The customer life cycle or funnel

After working at different organisations I have had the opportunity to test different channels with the purpose of driving acquisition. I have learned and find out that some channels are effective at doing different things and reaching the user in different ways and stages of the funnel.

I will call it a funnel but some people call it a cycle as the main goal is to acquire users but also then you want them to repeat or at least to buy other products of your catalog that complement that initial purchase.

As I will be focusing this article only on the acquisition side of marketing I think the funnel is a great way to represent how users fall in each bucket and the volume that we can reach.

There are many ways to represent this funnel, but in generic terms it can be divided in 4 segments or stages: Awareness, consideration, conversion and referral. We can associate different situations stages of the user/customer journey and channels to each of the segments of this funnel.

The first 2 segments are sometimes harder to measure accurately as these are not yet our customers, to measure their size we can run estimates based on market research or by directly asking the people in a survey. There are many examples of this situation that you have seen yourself, for example the survey shown on Youtube before you play an ad that usually says: What of this brands have you seen or heard about?

The 2 bottom segments of the funnel are users who have purchased and we should have data and ways to measure them in size and opportunity.

Awareness

At the highest stage we have awareness, this is the stage where channels such as display, paid social but specially all branding media efforts would sit such as offline advertising, TV, radio, PR and any above the line media. All these channels are very effective at reaching a vast audience and rising awareness but usually lack the precision of some online channels.

Consideration

The second stage or segment which is consideration, refers to the users who already are aware of a service or need and are now doing some research and comparing between brands and products. Here is where brand and direct response start to overlap. The channels that represent better are search (organic and paid), usually generic terms, paid social, display and video prospecting and affiliates.

Conversion

The third stage of this funnel is the conversion, the most crucial stages of all, these is the situation when for example after capturing the email of the user a sales campaign converts, usually the channels that would fit best are paid search, branded search, direct, email or sales and in many cases all kind of retargeting such as display or email.

Referral

Referral is a very important stage and sometimes underestimated by some companies. When a customer is satisfied with a product or service he is likely to talk with other people and recommend it. There are ways to incentivise this behaviour. This could be a great product and/or service combined with a monetary incentive. This is one of the most cost effective and powerful tools available to any marketer, the referral program. We want our users to get to a be our advocates, but we need a critical mass of users to be able to activate referral as a channel.

Prioritising channel testing

Now that we know what are the different stages of the funnel and what are the channels that we can use to influence the user at each stage, it might be the time to set a list of priorities on how we will be scheduling the testing, media planning and channel activation. How we prioritise this and set our media strategy will based on different criteria and parameters such as:

• We have a big budget to cover our goals or a tight budget and resources available
• We have the infrastructure in the marketing department with a team to run the campaigns and the product development capabilities.
• The business is new, or has been running for a few years and has a baseline to work from.
• There’s already a demand for the product, we just have to make room for our share, or it’s such an innovative product that we want to offer that there’s no one looking for it.

On one hand, we might have limited resources and would naturally like to focus on leveraging low hanging fruits, using the resources as efficiently as possible. On the other hand it might be the case that we have a lot of resources and budget to launch our new product or business idea.

In this case we could be taking different marketing strategy approaches, either focusing on volume or efficiency. A effective approach would be to focus on activating the bottom funnel channels first to drive conversion and gradually use other channels to reach more potential customers by filling the top of the funnel by driving awareness.

If you’re looking for guidance about a framework on how to prioritise your channel activation efforts, read the guide about how to prioritise your channel activation efforts.