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Sales funnel for e-commerce businesses explained

Sales funnel for e-commerce businesses explained

The e-commerce sales funnel has evolved over the last few years. With shoppers no longer being dependant on stores for information about the product, the asymmetry of information that retailers used to have is gone.

The sales funnel is a great guide at how to treat customers at different stages of conversion, and newer models have come-up that want to broaden the role of the funnel in a customer’s purchase journey. To become profitable, e-commerce businesses need to nurture potential customers from the start and continue this post-conversion as well. They need new ways to interact and engage with users based on which level of the sales funnel they are on.

In this article, we try to break down what would be the starting point for a good sales funnel for a small or medium e-commerce business. Before we start, make sure that you have your e-commerce and search analytics enabled as we will also take a look at which analytics you can use to measure how your store is doing.

How the new funnel works

The five-stage funnel is one of the simpler expansions of the funnel that is currently being used by data scientists to look at the profitability of e-commerce businesses. While the basic tenets of the funnel remain, this model includes the fact that customers are now more knowledgeable than before and have the chance to be converted faster. The steps that we will be looking at are:

  1. Awareness
  2. Consideration
  3. Conversion
  4. Loyalty
  5. Advocacy


The awareness stage is where you have to make your target audience know about your brand. This step is about creating familiarity with your name, not just the products you offer. The best way to do this is by:

  • SEO - This would include content writing, social media presence, good product and alt descriptions.
  • Paid Advertising - This includes AdWords, social media marketing, influencer marketing, etc.

While paid advertising can generate results in the form of increased traffic, it won’t necessarily lead to traffic the converts for your site. Content is more helpful as it is more relatable to your audience and can gain you traction over time. By focusing on content you can also monitor how your brand is performing.

What to track - At this stage, you want to track how often your brand is part of the conversation. Keep an eye on inbound traffic sources by looking at the Click Through Rate (CTR) and the Cost Per Click (CPC). Also, remember to focus on traffic sources that give more conversions than traffic in future marketing campaigns.


After capturing the attention of your audience, you need to nurture their desire to explore your offerings at the consideration stage. You need to be able to communicate with them what products does your brand offer and how it benefits them. For this make sure that you have written good product descriptions and have detailed product images. This helps entice customers as they cannot talk with your sales person directly.

Stores have begun to realize that search forms a critical component of the early stages of a sales funnel. With more than 30% of visitors interacting with site search, having a well-implemented e-commerce search can increase sales and conversions for a store. Irrelevant results and poor UI/UX can lead to visitors using search to exit a site.

What to track - Here a good metric to track is New vs Returning Users. As most visitors are unlikely to convert the first time they visit your site, the more return visitors your site can generate, the higher the chance of them converting. You can also look at your search analytics to check which Search Terms are popular and which are leading to Zero search results. For email campaigns, look at the Open Rates and CTR to check its success.

Search users can contribute 30-40% of your e-commerce revenue. Are you doing enough to ease their purchase journey?


Some users move on to the conversion stage with or without being nurtured and want to make a purchase. This stage is about convincing visitors that your store is the right place to complete the purchase. See to it that your Call To Actions (CTA) are clear and concise. You can also experiment with them by having custom CTAs for popular products which describe their benefits.

At this stage, you want customers to complete their checkout quickly. Users can typically drop-out when filling up the sign-up and login forms or during checkout. Businesses can always get additional information about preferences they want by asking the shopper at a later date without interrupting the purchase journey.

Social login is a very popular way by which your users can complete the sign-up and login process with ease. Social login uses accounts tied with Facebook, Google, Twitter, etc. to log in a user.

One Page checkout is getting noticed by e-commerce platforms to increase conversions. This method shows all the relevant information like product price, address, name, shipping information, etc. on a single page. More steps a checkout has, more chances for a customer to drop-off and abandon the purchase.

What to track - Here important metrics for you to look out for are Add to cart rate, which tells you how many people wanted to purchase the product. And Abandonment Rates, which tells you how many people did not complete the checkout. Using this data you can introspect as to what is causing the customer to discontinue the purchase. Some of the most common reasons are different methods of payment not being accepted, lack of secured payment gateway, and hidden shipping fees.


Loyalty stage is about making sure that your customers keep coming back. Transactional customers do not contribute to the long-term profitability of a business. Here is where all the data you have collected in analytics comes in to give a clearer picture of your audience.

You can promote best-sellers and popular products to try and get more people to convert. Searchandising, where a product is boosted to appear higher in search results for certain keywords, is also a great way to increase revenue. Your e-commerce business should also leverage the email list that you’ve have built up. You can segregate customers according to the value of the purchases made or the categories they prefer to shop and send them relevant newsletters and offers to keep them interested.

Shoppers that have made a purchase from your store are more likely to make another one than a new customer. With that in mind, you should cultivate a sense of belonging in your audience to encourage them to interact with your brand. You can do this with the help of email newsletters and social media.

What to track - Here the most important metrics you will be looking at are Repeat Purchase Probability (RPP) and Customer Retention Rate (CRR). Both of these are great indicators of how well does your brand retain its customers. Churn is one of the most common occurrences even in the field of e-commerce. Both take into account repeat purchases made by customers and use a set time frame for calculation.


The final stage in this model is the Advocacy stage. Here you rely on your customers to become endorsers for your brand. The power of word-of-mouth advertising is in full force today and should be harnessed by your e-commerce store as well.

Online shoppers feel much more secure about buying into a brand that has been trusted by others before. It creates trust between the brand and its customers when they see someone with the similar needs or background has purchased and benefited from a product.

Have the option to let customers share their reviews or ratings with their social circle is a great way to leverage social proof in your favour. With close to 80% of customers getting information about the product online, people’s talking about your brand can generate more traffic for your brand than advertisements.

Having a strong brand identity along with a unique experience is essential over the long run for any business. The more value a customer feels that they have gotten from your store that happier they will be. Advocacy is a cost-effective method of getting new customers as it doesn't require any new investment on its own but can give huge returns.

What to track - Look at the ratings and reviews that your best sellers have gotten. If there is a sudden change then it could be due to a new product, promotion or competitor. You will have a tough time building a good reputation if your offerings are not matching customer expectations. A metric you can use to track how your customers feel about your products is Net Promoter Score (NPS).

NPS is the 10-point scale where customers rate how their experience was. Shoppers who rate 9-10 are extremely happy with the experience and are called promoters. Those who give a score of 7-8 are neutral and could have had a better experience. The ones you will have to look to for understanding what you can do to improve are the shoppers who give 6 or below called the detractors.

Monitoring your Sales Funnel

There are two keys to having a good sales funnel. The first is good data from your store’s analytics and the second is a deep understanding of your customers that comes from analysing this data.

Your final goal should be to understand the sales funnel well and use it to increase conversions for your online store. This is going to be an iterative process but will be well worth the effort to make your e-commerce store profitable in the long run.

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