understand is what makes a funnel. When we talk about a funnel, we are talking about a user acquisition framework. Frameworks are really popular in the business world and marketing in particular. We use this approach to describe complex ideas and put them in simpler terms. We deconstruct the big picture and put it into steps or elements, that could be understood by people not working with this topic on a daily basis. This is key aspect of funnels – simplification. We use frameworks to simplify complex models and try to put them into a structure guide / roadmap for others to follow.
The next step is understanding funnels, which are a type of user acquisition framework. By a funnel we understand a shape that is wider at the entrance and narrower at the bottom. What we want to explain is that a lot more users enter, than convert. Depending on your business, we can see ecommerce shops with 0.5% conversion rate, but there are also other ecommerce businesses that have 5% conversion rate. The funny thing is, both businesses can be happy with their conversion rate, it really depends on the business model. For example if you’re selling very expensive and niche products, it could be 0.5%, but if you’re selling mass market product you have 5% conversion rate. There are a lot of different factors that you need to consider. When talking about high and low conversion rates. So to emphasize, we need a broad base of users that enter our funnel, and only a portion of them will come out the other end and make a purchase. There are no established proportions on the amount but based on my knowledge and experience I could be venturing educated guesses on the efficiency of your digital marketing strategy. If you would like to talk more please contact me via the contact page.
Now let’s go into the types of funnels that we will be discussing.The initial and most basic one is the Prospecting-Remarketing funnel.When you start a digital campaign, you can divide the traffic into two parts. The first part would be the prospecting campaign and the second part would be the remarketing campaign.
What happens here is this is the simplest approach. And if you are just starting with funnels and you’re just starting to divide the type of traffic that you’re trying to acquire,
At the beginning, we need to have prospecting, so we need to acquire new customers that don’t know our brands.In this particular setup, what we do is we exclude people who already interacted with our website or facebook page. We target our Fresh users (users, who didn’t interact with our brand) and in the second step. we remarket those people who have interacted with our website and we try to make them convert. This is the digital marketing one-two.
When I do consulting, in particular for small businesses, this is what they forget. They spend money on acquiring new customers, forgetting to use the audience that they have already acquired. The Remarketing group is usually a lot more effective in terms of Cost per acquisition, but it is a finite group. Which means if we have a 1000 users in this audience, and 10% will buy, it’s extremely possible that they won’t buy again if your product is not a repeat purchase. To make this work, we need to have a steady influx of new users from the prospecting campaign to make them convert.
Okay, so the next funnel is a very popular funnel that’s talked about a lot on YouTube &LinkedIn. It’s the cold, warm and hot funnel. The principles of all the funnels I present are the same. We need to have fresh users that enter, we do some remarketing, and then they convert – simple yet effective 🙂 !
In this funnel, we try to acquire. customers that are cold. Cold means they don’t know our brand. They don’t know our product. And they don’t really know what our brand is about. We try to reach them, we try to show our brands, we try to show our product, and they become a bit warmer towards us. Warmer means that they have some knowledge of what we are about. This means they might have visited our website, they might have clicked the ad, they might have viewed a video, and they can recognize us.
The second step, is we try to get them even warmer to the HOT stage. Now the users are aware of who we are, they might be aware of our products, they might be aware of similar products in our category, so they’re not completely cold. They might even need a product like ours! This is half of the job already done.This type of audience is the best to try to convert.
Now let’s talk about the HOT audience. These are user, who are the most engaged users on your website, closest to the purchase. This could be people for example who:
- added to cart,
- Previously have made a purchase
- Cart Abandoners
- Newsletter subscribers
This funnel is sometimes also referred to as Top-Middle-Bottom funnel
So cold are the people who don’t know your brand. Warm are the people who already have some kind of knowledge and hot are the people who are most likely to convert or have already converted.
AIDA or Awareness, Interest, Decision and Action funnel
Here is another funnel so you might have already heard about AIDA – awareness, interest, decision and action. Compared to the previous funnel there is an additional funnel with an additional step which is building interest.
The building blocks are the same. At the beginning, in the first step, we need to build awareness reaching a broad user base. Using affinity/interest/behaviour and even demographic characteristics in targeting.
The second step is building interest. We have users, who are acquainted with our brand, and now we want to make the interested in our products. In e-commerce terms this could be bringing traffic to the Product page.
The third step is Decision. We try to select the users who are more engaged and we could be remarketing to them with messaging saying a limited amount of products are left. This is one of the techniques that work best. Giving the user some sense of urgency.
The final step is the Action. This means we want the user to convert. These would be people who added to cart or abandoned checkout. They are the closest to making a purchase. Now if we really want to make the purchase I recommend giving some other incentive for example 10% discount. Of course, this depends on your business model but I recommend considering this possibility.
- To sum up, there are users who are not aware, and our goal here is to let them know of your existence.
- In the second step, we want to make them consider our product, go on the product page.
- In the third step, we make users want to convert. We want to influence their decision either by incentives or building more trust, showing more features of our products.
- In the final step, we go all out in terms of convincing to convert. We try to building pressure on the user to buy, or show them persuasive messaging that helps with the decision.
See, Think, Do, Care
The last one is the See, Think, Do, Care methodology developed by Google.Full disclosure this funnel was made and used by Google to present their advertising tools, however I feel it it the most efficient funnel, and I would definitely recommend it to more mature businesses.
In the first step – See – we built our brand awareness. Our brand needs to be seen. This could be a Facebook reach campaign or Google Display Network campaign using affinity targeting or demographic targeting. We want to get out there and get people aware.
Then we have the Think phase, where we want to bring users to our website, we want to make them see the product, click the video, go on our website and do something else. We are fishing for consideration and engagement here. This will make it easier for us to reach these users later on.
In the third phase, we help the user make the action. For this kind of audience, I like to give some kind of additional messaging urgency, maybe some kind of limited offer, and make it easier for them to make the purchase.
In the fourth phase, what happens is we care about our users. By caring we mean, user activation and retention in case of SaaS businesses or by letting them know about ongoing promotions, customer care programs in case of e-commerce shops.
We want to be there for our users and interact with them. We already paid for their acquisition and made them buy. Now we need to use this core user base and build a relationship with the brand.
In my opinion this is the best funnel out of all of them. This is how you should be segmenting your audiences, because you need to have some kind of brand awareness, some kind of consideration, some kind of digital activities aimed on conversions and some kind of post-sales program.
Using user acquisition funnels to plan digital marketing strategy
Now, I would like to show you how to use these funnels when planning your digital marketing strategy. When we talk about strategy we can talk about Budget, Channels, Targeting and Ad Format. We will skip Ad Formats and mostly focus on Budgets and channels.
How To Plan Strategy Using Prospecting-Remarketing Funnel
First of all we go with the most basic funnel, which is the prospecting and remarketing funnel.
We need to start with the prospecting phase where you really need to spend more money that on remarketing. Here you should start planning from the bottom. How many users do you currently have? How many Past buyers? If you know this you can plan how often you want to reach them and show them your ads. With this in mind you can allocate the budget to remarketing and everything else spent on prospecting campaigns. In this example we put 20% of the budget on remarketing and 80% on prospecting. The proportions seem reasonable for smaller brands.
In terms of digital marketing channels and targeting this could be anything from Google Display Network in-market to affinity targeting. On Facebook reach or brand awareness campaigns targeting – something that gets you out there. Prospecting can be in the form of Instastories on instagram which in my opinion are really effective. I know that for some brands that I work with, it works really well.
And then in the second phase we do remarketing. This could be normal GDN remarketing, Facebook remarketing or Dynamic Remarketing, Dynamic Content Remarketing or even email marketing.
How To Plan Strategy Using COLD-WARM-HOT Funnel
The next one I want to focus on is the Cold, Warm and Hot audience.
As mentioned before in the COLD phase you target users who don’t know your brand. So this could be a YouTube campaign for a custom intent audience. This could also be Facebook or Instagram reach campaigns. There’s a lot of different types of targeting that you can be using. What’s very important here is to try to exclude your current users. Even if you are using for example, Lookalike audiences (which could also be a cold audience) you have to exclude your current user base – all website users. In this phase you need to spend an estimated 70% of your budget.
Then in the WARM face you target users who might have heard about your brand or who might have interacted with your website. We are even talking about GDN in-market audiences as they include people wanting to buy a product. On Facebook, this could be a campaign optimized for conversion or traffic. We are also talking about remarketing to users who visited your website but didn’t view the product.
In the HOT phase you are reaching the users who are the closest to convert or, or people who are the converted. I mean cart abandoners, people who added to cart, or people who already made a purchase previously.
A very good practice – just just on the side notep- is to start creating audiences from the beginning. The earlier you start to create them the better for you in the future. Some recommended audiences would be:
- Cart abandoners
- Past Buyers
- Added To Cart
- Newsletter subscribers
- Product Detail Page Viewers
Please also remember you should start planning from the bottom. So depending on the number of users that you have in the HOT audience, you need to plan the budget for the previous phases.
How To Plan Strategy Using See Think Care Do Funnel
So now the last funnel, and with this one let’s try planning from the bottom-up. We are an e-commerce store selling custom made wall prints. We have 1000 past buyers in our database and would like to build a relationship with them.
- Care – we decide we need to want to reach users 30 days after their purchase with a cross-selling campaign. We want to show them similar products to those which they have already bought. Also as a part of our strategy we decide to send monthly newsletter to inspire and inform our customers about our promotions and new arrivals. After careful calculations we estimate we need 10% of our budget to achieve this.
- Do – We check the list of people who added to cart but did not convert and list of cart abandoners. We want to only reach people within 7 days from their last meaningful event as from our attribution data we see people usually buy within 3 days from their last visit. Checking the CPM and CPC we decide we need 10% of our budget to achieve this.
- Think – as we have 80% of the budget left we check the number of Product Viewers, all visitors and look at the user drop-off analysis. Based on the percentages we decide that we need at least 20% of budget to make people interact with our website and make them more interested in our products.
- See – we check how much money is left. If we reasonably can allocate it we will because even if it will not bring us direct purchases it can bring us newsletter subscribers, likes on FB or followers on Instagram. Every user like this can be a purchaser in the future. We plan our channels and targeting to reach the most valuable users. For this step we allocate 60% of the budget.
I hope this article clears up a lot of misconceptions and doubts you might have when planning your digital strategy. I focused mostly on paid channels but you can include SEO, Influencer marketing and others. The most important thing is to have a plan and stick to it. You should never forget about remarketing, but on the other hand remarketing cannot function without prospecting. This relationship between the phases can change and the budget allocation can be different from month to month. At the end, the only thing that matters are the buyers.
Now, take a minute and think about your marketing efforts. Do we spend all our money only on acquisition? If, if the answer is yes, then you’re doing it wrong.
Don’t be a stranger, my name is Chris and you can connect with me on LinkedIn.