Funnel Analysis: Why users leave?
Why call it a Funnel?
Sales, PMs, Marketers and a lot of other people use a method of sales analysis called Funnel Analysis. Why call it a Funnel?
Considering the steps between a user visiting a page, till the user completes the payment, there are users that drop off at each step. These drop offs give the sale the form of a funnel.
So what is Funnel Analysis?
Identifying each step from intial visit -> purchase for the intent of identifying where users drop off is Funnel analysis.
Funnel Analysis can help to identify the steps where users drop off. The team usually works on making sure the number of drop offs are minimal with each consecutive step. Once all the steps have been identified, the team investigates the reasons for drop offs and accordingly implements changes into that part of the process.
For example: A user visits a e-commerce website, browses the collection of items to find something he/she likes and adds that to cart. On checking out and hitting the payment gateway, he/she sees the options of payment are either debit card or credit card, but this user only wants to make a purchase with cash. So what then? The user logs off and visits another website that will allow him/her to make a payment with cash. The team after having done a funnel analysis understands it needs to update its checkout process with more options for payment to lower drop offs at the page and avoid losing a potential customer to its competitors.
Let’s do some Funnel Analysis shall we? We’ll be comparing the Funnels of Nearbuy.com and Littleapp.in.
Nearbuy (earlier Groupon India) is a pan-India online marketplace platform (with Groupon as a minority stakeholder now) that allows customers to connect with local merchants and engage with each other across 33 cities in India. As a business, it allows customers to Discover, Buy and Save on these local merchants. (Wikipedia)
Little has the same business model offering various types of deals and coupons from merchants to users staying across India.
We’ll do a Funnel Analysis of these two platforms to determine which works better.
Steps in the Sales Funnel
A typical Sales Funnel comprises of the following steps
- Visits, Product Views
- Product Customisations
- Cart Additions
Nearbuy and Little have the same steps.
Why the Funnel works?
Creating a funnel after identifying the steps involved in the business model helps list down the steps till the business goal is achieved. Business Goal such as: Purchase, Subscription, Sign-Ups, etc.
Once the steps in the funnel are identified, the team analyses each step to understand why users are dropping off and accordingly implement changes in the steps to reduce the drop offs.
Once the corresponding step has changes implemented, in an ideal scenario the drop-offs reduce and hence more users make it to the next step of the funnel.
Which is better and why?
The experience of purchasing an item on Nearbuy or Little seem to be more or less the same.. with an exception.
The last step, that is the payment screen. The options Nearbuy and Little provide are identical but different.
As we can see, Nearbuy has more wallet options compared to Little which forces the user to add money to their PayTm wallet for the purchase.
In my opinion, Nearbuy is better solely for offering more options to the user for payment.
Where could improvements be made?
Little should ideally stop forcing the use of PayTm to its users and offer more wallet options to complete the purchase. This last step of Little’s sales funnel seems to be little problematic.
Example: A user has money in their MobiKwik wallet going to the Little website, adding an item to cart and checking out for purchase will be disappointed to know that MobiKwik isn’t supported. What does this user do? Leave the website and find another which does offer MobiKwik in their payment options. This is a drop-off.
To avoid a scenario for drop-offs like the above, Little needs to add more flexibility in payments and be at least on par with Nearbuy.
Using two deal aggregator websites we identify the step in the sales funnel that might lead to drop offs.
Funnel analysis essentially is a brilliant tool to identify problematic steps in the sales funnel and implement changes to reduce drop offs and achieve business goals.