A funnel, just like the name suggests, represents the typical stages a user goes through in the customer journey.
It is a way of visualizing the process that turns leads into customers and beyond. Not every user has to go through each stage in a marketer’s funnel but it is a great reference for the marketer to understand the possibilities of their customer’s journey – in order to get the most value from the user as well as to add the most value to the users based on the stage they are in.
Let’s take a simple example where a customer goes through the following stages for startup A:
EXAMPLE 1:
- Step 1: They come across a press release about Startup A
- Step 2: They visit the website and sign up for the startup’s newsletter.
- Step 3: They get a email and take a free demo by the startup.
These 3 steps would sound very familiar but the same can happen in multiple other ways.
EXAMPLE 2:
- Step 1: The user finds a shared social media post mentioning Startup A.
- Step 2: They visit the startup’s social media channel and subscribe to their updates.
- Step 3: They find a post giving a free demo and they sign up for it.
Now, both these examples are different however the user is going through exactly the same stages of the customer’s journey.
So, what we can do is to name these stages so further instances of such user behavior can be referenced easily by the marketing team.
Let’s call the 3 steps above (in both examples) by easy to reference names:
- Stage 1: Awareness
- Stage 2: Acquisition
- Stage 3: Activation
Now, go back to both the above examples again and see the further possibilities:
Back to Example 1:
- Step 1: They come across a press release about Startup A
- Step 2: They visit the website and sign up for the startup’s newsletter.
- Step 3: They get an email and take a free demo by the startup.
- Step 4: They like the free demo and pay for the product or service.
- Step 5: They renew their service after one month.
- Step 6: They ask one of their friends to sign up for the service too.
And In Example 2, let’s say the next steps are as follows:
- Step 1: The user finds a shared social media post mentioning Startup A.
- Step 2: They visit the startup’s social media channel and subscribe to their updates.
- Step 3: They find a post giving a free demo and they sign up for it.
- Step 4: They like the free demo and pay for the product or service.
- Step 5: They extend their service contract for a year.
- Step 6: They share the service or product on their social media where their friends can sign up for the service too.
See in both the above examples, the 3 new steps are actually the same stages of the funnel. This will help us extend our funnel to the following 6 stages:
- Stage 1: Awareness
- Stage 2: Acquisition
- Stage 3: Activation
- Stage 4: Revenue
- Stage 5: Retention
- Stage 6: Referral
This gives us our updated stages of the customer’s journey. We can create a simple acronym for the same to remember it:
- Stage 1: Awareness (A)
- Stage 2: Acquisition (A)
- Stage 3: Activation (A)
- Stage 4: Revenue (R)
- Stage 5: Retention (R)
- Stage 6: Referral (R)
That makes it the AAARRR funnel or we can shorter than to A3R3 funnel. This is a growth funnel any marketer can use.
Now, you should be thinking: what about users who churn? what about user’s who don’t refer their friends? what about user’s who, instead of renewal the product or service, go for another product or service by the same startup A?
Well, first of all, you are in the right mindset if you’re thinking about all these questions and this would mean you’re trying to get into the mind of your users.
The answer to all these questions can be different if we go into the specific scenario of the particular users. However, in general, the answer is that the growth funnel represents the “ideal customer’s journey”, not every customer’s journey.
The job of the growth funnel is to act as a tool for the marketer to design growth experiments in the potential and ideal stages of the customer’s journey.
As you run growth experiments on your customers, you will be able to start creating segments of users who are the best fit for each stage of the funnel. And then, you should focus those growth experiments only on those users.
For example, you’ll be able to know with the customer’s data the set of people who are “most likely to refer their friends” and design your initial referral marketing experiments to those set of users.
Also, remember that every user, at any given time, could be at any stage of the funnel. The key is to identify sets of users in each stage of the funnel and then design your growth experiments accordingly.
In the next chapter, we will deep dive into the A3R3 funnel or the AAARRR growth funnel that we just created together in this chapter!