Conversion Funnel #2: New User Transaction Conversion Funnel
**I’m launching a newsletter in 2022 called Personal Finance in the Blockchain Age. It would make my day if you sign up.**
The Transaction Conversion Funnel is the most familiar type of funnel. It’s what you experience when you shop on Amazon, Ebay, and other online retailers. Below I break down this conversion funnel into phases and explain what happens in each phase.
The New User Transaction Conversion Funnel entails 6 distinct phases: Inbound, Product Pages & Education, Item In Cart, Account, Payment, and Conversion.
Inbound → Product Page / Education → Item In Cart → Account → Payment → Conversion
The outline below will use two distinct words that will have specific meanings to the ‘theory’ of the Transaction Conversion Funnel vs the actual implementation of the conversion funnel. The 6 ‘Phases’ of the Transaction Conversion Funnel could be expanded into more than 6 ‘Steps’. So as I define each of the Phases, I may mention that the Phase could have multiple Steps. I want to be intentional about using the word ‘Phase’ to signify the theory and the word ‘Step’ to signify the actual implementation.
We’ll review the New and Returning User Conversion Funnels separately, because once you have already captured a user’s initial info, repeat conversions (ie purchases, etc) can and should follow a different set of phases. In addition, user behavior becomes a much more important factor for the Returning User Conversion Funnel since there is more data available. For today, we’ll only look at the Transaction Conversion Funnel from the New User perspective.
Depending how you set up your conversion funnel, you can create a seamless user experience with high revenue or a friction-filled experience that slows your growth. Regardless how you initially create your funnel, if you have analytics set-up, you’ll have the data to iterate as you seek the optimized conversion funnel for new users.
A note on tracking: I prefer to use an event triggered upon landing on a page that maps the user’s ID with the browser, software, hardware, channel, IP address, etc. I’ll dig into event-based tracking another time. One more thing to keep in mind: Modals may trigger events inconsistently, so I prefer using distinct pages for all conversion funnel steps whenever possible.
Phase 1: Inbound Channels
The Inbound phase of the conversion funnel is both the channel that drives traffic to your product (SEO, SEM, Email, Social, Referrals, etc) and the landing page. This phase is typically shared between Product and Marketing / Growth, especially if landing page templates are not already created.
There are several levers for the Inbound channel, depending which traffic channel you choose to emphasize (SEO, SEM, Email, Social, Referrals, etc). Typically, you’ll hire a marketer for strategy and execution for each channel to handle the manual work of setting up campaigns and tracking results. There is a multi-Billion dollar industry for Google Ads, Facebook Ads, etc, and a great marketing team who can build strong inbound channels with high intent users will make the product look amazing when paired with a highly optimized conversion funnel.
As your organization matures, automated campaigns using API integrations will become more widely used to optimize the ad spend and identify new opportunities, and around this time, Product will drive more of the inbound channel work.
The initial landing page will also be the subject of heavy scrutiny. As the first step of the funnel, it is the single biggest step in the funnel (each step along the funnel users drop off) and the first initial barrier to using the product. The more users we can convince to learn more about our product, the better chance we have to actually sell them our product.
Phase 2: Product Page & Education
The second phase of the funnel could have several actual steps once you implement it. Or it could be the same page as the Phase 1 Inbound Landing Page.
For instance, Amazon requires that you go to a product page to place an item in your cart. You can’t land on the homepage (for instance) and add a product directly to your cart. On the other hand, Lending Club lets you input how much money you need to find out your interest rate directly from the homepage.
As long as you are inputting info that relates to customizing the product that you will transact, it would be a part of this phase. Underwriting criteria (ie your personal info used to qualify your credit-worthiness) will be covered separately on Friday since regulated products present a few unique challenges.
You will want to evaluate how your pages that both sell and educate about your product impact the user’s progression through the funnel.
Phase 3: Item In Cart
A user who has added something to the cart has expressed the next level of interest in the product.
While this is typically an event that is captured as click, at this point, if you haven’t captured the user’s email, you may not be able to retarget them. There may be value in running an A/B Experiment if you have drop-off at this step with no way to follow up with the user’s. More on A/B Experiments another time.
Phase 4: Account Set-up or Guest Check-out
Once a new user has decided to checkout, it is time to gather their info. For physical goods, you will need a shipping address in addition to an email and phone number. For digital goods, the email may be enough (though you’ll want some form of 2 Factor Authentication aka 2FA).
A user can typically opt into creating an account or checking out as guest. There is more value if the user creates an account, so depending how much friction you see at this point, it may be worth an experiment.
Phase 5: Payment
Payment for the transaction conversion can be as simple as dropping in a couple lines of code from a ready-to-use payment input offered from Square, Stripe, PayPal, and others. Or it can be as complex as allowing users to store their credit card on file for repeat use — which requires an API integration to create the nonce from the encrypted credit card on file for the user’s transaction.
In any event, payments has a ton of detail and complexity. The user-facing part of payments is already complex (error handling, fraud monitoring, etc), but the back-end (refunding money, disputing chargebacks, etc) can be equally complex. On top of all that, quality control monitoring is essential. Incorrect cart calculations and other bugs that accidentally result in unreliable charges could be devastating.
Phase 6: Conversion
Once the payment has gone through and the order has been completed, the user has converted. Congrats!
This is the last phase in the New User Acquisition journey. Hopefully your customer acquisition cost (CAC) is in-line with expectations (or below).
It’s key to start this new relationship off on the right foot. After all, this customer will hopefully become a repeat customer.
Show a confirmation page. Email a receipt (or provide access to one in the Returning User dashboard). Begin your on-boarding education.
Returning Users is a topic for another day. Just remember that it’s important to make a great first impression.
Tomorrow
I’ll give a high level view of the New User Subscription Conversion Funnel, highlighting the differences with the New User Transaction Conversion Funnel.
Next Week
I intend to dig into each phase of the New User Transaction Conversion Funnel next week. Each day, I’ll focus on a different phase and dig deeper. The following week will be the New User Subscription Funnel, and the week after that will be the New User Freemium Funnel. I was planning to move on to Returning User Conversion Funnels (aka retention and loyalty) afterwards, but I’m open to feedback.
