Essentials, with a laptop next to it. And a person sitting down working on a laptop.

Growing a successful ecommerce business requires understanding how your potential customers progress from learning about your product to buying it. This journey is called a conversion funnel. 

In this article, we’ll dive into each of these key stages, then show how tracking key performance indicators (KPIs) can help you optimize your conversion funnel and convert more of your site visitors into customers. 

Key takeaways

  • An ecommerce conversion funnel describes a potential customer’s progression through four key stages of your customer journey: awareness, consideration, conversion, and retention.
  • There are a number of key performance indicators (KPIs) that can reveal the effectiveness of a conversion funnel, including conversion rate, cart abandonment rate, customer lifetime value, average order value, retention rate, net profit, and customer satisfaction.
  • Optimizing each of the stages of your customer journey can benefit an ecommerce business in a range of ways, including reducing the cost per customer acquisition, improving conversion rates, and increasing customer retention.

What is an ecommerce conversion funnel? 

Before someone makes a purchase in your online store, they move through a predictable series of stages—also known as a customer journey. The more you know about that journey and its nuances for your unique customer base, the better you can help move each customer through those stages. 

Optimizing your conversion funnel can help you reduce the cost of acquiring new customers. It can increase your conversion rate and even boost your customer retention by allowing you to more effectively attract loyal customers to your business.

Different businesses may conceptualize each stage slightly differently, as the nuances of every customer journey depend on the products or services sold and unique customer base purchasing those products. In this post, we categorize the four stages as follows: awareness, consideration, conversion, and retention.

With that in mind, let’s explore each stage.

The 4 stages of an ecommerce conversion funnel 

1. Awareness 

First and foremost, a potential customer must become aware of your brand and offerings. The goal of the awareness stage is to make your brand visible and memorable to a wide range of people who may or may not eventually become your customers. 

Efforts to improve the awareness stage are frequently referred to as top-of-funnel marketing. Social media campaigns, search engine results, billboards, and television ads are all common examples of top-of-funnel marketing tactics. 

Have you ever wondered why companies might spend $6.5 million for a 30-second ad running during the Super Bowl? The goal is to capitalize on the massive audience of that event and dramatically increase brand awareness.

While it can be important to cast a wide net at the awareness stage, it’s also key to ensure that you’re targeting the right audience for your efforts. Ideally, these potential customers should share common traits with your company’s buyer personas or ideal customer profiles, as these shoppers are most likely to buy from you later on. 

2. Consideration 

At this stage—also referred to as the middle of the funnel—the potential customer knows about your brand. They may even know a little about your products or services, but they aren’t ready to buy from you quite yet. This is the consideration stage of the funnel, and it’s a challenging one. 

You can help with this stage by providing compelling information about your products through ads, product pages, and social content, but people in the consideration stage also look for social proof. 

GlobeNewswire reports that nine in 10 consumers read reviews before buying a product. Many others check out user-generated content, like social media posts that tag your brand. You can even consider adding testimonials to your marketing campaigns and product pages to provide this key context for your customers when they’re browsing your website.

Your marketing team should also monitor sites you don’t control (like Facebook, Instagram, YouTube, and Google) to ensure plenty of social proof exists for those who aren’t quite ready to visit your online store, but may already be curious about your brand. 

3. Conversion 

The goal of the conversion stage—also known as the bottom of the funnel—is for your marketing efforts to result in a sale. At this point, the buyer has heard about you, potentially researched your offerings, and decided to head to your ecommerce website.

Some people call this funnel stage decision, and that distinction is important. Customers don’t necessarily arrive at your site with money earmarked for you. Therefore, it’s key to think of them at this point in their journey as active shoppers who are interested in buying a product or service like yours. The sale is still yours to win or lose. 

Your role at this stage is to convince them that you truly are the best choice. Implement effective copy, enticing discounts, social proof, and amazing customer service to do just that. 

4. Retention

This stage of the buyer’s journey is easy to neglect, but doing so can be costly. Gartner Group reports that 80% of a company’s future profits come from about 20% of existing customers. Clearly, retaining customers can have an enormous impact on a company’s bottom line. 

After a customer makes a purchase, stay in touch with them through strategic retargeting, email marketing, and surveys. Consider offering membership programs and subscriptions to foster repeat purchases and keep your customers coming back. In this way, you can create positive customer experiences that convert one-time buyers into brand ambassadors.

How analytics tools can help with your ecommerce conversions 

Analytics tools are a key component of any ecommerce platform, and they’re particularly crucial when thinking about optimizing your conversion funnel. The right analytics tools can help you with:

  • Website metrics: How many people come to your ecommerce website? What do they do while they’re there?
  • SEO: Is your search engine optimization strategy working? How many website visitors come to your site from search engines, and do those visitors eventually make a purchase?
  • A/B testing: How well does one landing page convert when compared to another? Do different elements of your copy, images, or design lead to more conversions?
  • The viability of your content marketing: How many people come to your ecommerce website from a piece of content you created? Which pieces of your content are most effective at converting customers?

With the right tools in place, you can track different ecommerce business metrics for each stage of your customer journey over time. This can help you identify which aspects of your conversion funnel are most effective and which can be improved, as well as specific strategies for improvement.

What are the most important KPIs to track for your ecommerce business?

Different businesses have different analytics tracking needs, all of which depend on their unique customer base and products or services. A few core KPIs to track include: 

Conversion rate 

A conversion rate for an online store is the percentage of site visits that lead to a sale. Issues that can bring your conversation rate down include:

  • High shipping costs
  • Confusing copy 
  • Poor customer service 
  • A lack of options 

Addressing these issues can help convert more visitors into paying customers. 

Cart abandonment rate

As of November 2021, almost 70% of all shopping carts in online stores were abandoned, according to Statista. If your cart abandonment rate is high, it’s crucial to discover the causes and make adjustments. Those causes can include:

  • Malfunctioning webpages
  • A difficult checkout process
  • An unclear shipping policy
  • Pages not being mobile friendly

Customer lifetime value

Customer lifetime value (LTV) measures how much an average customer will spend with you during a typical relationship with your business.

This metric can give you deep insight into the long-term value of your customers. If your LTV is high or increases and your customers spend consistently with you over time, they can show greater value than a customer who purchases from you only once and never purchases from you again.. 

Average order value 

Your average order value (AOV) measures how much people spend, on average, when making a purchase from your online store. Various strategies can help you encourage your customers to spend more with each transaction.

For example, some businesses may consider enticing people to spend more to earn free shipping, or cross-selling add-on products to customers alongside their usual orders. Test adjustments and track your AOV over time to see what works. 

Retention rate 

Your customer retention rate measures the percentage of customers who stick with your business over a given period of time. One powerful way to increase retention is to encourage repeat purchases through strategies like implementing subscription services and membership programs. These strategies encourage customers to stick with you and offer them greater value beyond just their purchases with you.

Customer satisfaction

Satisfied customers are more likely to make repeat purchases, write positive reviews, and post about you on social media. To improve this KPI, make customer feedback collection a regular part of your marketing efforts. Based on that feedback, refine your customer experience at every stage, from shopping and checking out to shipping and returns. 

Invest in your ecommerce conversion funnel 

No matter how effective your conversion funnel is, there is always room for improvement. Pay attention to your KPIs and invest time and effort into optimizing every stage, helping turn more potential customers into brand fans and long-time customers. 

FAQs on ecommerce conversion funnel: 4 customer stages

What is return on investment (ROI)?

ROI measures the financial impact of a business decision. For example, if you pay to post an ad on social, track how much that ad increases your sales. If you made more than you spent, you’ve achieved a positive ROI. 

Are organic search rankings relevant to measure growth performance of an ecommerce business?

Some experts say tracking organic search rankings is critical, as it ensures your SEO work is paying off. But focusing too much on this number might cause you to miss traffic coming from social media, referrals, and email pushes. If the majority of your customers arrive via word of mouth, switching to a sharp focus on organic traffic could be a mistake. Therefore, the importance of organic search rankings depends on your unique business, the products or services you sell, and the trends in your customers’ purchasing behavior.