The Evolution of the Marketing Funnel: How Much Has It Changed Over Time?
The goal of all digital business is to find probable customers in a moment of need — what can I get for my brother on his birthday? what can I wear to the office party? where can we stay on our vacation? — and guide them to your product or service. This journey from when a customer learns about your business to when they make a purchase decision is called the marketing funnel.
Marketing Funnel in the Pre-Digital Era
In the pre digital era, the funnel had four stages: Attention -> Interest -> Desire -> Action and marketing efforts were focused predominately on the first stage i.e., getting the customer’s attention. Majority of the marketing budget would therefore be used on traditional methods such as TV, print and mail.
The remaining stages Interest -> Desire -> Action would typically take place in shopping malls. Marketing success would be extrapolated by combining metrics such as store sales and survey feedback from customers. Marketers also benefited from limited global competition and organizations budgeted a larger proportion of budget on product innovations.
Marketing Funnel in the Mid-Digital Era
Today we are in the mid digital era where every step of a consumer’s interaction with a digital business can be tracked. Product innovations are in small increments and product development is in close sync with marketing and communications. Due to global competition at scale, companies are under increasing threat of losing customers from any point in the marketing funnel.
In this era, we are also seeing an overwhelming volume and variety of data generated at an incredible velocity. Data storage and security has caught up, supported by a robust and reliable cloud infrastructure. Digital businesses can now very quickly start generating revenue with the help of technology. These technologies when implemented correctly help digital businesses integrate the four types of data — geographic, demographic, behavioral, psychographic — together into coherent insights that helps marketing leaders make successful long term decisions.
Diving deeper into funnel stages, below is a table with the five stages of a typical marketing funnel in the present day — Awareness -> Interest -> Consideration -> Conversion -> Retention and corresponding KPIs, Activation channels, Audience targeting and segmentation, and Attribution models. This table can be used as a point of reference when thinking about measuring success of a marketing campaign. For example, during a new product launch, the marketing team could run two campaigns with different goals — one to generate awareness and the other to drive conversions. It is crucial that the marketing team maps campaigns to the funnel stage it impacts and uses KPIs in that stage as primary indicators of success. Marketing teams can define funnel stages that are specific to their business such as by choosing to combine interest and consideration into one. Depth of funnel stages also depend on the type of business they are in — B2C vs. B2B — a key difference between the two being the time to sale and number of marketing touch points required before the sale takes place, both attributes being much longer in B2B.
An important element of the funnel, as noted at the top corner of the table, is advocacy. Typically, relevant to B2C businesses and done through social media platforms such as Instagram or Facebook, advocacy begins in the consideration stage by way of queries on forums. And it becomes increasingly relevant through conversion and retention, by way of posts on social platforms sharing product purchases and post purchase reviews.
Between the pre- and the mid-digital eras, the funnel has fundamentally remained consistent, including the dimension of advocacy which was done ‘word of mouth’ in the pre-digital era. The what of the funnel i.e., the stages itself have not really evolved, it’s the how that has evolved i.e., the Actions, Activation channels, KPIs, Audience targeting and segmentation, and Attribution models along each stage. While some elements in the table such as Actions and KPIs are more relevant to B2C businesses, Activation channels, Audience targeting and segmentation, and Attribution model suggestions are industry agnostic.
Let’s talk about audience targeting techniques in each stage. In the awareness stage, the goal is to find and reach relevant audiences, where they are. In interest and consideration stages, audiences that interacted with awareness channels are persuaded by pixel targeted and retargeted ads to take a conversion action. The nature of these campaigns is often personalized offering a discount coupon etc., to improve chances of conversion. Upon conversion, audience cohort analysis helps build predictive propensity models such as ‘propensity to engage’, ‘propensity to convert’ and ‘propensity to churn’. Conversion also is a step where the audience shares personal data such as email, address, and phone number. This data, also known as 1st party data, is becoming more and more important for businesses to analyze and inform new product development, identify new markets and, even new marketing and communication strategies.
Now let’s consider attribution models in each stage. The most common attribution model used in businesses is the last touch model, that gives the entire credit of conversion to the last channel (Organic Search, Paid Search etc.) used to make the conversion (I won’t dive deep into each model and instead point you to an article, that explain them in detail). I would however persuade marketers to re-think the last touch model approach. The choice of a model depends on considerations such B2C vs. B2B business, the number of touchpoints, time taken to sale and, campaign objective. B2B businesses tend to have a significantly longer sales cycles than B2C, and so lean towards more complex models such as U, W or even machine learning driven models. The funnel stage that the campaign impacts also become a consideration, for e.g., if it is an awareness campaign then first touch is the appropriate model to use to measure success, as opposed to last touch or time decay in a conversion driven campaign. What makes attribution, audience targeting, or basic measurement tick, is a strong foundation in campaign tagging and data governance.
Marketing Funnel in the Post-Digital Era
In the post digital era, digital marketing experiences will integrate seamlessly with our lives like how electricity is today. Wearable devices with digital assistants that are powered by generative AI such as Chat GPT will always be at our disposal, heavily influencing our buying decisions.
Like between the pre and mid digital eras, I expect the marketing funnel of the post digital era to remain consistent. But, yet again it will be the how i.e., evolution of the Activation channels, KPIs, Audience targeting and segmentation, and Attribution models that will drive change, even disrupt, how marketers operate.