What is an Acquisition Funnel and How Does It Work?

Building a customer acquisition funnel from scratch comes with a fair share of hiccups. Most product marketers cite:1) the non-linearity of the buying process, 2) finding low-effort, high-impact marketing channels, and 3) identifying the right funnel metrics to track as common headaches along the entire process — do you too? 

By the end of the guide, you’ll become well-versed in designing an acquisition funnel that drives conversion. This will be done through strategy-focused examples. 

We’ll also be sharing expert tips and recommendations on how to optimize the acquisition funnel for capturing high-value, quality leads. 

Let’s go! 

What is an Acquisition Funnel?

An acquisition funnel is the process a business uses to acquire new customers or clients. It is vital in helping the business put resources into the right acquisition channels and acquire customers that are most likely to bring repeat business, leading to improved revenue and growth. 

It is typically depicted as a “funnel” with a wide top and a narrow bottom (as shown in the image below).

Alternatively, we can say that a customer acquisition funnel depicts the different stages (read: touchpoints) in a customer lifecycle, from when they first become solution-aware to the point of purchase.

And how exactly do these stages work? Let’s explore in detail below.

Note: The customer acquisition funnel is also sometimes called a “marketing funnel”, a “sales funnel” or even a “conversion funnel”.

What are the Different Stages in the Acquisition Funnel? 

A customer acquisition funnel has four stages. Let’s begin with the first two stages, which come under the purview of marketing and demand generation teams. 

Stage 1: Awareness

The awareness stage is where potential customers first become aware of your product while looking for a solution to their problem.  

At this stage, most visitors will come to your website with the intent of acquiring more information, looking to learn and explore. So, the focus of your marketing strategy should be on educating and providing valuable content without pushing for a sale. 

As Des Traynor, Co-founder of Intercom, shares in Intercom on Marketing:

“The most important tasks for any early stage startup are to write code and talk to users. When we started Intercom the latter was my job. About 50% of my time was spent communicating with potential users, whether that was asking them to try Intercom over email, meeting them at conferences, responding to them in blog comments or talking to them on Hacker News.”

In a similar vein, one common yet incredibly effective strategy for building awareness and pulling in prospects is doing a Product Hunt launch. This customer acquisition channel lets you reach target users actively hunting for a solution and generate thousands of website visits in a single go. The negative and positive feedback from early users can also inform product development.  

In his comprehensive Product Hunt Launch guide, Nick Costelloe suggests the following steps:

To aid the launch further, you can also create a product-led experience for ‌website visitors with embedded product tours. It’s a great way to keep the momentum going for the traffic coming from PH. Here’s one example from Clari built using Storylane’s no-code editor. 

Stage 2: Consideration

The consideration stage is where prospects start actively searching for product options and finding the most suitable ones. They may dig up information across review sites like G2, ask for peer recommendations, or sign up for free trails to explore. This is when prospects should be warmed up through lead nurturing methods.

From the sales POV, this is where the sales reps need to focus on building customer relationships and qualifying the best-fit leads to pass them along as opportunities to AEs.

Now, lead nurturing takes time. So the marketing budget should be flowing into marketing channels where personalization and precise targeting is possible. This is where email marketing shines the most, as backed by 47% of the surveyed marketers.  

Here is how.

To start off, you want to nudge ‌interested website visitors to try out the product. When they see the value upfront, they’re more likely to shortlist you for the final evaluation. Pulley, a cap table platform, wanted to do the same and embedded an interactive demo on their website. The conversions from the addition were impressive, to say the least. See for yourself!

Now comes the caveat: Not all freemium users/free trial users will convert. Can you guess the average free-to-premium rate for SaaS? It’s at 3% 🤯

Solution? Email marketing with a drip campaign. Here are two email sequences we love. 

Airtable’s empathetic messaging 

• Use of empathetic, affirming language countering the otherwise complexity of the product. 
• Direct links to helpful resources and guides, encouraging product engagement. 

Webflow’s persona-specific messaging  

• This is the onboarding email for the “agency business” persona. So, the messaging focuses on the outcomes users can achieve for their “clients”.
• Action-oriented CTAs at the top and bottom of the email.

Now, in the last two stages of the customer acquisition funnel, sales and marketing teams come together to convince the prospects. Let’s see how. 

Stage 3: Evaluation 

In the evaluation stage, the prospect has done their research, tested out products and shortlisted a couple of options. Now, they’re ready to make the final decision. 

To do so, they’ll likely want to speak to the sales. This is often the first time a prospect is meeting in the middle, so try your best to deepen the relationship. Earn their trust by demonstrating why you are the best choice out there.

How? Hop on a one-on-one call to understand customer concerns and answer objections. (We’ve covered everything you need to know about discovery calls here!)

This is the pre-sales stage where you want to differentiate how your product can help the prospect achieve the bottom line results. Do you have the reliability and the expertise the customer is seeking? Yes? Prove it.

Where a product showcase is concerned, nothing beats a live demo. But server crashes or unreliable native demo environments can become a hassle in the sales process. Not to mention, there’s less scope for personalization and they eat into the engineering resources.

For example, Upland’s sales team was spending an average of 5 to 20 hours weekly on creating custom demos. That’s when they switched to pre-recorded, interactive demos. Here’s how they fared. 😁

Besides, even at the evaluation stage, prospects are most likely gathering peer reviews and customer testimonials to decide. This is where targeted content marketing hits the bullseye.

Objectively done case studies and product comparison blog content can lead to a positive outcome. Not to toot our own horn, but Storylane’s library of customer stories is a good example to emulate – with our crisp and result-oriented storytelling!

• Badges of honor from G2 and brand logos act as social proofs.
• Outcome-focused headlines clearly stating the benefits.

Stage 4: Purchase

The final stage of the buying funnel is the purchase stage. This is where prospects have had talks with sales, discussed pricing and implementation strategy, and shown positive intent to buy. The only thing left is to seal the deal.

This is the moment of truth, but there’s still a couple of things you can pull off.

After the live demo or the sales presentation, sharing interactive demo leave-behinds in emails is a great way to recap the product highlights in the product stage. 

For example, for Quorum, selling to enterprise customers with multiple stakeholders meant someone was always missing during the sales calls. To ensure the product’s value was communicated to all, they would share the personalized demos in ABM and email campaigns, accelerating the deals by 2-4 weeks. 

You can share such leave-behinds and guided demos either in a follow-up email or create a personalized landing page with exclusive offers and strategic CTAs. Here’s one follow-up email example to check in with prospects who missed a scheduled call.

Just remember: Prospects only “commit” to buy at the purchase stage, the actual conversion happens later. They’re ready with the budget to proceed, have weighed in the pros and cons between competitors, discussed among colleagues, and decided on a product. So, what’s the hang up? What’s the one thing stopping them from going ahead and buying your product?

This is where you’ll need to push the post-sales services a fair amount, and reflect how well you can walk the talk. It’s better not to make any formal offers or present incentives to sway the prospect. You may come across as desperate. So, what else can you do? 

• Make the path to purchase seamless by optimizing the pricing and checkout pages with clear information.  
• Support AEs with sales enabling collateral like video reviews, micro demos, or sales leave-behinds. Because as they say, the proof is in the pudding. 
• Provide links to FAQ pages, knowledge base, and other helpful, relevant content in the follow-up communication. 

Now, ideally, prospects should journey from the awareness stage to the purchase stage in a linear fashion. But customers may not always move as predicted. For example, after showing positive intent to move ahead, they may want to reconsider and get a second demonstration to get more assurance.

Since there is no single path to conversion, different customers will experience and evaluate your product differently. Fortunately, there are steps we can take to minimize friction for each of the funnel stages to lower the cost of customer acquisition and build a loyal customer base. 

Expert Tips for Customer Acquisition Funnel Optimization

Building a customer acquisition funnel is only one-half of the process. The other half is optimizing the funnel for better conversions. Here are a few expert-backed tips you can use for customer acquisition funnel optimization.

1. Provide the “Wow!” Moment Upfront

Instead of keeping the product locked behind a sign-up form, allow website visitors to get a taste of the product upfront. As David Skok, serial entrepreneur and VC, explains in his blog,

“The conventional approach to registration is to make the customer register before they can get to experience the Wow! moment (i.e. experiencing some gratification from use of the product) and getting some gratification. If you are doing this, you may want to try a different approach, and place the Wow! moment before you ask them to register.”

This early gratification can keep the interested onlookers engaged, and even nudge them forward. 

As mentioned previously, website embedded tours are proven ways to get the visitors/leads to experience the wow! moment faster. Fulcrum, for example, embedded  an interactive demo on its website, created using Storylane as a customer acquisition strategy, and got 32k+ impressions and 400+ leads!

2. Handle the Marketing to Sales Handoff with Extra Care

Marketing and sales have been at loggerheads for a long time. The former will pass on thousands and hundreds of MQLs and the latter will keep rejecting, saying they’re all bad. This misalignment often hampers ‌customer acquisition efforts.

Myk Pono, a GTM and PLG expert, recommends using a lead scoring method to find high-value leads,

“When a company gets a high volume of inbound marketing leads, the problem for the SDR becomes time management and prioritization. At this point, marketing has to understand how SDR teams qualify prospects and help the SDRs identify potential CLV or opportunity size.”

Another example comes from ZoomInfo. The company implemented an SLA for inbound leads to get the two teams to work together: 

“To align our sales and marketing teams, ZoomInfo created a sales role 100% dedicated to calling warm marketing-qualified leads. (Yes, calling them.)
Our conversion rate increased from that stubborn 4 percent up to 15 percent. We found the sweet spot is 150 dials (yes, dials) per day.”

3. Create a Memorable, Immersive Homepage Experience 

After the onlookers become aware of your product, where do they go to learn more? Your website, of course. And the homepage is often the first touchpoint, the first impression of the product as well as the company. 

This means creating a memorable homepage messaging. Here’s how to get it right by Anthony Pierri.  

With the messaging done right, it’s time to show the product in action. The cheat key here? As iterated before, embedded product tours. They’re hands down the most effective way to demonstrate your value proposition. 

As Matt Hodges, Senior Director of Marketing at Intercom, shares,

“The majority of people who visit your marketing site don’t have the time to invest in learning what it is you actually do. If you can’t communicate that clearly on your homepage they’ll just bounce, quite literally, off your site – an opportunity gone.” 

4. Don’t Put Customer-Centric, Valuable Content Behind a Form

It’s a common content strategy to use comprehensive, organically researched content to attract leads – who need to fill out a lead form and share contact details for access. This has been the trend for years now (Think Hubspot’s entire content hub!), and is often the first touchpoint in the B2B buying journey. But is the approach effective? 

In his now famous article, Why I’m Killing the Marketing Qualified Lead, Tom Wentworth, former Chief Marketing Officer at RapidMiner, explains why they got rid of the lead forms:

“I really don’t care how many leads our content generates. If our content is great, more people will download RapidMiner (we do capture email addresses on downloads) and more importantly, people will use it and see how we can deliver business impact. I’d rather help one user build a predictive model that generates millions in new revenue than add a bunch of poorly qualified “leads” to a database.”

5. Early in a Startup, Harness the Power of Community and Network Before Shelling Out a Marketing Dollar 

“MySpace launched in the Hollywood crowd that were friends of Tom and Chris. Twitter launched in the SF tech community that were friends of Ev and Biz and Jack. Tumblr launched in the "roll your own blog" avant garde community that David was part of. Quora launched in the Facebook alumni community. Facebook launched on Ivy League campuses. You get the idea.”, writes Fred Wilson, Venture Capitalist, in his often-quoted blog post on Marketing.  

“Find an obvious group of like minded people who know each other and launch into that community. If they like it, it will spread throughout that community and eventually beyond.”

This is where creating highly shareable, interactive demos can pay off big time. Storylane’s no-code HTML editor lets you create personalized demos for multiple user personas in just 10 minutes! 

6. With Social Media, Build on the Back of the Founder’s Personal Brand

With social media marketing, there’s no better way to lead than with the founder’s brand. It’s cost-effective, and if done right, it can become a growth multiplier, saving you hours of marketing efforts and Ad spend.

And the best example to emulate? Rand Fishkin, the CEO of SparkToro and former CEO & founder of Moz.

He often shares valuable insights around marketing and entrepreneurship, while candidly sharing the gorwth plans and financials of their company on platforms like LinkedIn. Here’s a sneak peek of his feed.

This type of content draws the attention and interest of onlookers and potential customers alike. But most of all, it drives the interest of well-connected and influential people like Rand himself. This gets the horizontal SaaS product in front of a broader audience.

With only 3 members in the team, SparkToro solely relies on word-of-mouth to acquire new customers. As Rand explains in his candid blog post about SparkToro’s growth journey:

7. Go for Growth Loop Frameworks Instead of Acquisition Funnels

This point is ironic, but has to be mentioned here. In the B2B buying process, growth loops can play a pivotal role in driving acquisition through referrals, retaining users, and lowering the cost of customer acquisition. How? This is because of the self-sustaining nature of the growth loops, as depicted in the image below. 

For example, LinkedIn harnesses its network effect to acquire new users. They use acquisition channels like word-of-mouth, organic traffic, paid media, and other social networks to encourage fresh joinees. 

When the same joinees experience value in the form of learning, job hunting, or networking, they refer others to join as well and the number of LinkedIn users goes up naturally. 📈

Customer Acquisition is Only the Beginning 

As promised, we’ve covered the fundamentals and inner workings of a customer acquisition funnel. Now, you’re ready to build an acquisition funnel of your own.

But customer acquisition is only the beginning. To make sure ‌growth continues, you must put equal efforts into customer relationship management and customer retention. But more on that another time!

Q1. What is an acquisition funnel?

An acquisition funnel depicts the process a business uses to identify, attract, engage, and convert leads into paying customers.

Q2. What is the top of funnel acquisition strategy?

A top of the funnel (TOFU) acquisition strategy is concerned with the initial stage of the funnel, which focuses on spreading awareness and generating leads.