The Customer Acquisition Funnel, Explained
Customers go through several stages before committing to a product or service. These stages represent the customer’s journey from the time they become aware of your company—usually by way of a Google search or ad—through various channels where they engage with your content and sales team, until they come out the other side as a customer. Together, they make up the customer acquisition funnel. Understanding each stage in the customer acquisition funnel allows you to identify areas where sales prospects are dropping off.
There are three stages in the customer acquisition funnel:
- Lead Generation, in which prospects are made aware of your company and products;
- Lead Nurturing, in which those prospects become more familiar with and interested in your product, until they eventually reach out to your sales team; and
- Sales, in which your sales team engages with an interested prospect and converts them into a customer.
This is represented in the image below:
In this article, we’ll discuss how to optimize each stage.
Customer Acquisition Funnel Stage 1: Lead Generation
The lead generation stage of the customer acquisition funnel focuses on increasing awareness of your business and product among your target audience, and ends with convincing them to leave their information, becoming known leads. At this stage of the funnel, most prospects will have a more research-oriented intent, as shown in the prospect intent spectrum below:
Because these top-of-funnel prospects aren’t yet ready to buy, materials created for lead generation should provide readers with primarily informative material that avoids sales-oriented language, thereby building trust. A common example of this is blog posts targeting research-oriented keywords that provide explanatory information about topics that indicate a searcher may have a use for your product. For example, these articles could focus on the best way to solve a problem or provide an objective comparison of products related to your field.
By following the below guidelines, you can ensure your lead generation content maintains interest from uncommitted prospects:
- Skimmability: Paragraphs should be kept short (ideally 3-5 lines) and broken up by skimmable elements such as bulleted or numbered lists.
- Visual Elements: Tables, charts, graphs, and images should be used to make points clearer and keep readers’ eyes moving downward.
- Value-Driven: Winning the audience’s trust early on requires providing them with answers quickly. Give your readers insight within the first paragraph, thereby encouraging them to continue reading.
- Next Steps: Provider easy ways for readers to progress down the funnel by linking to other materials or including CTAs.
Building trust with readers makes them more likely to leave their information for further contact. Once they do—for example, by signing up for an email newsletter—you can begin the lead nurturing process.
Customer Acquisition Funnel Stage 2: Lead Nurturing
Lead nurturing focuses on improving the relationship between leads and your business. In this stage, leads are somewhat committed but not yet ready to talk to your sales team. This takes place across multiple marketing channels:
|Can reuse other content for lower cost. Targets interested parties directly||Building a quality mailing list or a social media following takes time.|
|Organic Social Media|
|Podcasts||Allows for highly informative & longer-form content. Builds a somewhat personal connection.||Expensive to produce. Requires a charismatic personality who can provide expert insights|
These lead nurturing channels are often used as supplements to primary customer acquisition channels as they provide little lead generation; but have a strong lead nurturing impact. In some cases, these channels also allow lead nurturing content to be personalized to each lead. For example, a lead that came from an evaluation-oriented landing page should be sent personalized case studies and other materials that are directly related to their initial interest.
Lead nurturing ends when a lead reaches out to your sales team to schedule a call, and your sales team establishes that they are a serious prospect who can purchase your product—in other words, after the lead is qualified.
Customer Acquisition Funnel Stage 3: Sales
The final stage of the customer acquisition funnel takes nurtured leads and converts them into customers. At the sales stage, your team must ensure that they maintain these leads’ interest, losing as few as possible before they commit to a purchase.
Your sales team should begin by looking to earlier stages and existing sales to better understand qualified leads. For example, you may notice that a predominant portion of your customer base come from high-stress occupations like law or medicine. Understanding this fact will then let your sales team know to discuss how your product can alleviate the strain associated with those positions.
This process can be further improved through use of sales management software such as Hubspot or Salesforce. This software can automate follow-ups, templatize common sales messages, and help identify bottlenecks. Combined with marketing analytics software that provides your team with more information about incoming leads, you can produce highly personalized and therefore effective sales strategies for each prospective customer.
At this stage, your sales team should also track core metrics to contextualize their overall performance. These metrics include:
|Metric||Description||Benchmark (Chastity to fill)|
|Customer Acquisition Cost (CAC)||How much it costs to gain a single new customer.||Organic: $942
|Customer Lifetime Value (LTV)||How much your company makes off a single customer over the course of your business relationship.||See LTV Benchmarks|
|LTV to CAC Ratio||How much a company spends to make a sale vs. how much they can expect to make off that sale over the customer’s lifetime.||4:1|
|Customer Retention Rate||How many customers stay with the company over a defined period of time. Typically measured annually.||91.5%|
|Lead to SQL Conversion||What percentage of incoming leads are both interested and capable of making a purchase||14%|
By understanding each of the metrics above, your sales team can identify and correct potential problems in their sales process.
Implementing a Customer Acquisition Funnel
The customer acquisition funnel is complex and executing a customer acquisition strategy is a challenge for many companies. This reality leads many companies to work with a customer acquisition firm to best capitalize on limited marketing and sales budgets.
Our full-service agency specializes in customer acquisition, optimizing every step of the funnel described above with a thought leadership approach that generates trust with prospects and establishes your company as an industry leader. Contact us to discuss a potential partnership.