How to optimize your ecommerce conversion funnel

Ecomemrce conversion funnel optimization

An ecommerce conversion funnel is a representation of how leads interact with your brand online. It’s a helpful model for developing strategies to grow brand awareness and increase your customer base. It’s also a valuable diagnostic tool to analyze where you might be losing customers.

If you’re trying to help your team close more deals and convert more visitors, optimizing your ecommerce conversion funnel is crucial.

Here’s what this post will cover:

What is an ecommerce conversion funnel?

Ecommerce conversion funnel stages

An ecommerce conversion funnel, sometimes called an ecommerce sales funnel or just an ecommerce funnel, is a visual representation of your audience as they engage with your brand throughout the digital customer journey.

Just as a funnel is wide at the top, a large pool of prospective customers will signal interest in your company as a result of marketing campaigns, word-of-mouth recommendations, and more. As these leads learn about your brand and move through the customer journey toward a purchase, some will drop off, leaving you with a smaller group of buyers at the narrow end of the funnel.

The importance of an ecommerce sales funnel

Sales funnels provide actionable insights for improving every stage of the buyer journey. Tracking and analyzing each step lets you know where your marketing, sales, and customer relations efforts are succeeding and where there are opportunities for improvement.

For example, a good conversion funnel emphasizes the stage in the customer journey that impacts conversion most. This insight could be positive or negative — like email subscribers clicking on subject lines about discounts, or low social media engagement on posts about certain products. This information helps you reconsider and arrange the sales funnel process to meet customers’ needs.

What are the stages of an ecommerce funnel?

The stages of an ecommerce conversion funnel are flexible and can be customized to your industry, business, and target audience. Some companies specify almost a dozen layers in their funnels, but every conversion funnel can be summarized in four basic stages.

1. Awareness

The first stage of the ecommerce conversion funnel represents an awareness of your brand. The customer has just started their buyer’s journey. They don’t know the specifics about their needs yet so they’re likely searching for answers to broad questions. Users at the awareness stage are looking for solutions to their problems or ideas.

One of the best ways to attract potential customers at this stage is to be a resource. Write blog posts or articles that address common questions shoppers have when searching for your product or service. Create short answers to those same questions for social media channels and consider an email drip campaign that answers some of those early questions one at a time, in greater detail.

2. Interest or consideration stage

At the interest stage of the funnel, leads know the name of your brand and the products you make. If a buyer continues to engage with your content, they are likely considering your solution or product for their business.

As customers consider different options they begin to ask more specific questions. Providing in-depth content will be helpful for buyers in this stage and demonstrate your business’ expertise. Content should move from “What is?” titles to “How to,” and social media content could focus on longer videos.

Customer reviews to support the interest stage of the funnel

3. Desire or intention stage

By the desire stage, the buyer has narrowed down their search and is likely comparing your product with other businesses and reading reviews. This is when your team pivots from selling your product or solution, to selling your brand.

Content that’s helpful for moving buyers through the desire stage includes pricing, side-by-side comparisons, brand storytelling, and more. Social media and email marketing material should explain how your brand or company is better than the competition. This is a good opportunity to utilize client testimonials since brand credibility is a priority factor.

Leads in the desire stage of the traditional sales funnel are often handed over to sales teams to help close interested deals. Ecommerce conversion efforts should take a sales-oriented approach.

4. Action or purchase stage

The action or purchase stage of the funnel is when the deal closes — the customer has decided to purchase from your business and has items in their cart. This stage is still part of the funnel because your relationship with the customer isn’t over.

The primary goal in an ecommerce setting is to reduce friction for customers during the checkout process. Accept as many payment options as possible and reduce the number of form fields a customer has to fill out. Present clear shipping or pickup options, ensure seamless returns if necessary, and see that customer data is handled securely.

Best practices and tips for optimizing your ecommerce conversion funnel

Optimizing your funnel will ultimately help your team maximize the ROI of their marketing campaigns. However, you first need to understand how to successfully create an ecommerce marketing funnel.

Define your customer journey

Your customer’s journey includes every touchpoint and interaction from initial search to conversion. It spans the time your customer learns about your brand, to when they compare solutions and eventually make a purchase.

Observe the typical flow of each persona from the beginning of the journey to where they end. Gather data to learn about their behavior and map which channels and what types of content they use to move through the buyer journey.

For example, one persona might discover your brand on social media, show interest on the website, be nurtured through the desire stage by a strategic email drip campaign, and return to the site to make a purchase.

Identify the conversion events for each funnel stage

Define what you’d like potential customers to do in each level of your funnel. In the awareness stage you may just want the user to engage somehow with the brand, like following a social media profile or signing up for a newsletter. In the desire stage, you want more intentional events like downloading spec sheets or signing up for a demo.

Clarifying the key event at each stage helps you focus on the design, messaging, and CTA for content and promotions. It also establishes goals and metrics. If the conversion event in the awareness stage is signing up for a newsletter, your team knows to emphasize that CTA. And you can measure the success of that funnel stage by how you are improving email signups.

One way to fine-tune this is split testing, where you present different versions of a page or CTA to different users to see which one achieves the best results.

Specify the point at which a visitor turns into a lead

There’s a cost to nurturing prospective buyers. Someone may click on an ad or visit your site but never make a purchase. No amount of marketing is going to turn some users into customers. That’s why qualifying leads is important. You only want to invest in leads that have a good probability of turning into customers.

The point at which a user becomes a lead differs for every industry and business, but marketing and sales teams should collaborate to define what a qualified and interested visitor looks like. This is easy when a prospect requests to download a demo or shares their contact information, but there are more subtle indicators that teams should examine and clarify.

Lead scoring is a helpful strategy to determine the value of each prospect. It’s a numerical point system used by marketing and sales teams to evaluate users in the funnel. Lead scoring involves analyzing actual customer journeys to identify which behaviors and demographics are common among leads who eventually convert. Point values are then awarded to those actions and traits, so that users build up a score over time. Prospects with higher scores are more likely to convert and are therefore worth more attention.

Pinpoint when users drop out of the funnel

If you already have a funnel, it’s helpful to focus on customer loss as well as wins. Resolving points at which prospective customers drop out of the funnel can help optimize conversion rates.

For example, you might track the traffic on your website to see where customers lose interest and leave. Then investigate those pages to see if there are broken user experience (UX) elements, missing next steps, or outdated information. Consider issues like:

  1. Site speed. According to Hobo, over half of mobile site visits are abandoned if the load time is longer than three seconds. If your page loads slowly, fix it.
  2. Ease of navigation. If customers spend time on your homepage but don’t visit other pages, you might need to address navigation. Moving around your site should be easy.
  3. Checkout. You may also be losing customers during checkout. Review your cart abandonment rate. If it’s higher than 70% then there’s a chance your checkout process is too confusing, long, or unpleasant.

Look for low-effort fixes that have big ROI

Resources are limited and you won’t be able to resolve every issue at once. Begin with small tweaks that offer a big ROI as an efficient way of optimizing your ecommerce funnel and getting quick results. Remember that you’re trying to understand how your typical user base navigates your ecommerce experience so review areas that will affect the customer journey experience most.

For example, examine each click around the dropoff point. Consider which ones caused most users to leave, or if there were any that caused people to get stuck. You should also inspect unique paths like what actions users took after they didn’t convert.

Your ecommerce funnel is targeted and focuses on capturing leads and driving conversion, whereas your website provides a more generalized experience for visitors. For that reason, the latter shouldn’t take precedence over funnel optimization.

Lean into audience segmentation

Audience segmentation is the process of identifying subgroups within your target audience for better messaging and personalization. You could segment by age, location, job title, or online activity.

For example, if you’re optimizing a B2B ecommerce funnel, try segmenting users in your funnel by job title. This will show you what member of the buying team your top-of-funnel marketing activities are reaching. It can also help you determine which users tend to be interested enough to make it further into the funnel. You might then develop new marketing strategies to reach more of the segment that closes a deal and review conversion events to figure out why the other audience segments are falling out of the funnel.

Keep fine tuning

Arriving at an optimized ecommerce marketing funnel is an iterative process. Your industry, product, marketing channels, and target audiences may change over time. Pivoting to stay on top of these changes will help your brand remain relevant and connected with your customers.

Pinpoint and answer any questions about how users navigate your funnel. Use a product analytics platform to track and analyze every action your site visitors and app users take. This will help you gain a thorough understanding of your audience behavior while capturing reliable, verifiable data on conversion.

Top KPIs for measuring ecommerce funnel conversions

There are several metrics that can track your results. Focusing on the ones that best align with your goals can help you test where your site is succeeding and where you have room for improvement.

Traffic

Traffic refers to how many people are visiting your site. This is a starting number of people that can be considered leads or prospects. This metric will also tell you where visitors are coming from, which can help you better understand which marketing efforts are working and which aren’t.

There are a number of tools that will tell you how much traffic volume your website receives, along with specific pages. You can track which blog posts readers are engaging with and determine which might need to be revised.

Conversion rate

Conversion rate is the percentage of site visitors that take the action you want them to take. The best conversion is the percentage of visitors who make a purchase, but you can use conversion rate at every stage of the funnel to determine how well leads “convert” from one stage to the next.

Divide the number of actions taken by the number of site visits then multiply by 100. The resulting number is your conversion rate percentage. For example, let’s say you had 20 sales last month and 40 people visited your site.

20/40 = 0.5

0.5 * 100 = 50

Your conversion rate for last month was 50%.

There are many tools that will automatically calculate metrics like conversion rate and display it in a central dashboard. These tools can also track sales year-over-year or month-over-month to offer greater insight into how well your business is doing.

Note that we’re not talking about dollars and cents. This is the number of sales you made regardless of dollar amount.

Cart abandonment rate

Cart abandonment rate tracks how many people added an item to their cart but never checked out. This number may tell you how difficult customers find your checkout process. If they add an item to their cart, go to checkout, and then find the process complex or confusing, they’ll bounce. Other cart abandonment factors include unexpected shipping costs, long delivery timelines, or insufficient payment options.

To find your cart abandonment rate, divide the number of completed transactions in a certain time period by the number of initiated (but not completed) transactions in the same period, then multiply by 100.

Let’s say you had 50 completed transactions last month and another 200 visitors who added something to their carts but never checked out.

50/200 = 0.25

0.25 * 100 = 25

Your cart abandonment rate was 25%.

According to Baymard, the average cart abandonment rate in 2022 is near 70%.

Add to cart rate

The add-to-cart rate is the percentage of people who add something to their cart compared to all your site visitors. This rate can reveal if your product selection, marketing efforts, and site usability are successful. It can also show if you’re presenting your products in the most compelling way, or putting your most enticing products front and center.

Calculate this by dividing total sessions by sessions with a cart item. For example, if you had 100 visitors and 10 of them added something to their cart, your add-to-cart rate is 10%.

10 cart views / 100 visits = 10%

Customer lifetime value

Customer lifetime value (LTV) is the total revenue from a customer or account over the span of the relationship. Some statistics required to calculate LTV are how much each customer spends per year and the average lifespan of a customer.

An example is a customer subscribing to a new streaming service — where customers tend to remain subscribed for ten months — at a cost of $10 per month.

$10 * 10 months = $100

Not all transactions are as tidy. A more complex example might be a ski shop. Customers come in biannually — once at the beginning of the season and once at the end. Assume the average customer spends $50 each time and remains a customer for three years. That ski shop owner would multiply the transaction amount by the frequency and the longevity.

$50 x 2 visits per year x 3 years total = $300

This metric is important because knowing how much you’ll net from each customer helps you plan your marketing budget.

Returning to the streaming example, if every $200 spent on marketing earns the company two new customers, or $200, strategies should be reexamined because a profit isn’t being earned from those efforts.

Average order value

Average order value (AoV) is the average amount or value of each order. To find this number divide your total sales amount in dollars by the number of orders. If you sold $100 worth of product last month to ten different customers, your AoV was $10.

$100/10 = $10

This KPI can be helpful in a few ways. If your goal is to increase AoV then you can track this metric to see if your efforts are paying off. You can also work backwards from AoV to create a strategy for increasing income. If you need to grow revenue by $100 next month, you know that you’d need to gain 10 new customers.

Retention rate

Retention rate is how many people purchased from your company more than once. Retention rate is important because it indicates how well your business is doing with customer satisfaction and loyalty. A solid retention rate shows users are active and more engaged, which may mean better opportunities for monetization. It can also help you determine how likely you are to keep each new customer you gain.

Calculate the retention by dividing the number of users who make multiple purchases by the number of users who originally make one purchase then multiply by 100. If you had 10 customers last month and three of them bought from your business again this month, your retention rate is 30%.

(3 return customers / 10 customers) * 100

Repurchase rate

Your repurchase rate is the number of customers who originally made a purchase and returned to make another. While your retention rate tracks how many customers you kept month-over-month or year-over-year, your repurchase rate looks at what percentage of your customers bought from you multiple times over a given period.

To calculate repurchase rate, divide the number of return customers by the total number of customers, and multiply by 100. Let’s say you had 100 customers last month and 20 of them bought from you twice. Your repurchase rate would be 20%.

(20 return customers / 100 customers) * 100 = 20%

Return rate

The return rate determines the rate at which customers return purchases. To find this number divide the number of returns by the total number of orders and multiply by 100. This is an important metric to measure when forecasting revenue as you’ll have to subtract the return volume from your total revenue.

If one month you get 10 returns from 100 orders, your return rate would be 10%.

(10 returns / 100 orders) * 100 = 10%

Manage your ecommerce conversion funnel with the right tools

Knowing what initial steps to take to improve conversion rates could be a challenge. With so many KPIs to track in each stage of the marketing funnel, a good ecommerce funnel strategy will help grow brand awareness and increase your customer base. It can also act as a tool to analyze where you might be losing customers in the buyer’s journey.

Getting started with your ecommerce funnel optimization requires the right management tools. Businesses of any size can provide custom ecommerce experiences with Adobe Commerce. It can be used seamlessly with other Adobe products, providing you with up-to-the minute profiles, deep analysis, and personalized webpages for target audience segments.

Watch a product overview of Adobe Commerce or take an interactive tour to learn more about how Commerce can help optimize your conversion funnel and improve your marketing ROI.