What Is Funnel Analysis and How Does It Work? Tools, Definitions, and Examples

Identify critical events along the customer experience with funnel analysis to boost KPIs like acquisition and conversion.

Not all leads will turn into customers, and not all customers will recognise the value of your offer right away. In order to conduct testing, improve the user experience, and increase conversions, funnel analysis can help you spot crucial events along the customer journey.

What Is Funnel Analysis and How Does It Work?

Funnel analysis is a technique for examining the chain of events leading up to a conversion point. The funnel’s events occur through products, mobile apps, websites, emails, and other digital touchpoints. Product and marketing managers can utilise funnel analysis to better understand user behaviour and the roadblocks they face along the way.

Users will almost certainly encounter obstacles on their way to the intended conclusion as they traverse this digital path. By zooming in on each step, you can reduce friction and encourage customers to move farther down the funnel.

“From leads through engagement, conversion, and retention, understanding each step and implementing even tiny adjustments at any level will have down-funnel repercussions,” according to TechCrunch.

Let’s imagine you’re attempting to convert free trial customers into paid subscribers. This is how your funnel might look:

  • Step 1: The prospect opens an email and sees a free trial offer.
  • Step 2: They redeem the free trial by clicking on a CTA button.
  • Step 3: Prospects make an account and get a free trial of your product.
  • Step 4: After the free trial period has expired, prospects convert to paying customers.

Many distractions or barriers can occur between each of these processes, and there are probable behavioural patterns that can alert you to what is and is not working. Perhaps prospects are abandoning step 3 because creating an account requires multi-device activation?

Perhaps you realise that getting prospects past step 3 increases their chances of conversion. You’ll miss out on these opportunities to delight customers and achieve business results if you don’t use funnel analysis.

Important Takeaways

Funnel analysis is a technique for visualising, measuring, and comprehending key user actions across the customer journey.

You’ll need to be able to track changes in client behaviours and patterns as soon as possible. When something isn’t quite right, funnel analysis lets you know so you can keep users on track to conversion.
When it comes to product innovation, personalisation, and establishing smooth customer experiences, funnel research is practically vital.

The Benefits and Importance of Funnel Analysis for Your Product
At its most basic level, funnel analysis is useful because it allows you to track user actions and behaviours. This is crucial since those activities expose your consumers’ intentions and motivations.

Not only are funnels used in sales and marketing to generate leads, but they are also crucial for client retention. You can inject value into each step of the customer journey if you know what your customers want.

Despite the fact that every organisation has its own set of objectives, funnel analysis can be used to:

Increase conversion rates. Conversion funnel analysis can help with a variety of outcomes and objectives. A user’s final step could be to click a “Sign Up” button or to download a PDF. You can utilise funnel analysis to figure out what’s keeping consumers from reaching their goal. Every stage of the funnel provides opportunity for a more seamless, individualised path to the funnel’s finish.

Simplify the funnel. Websites, mobile applications, email, and dashboards are likely part of your company’s digital interaction strategy. Each has its own funnel, but they all work together to form one overarching customer journey funnel. A macro perspective on how each of those funnels connects can be gained through funnel analysis.

Marketing and product teams should be combined. Marketing teams are frequently focused on turning prospects into customers, while product teams are primarily concerned with client retention. Both teams can benefit from funnel analysis since it allows them to cross-pollinate data and insights. If prospects respond well to one component of the marketing funnel, they may stick around if the product funnel offers the same value.

4 Ways to Make Funnel Analytics Work for You

Many different approaches to gain insights from the data you collect are available with funnel analytics. Your business and industry dictate how you interpret funnel data and use it to achieve objectives.

  • Conversion: This is the default option of funnel analysis. It counts how many people have completed each step of your funnel and converted. This data can be represented using a chart or a bar graph, depending on the platform. If there is a problem, the results of this procedure should immediately inform you. You’ll know where to focus your efforts if there’s a significant drop-off in users during one step of the funnel.
  • Conversion rates for users that entered the funnel on a specific date can be seen using conversion rates over time. Users are not required to complete the funnel in order to appear in your analysis. This is useful for figuring out how your funnel works at different periods of the year, such as holidays or special events.
  • Time to convert: Time is an important component to consider when examining a funnel. How long should each user spend clicking through each step? These user behaviours might help you ensure that your funnel sequence is working properly. Someone purchasing on a fast-food restaurant app, for example, should convert faster than someone shopping on a tax service app. Conversion can be broken down into hours, days, weeks, and months.
  • How frequently do users complete an activity or behaviour before moving on to the next step in the funnel? You can know exactly what your users are doing (and how often) across the funnel by tracking frequency. Understanding the frequency of events can assist you in making modifications to key funnel processes to boost conversion.

Many times, challenges in your funnel require a different method or perspective. The right questions can be asked using funnel analytics as a springboard. Once you’ve mastered the fundamentals of analysis, you can come up with creative solutions to problems.

Instruments for Funnel Analysis

For organisations that sell digital products and services, analytics tools are nearly essential. It becomes exceedingly difficult to measure and improve things like conversion without the correct tech stack.

When it comes to choosing a funnel analysis tool, there are numerous possibilities. Your best tool is determined by your product, industry, and present technology stack.


The Digital Optimization System from Amplitude is a unified set of tools that gives you a comprehensive view of how customers interact with all of your digital touchpoints. The funnel analysis software from Amplitude is designed for websites and products, providing a more comprehensive view of data.

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