Funnel Analysis is a method of understanding the steps required to reach an outcome. Let’s apply this in an example.
You are running a program in teaching kids Python online. You want to analyze how people get to register your program online. For analysis, you need to construct a funnel with the stages that leads up to the registration to your program.
The funnel from seeing the page to register will look like this:
By setting up the funnel, we can see how many people actually arrive to the last stage of register, and we call this whole process a funnel since the number of users who arrives to each stages decrease and its shape looks like a funnel. Conversion rate is a rate where the users move on from one stage to another.
Our goal is to make more people reach to the last stage in the funnel. Broadly, we have few approaches to resolve this issue:
Make as many people as possible view your page.
This would be an easiest choice since the only action needed would be to spend more money on marketing. If more people visit the page, more people would register to your program.
| Page view | Conversion rate | Registration |
|---|---|---|
| 100 | 5% | 5 |
| 1,000 | 5% | 50 |
| 10,000 | 5% | 500 |
Raise the conversion rate in each stages
The first solution would not be an efficient choice if so many people leaves during certain stage. Thinking of an action plan to increase the conversion rate can make more people register to your program without putting so much money for marketing / ads.
| Page view | Conversion rate | Registration |
|---|---|---|
| 100 | 5% | 5 |
| 100 | 30% | 30 |
What would happen if you increase the conversion rate and invest in marketing so more people visits? The number of people who end up registering to your program will drastically increase.
Decrease the number of stages in the funnel
During each stage, there will always be some people who leaves the page for so many different reasons that we cannot even imagine or take care of, such as the wifi was bad, there are too many steps, someone accidentally closed the window, etc. So the most efficient solution would be to decrease the number of stages in the funnel.
Here, we can maybe combine sign-up and registering stage, and put the register button to be always on the top of the page so people won’t need to scroll the page. This leaves the stage to be: View page → Click Sign-in/Register button → Register.
There is no one exact solution to this step, but having a lot of domain knowledge and good communication with your teammates will lead to the most efficient solution.
This post is written while taking "Advanced SQL Data Analysis Camp" by Datarian.