A funnel is the basic building block of a startup. Every product feature is a funnel. Every marketing campaign is a funnel. Every upsell is a funnel.
You should analyze your funnels relentlessly. Case in point: Branchout’s tremendous growth is due to a relentless focus on marginal improvements of their funnel. Every day for 6 months, the company set small daily improvement targets in the conversion funnel. These small gains compounded to create exponential growth. And then? 25M users. Boom.
Below are three different funnels, A, B and C. Which one would you rather see in your business?
|Funnel||Visit||% Convert to User||User||% Convert to Paid||Paid Users|
A is the best funnel. Why? It has the best performance at the top of the funnel (the step from visit to user).
The top of the funnel is the most critical part of the funnel because:
- Fits the 3 main product priorities. Distribution, Engagement, Monetization. Those are your priorities in that order. Your funnel should reflect this focus.
- Proves product resonance. A 10% conversion to user is a strong indicator that you have identified a problem for your customers and marketed the solution in a way that resonates with your customers. A 1% conversion to user indicates the opposite: your message is unclear or your problem doesn’t resonate.
- Offers a much larger data set. Funnel A has twice the data points on usage as funnel B. More data is better data. Better data drives better decisions and faster time to reaching an optimal product state. Plus, you have twice the number of email addresses for user retention and re-engagement should customers churn.
- Prevents early optimization. Global maximums are better than local maximums. You want to make certain that you’re optimizing the funnel across all users. If you start with a small population of users and optimize the tail of the funnel for them, you may be leaving a much larger, more valuable group of users on the table. You won’t know until you have a larger data set.
So at the beginning, focus on distribution – the top of your funnel. Then engagement – the middle of your funnel. Then monetization – the end of the funnel. You’ll build more successful products.