It is not hard to figure out why a funnel in analytics is called a funnel. An actual funnel, like the ones from a kitchen or garage, gets narrower along its length, allowing less volume to pass through it. An analytics funnel represents a very similar idea, just in regards to users on an eCommerece platform, application or online game. A funnel in business analytics is a series of events that lead towards a defined goal. It can help describe “how your business and web site converts new visitors into valued customers.” That goal can be a sale, registration, or another action that was reached after a chain of preceding events. It is called a funnel because users will enter the funnel but only a small number of them will perform all of the actions that lead to the final goal.

At CoolaData we focus on drawing actionable insights from funnels. We use funnel analysis to determine conversion and user fallout rates in a given funnel. We analyze the steps that lead to a desired goal in order improve future interactions in the same funnel. That is to say how many users actually make it to the end of the funnel, for example to make a purchase or register, compared with how many do not.

By continuously monitoring and analyzing funnels, you’ll be able to determine if changes to an application or platform are having a positive effect on conversion. For instance, if only 10% of users who come to your platform and enter the registration funnel actually reach the goal of completing registration. You can tweak settings or features within the funnel in order to see what makes that number improve. Or when creating a marketing campaign, you can analyze how well the campaign is working by monitoring a funnel that brings users from the initial event all the way to purchasing a product.

Funnel analysis helps you determine the point in which users are dropping off. The next step is to understand why they’re dropping off, so that you can reduce drop off rates an in turn increase overall conversion.

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