What Are Funnels and How Do They Work?
In marketing, a funnel is a sales technique that is used to "capture" prospective buyers and customers. The "funnel" will attract people to the store (website, etc.). A low-priced product will be offered to attract the buyer's attention. When the buyer makes the purchase at the widest end or "layer" of the funnel, they will be led to the next level of the funnel. The funnel narrows as the customer goes through the "layers" of the funnel. The customer may stop at any level. That is, the customer may not progress through every layer.
"Layers" or Levels of the Funnel
Once the customer makes the first purchase, they are immediately taken to the next "layer" or level of the funnel. There, the buyer is offered another good deal. This next offer will enhance the first purchase in terms of add-ons that will make the first product so much better or easy to use. This product is generally slightly more expensive than the first product but not so much so that it scares the customer away.
Funnels "Upsell" the Product
The third layer of the funnel will, again, be more costly but will offer the purchaser a product that enhances the use of the first two. The first product does what it says it will do without purchasing the next products but the "upsell" products just make so much sense and the price does not usually add a whole lot more to the cost. The upsell product(s) may be one-time-purchase products or they may be a subscription or membership type of product where there is an ongoing regular payment, perhaps monthly or annually.
There can be many levels in the seller's funnel. If there is a membership or subscription funnel, it may be that the seller will add more layers (or more products) to the funnel as time goes on.
Example in Marketing
Purchasing a Motorcycle
A buyer purchases a basic model of a motorcycle. Once the buyer has decided to purchase the bike, the salesman may work to upsell the product - leading the purchaser further into the funnel. The purchaser may decide to add a windscreen to the bike. The next add-on may be an upgrade on the seat to allow for a companion to ride behind on the bike. Perhaps then, the salesman will show the purchaser a comfortable backrest for the bike or dressier mirrors.
Not All Buyers Move Down The Funnel
Not all buyers will opt to purchase beyond the first layer of the funnel. That's okay, because they may eventually come back and add to the bike at a later date. They may not add to the bike later but they may come back to purchase the parallel products or accessories. These might be riding boots, a helmet, riding gloves or leathers. Once the seller determines how far the purchaser will travel down the funnel, they will remember this and further advertise to the buyer in future, announcing product sales, new products or whatever. By that time, the buyer may be ready to make other purchases.
End of the Funnel
The funnel in marketing often never really has an end. There is likely to be a new product, an improvement to the original product, an upgrade, a new style or model and so on. It is wise for the seller to continue to advertise to their customers on a regular basis. They do not want their customers to forget about them and they do want to keep their customers informed about the latest and greatest in their product line. In online marketing, sometimes the buyer will be referred to another seller's product whether or not the seller is still advertising their own product to the customer. An example of this would be affiliate marketing, where the referring seller will receive a percentage of the sale for the referral.
Watch for the Funnels
Next time you are purchasing, whether it be online or in a regular store, watch for the "funnel". Sometimes it is more obvious than others. In a grocery store, watch for the "funnel" as you go through the checkout. What about the magazines and candy for sale. They were not placed there just because there wasn't anywhere else to display them!!
ENJOY YOUR SHOPPING
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