The funnel and conversion maths: reach, consideration, trial and repeat

How a market of people narrows into repeat buyers, why the stage rates multiply, and how to find the stage worth fixing.

Key takeaways

A funnel follows people from first contact to repeat purchase. Each stage keeps a share of the one before, so the rates multiply: five stages that each keep half leave about 3 percent.
Common mistakes: Adding stage rates instead of multiplying them.
Reach: the people your advertising, shelves or sales team actually touch.
Awareness: those who notice and remember you.
Consideration: those who would think of buying you when the need comes up.

Key idea

A funnel follows people from first contact to repeat purchase. Each stage keeps a share of the one before, so the rates multiply: five stages that each keep half leave about 3 percent. Find the weakest stage, and remember that repeat buyers usually bring most of the volume.

The stages, in plain words

Reach: the people your advertising, shelves or sales team actually touch.
Awareness: those who notice and remember you.
Consideration: those who would think of buying you when the need comes up.
Trial: those who buy once.
Repeat: those who buy again. For anything bought often (food, drinks, apps, services) this is where the money is.

Online, the same idea appears with different names: visits, product views, add to basket, checkout, purchase. A shop on a high street has one too: people walking past, people coming in, people buying. Whatever the names, the maths is the same: start with the people at the top and multiply by each stage's rate.

Launch funnel for a fictional protein snack in the UAE, first year (illustrative)(people (thousands))

So-what

Fewer than 1 in 100 target households becomes a repeat buyer, yet those 27 thousand households buy most of the packs.

Worked case

Which stage should a snack launch fix?

The prompt

Using the funnel above: the fictional brand reaches 60 percent of 3 million target households, 50 percent of those reached become aware, 40 percent of the aware consider it, 25 percent of those try it, and 30 percent of triers buy again. A trier buys 1 pack; a repeat buyer buys 10 more packs in the year. Each pack brings the brand AED 5 of contribution, and launch marketing costs AED 2.5 million. Does year one pay, and is it better to lift trial from 25 to 30 percent or repeat from 30 to 40 percent?

Open this case to practice it with a partner

The structure

Contribution = packs x AED 5; packs = triers x 1 + repeat buyers x 10
- Triers = households x reach x awareness x consideration x trial
- Key: Repeat buyers = triers x repeat rate
- Compare two fixes on contribution

Working it through

1. Triers
3,000,000 x 0.6 x 0.5 x 0.4 x 0.25.
Triers (households):3,000,000 × 0.6 × 0.5 × 0.4 × 0.25 = 90,000
2. Repeat buyers
30 percent of triers.
Repeat buyers (households):90,000 × 0.3 = 27,000
3. Whole funnel
Repeat buyers as a share of target households.
Target to repeat (percent):27,000 ÷ 3,000,000 × 100 = 0.9
4. Packs sold
One pack per trier plus 10 per repeat buyer.
Packs sold:90,000 × 1 + 27,000 × 10 = 360,000
5. Contribution
AED 5 a pack.
Year one contribution (AED):360,000 × 5 = 1,800,000
6. Year one result
Contribution minus launch marketing.
Year one result (AED):1,800,000 - 2,500,000 = -700,000
7. Fix A: trial to 30 percent
Triers rise to 108,000; repeat buyers are 30 percent of them; packs and contribution follow.
Contribution with trial at 30 percent (AED):(108,000 × 1 + 108,000 × 0.3 × 10) × 5 = 2,160,000
8. Fix B: repeat to 40 percent
Triers stay 90,000; repeat buyers become 36,000.
Contribution with repeat at 40 percent (AED):(90,000 × 1 + 90,000 × 0.4 × 10) × 5 = 2,250,000

The recommendation

Year one does not pay on its own: contribution of AED 1.8 million is AED 0.7 million short of the AED 2.5 million launch cost, so the brand must win on repeat. Fixing repeat is worth more than fixing trial: lifting repeat from 30 to 40 percent adds AED 450,000 of contribution, against AED 360,000 for lifting trial from 25 to 30 percent, because each repeat buyer brings ten packs. The risk is that repeat is weak because the product itself disappoints, which no promotion will fix. As a next step, ask triers who did not buy again why, before spending more on reach.

Timed math drill

An online shoe shop in Germany gets 200,000 visits a month. 2.5 percent of visits end in an order, and the average order is EUR 60. What is monthly revenue, in EUR?

Timed math drill

A bank app in Indonesia: 40 percent of people who download it open an account, 50 percent of those make a first deposit, and 30 percent of depositors are still active after six months. Out of 100,000 downloads, how many active customers are left after six months?

Common mistakes

Adding stage rates instead of multiplying them. Measuring only the top of the funnel (views, clicks, downloads) and calling it success. Spending to widen the top when the leak is at the bottom: if triers do not come back, more triers only cost more. For products on shelves, forgetting that a shopper cannot try what the store does not stock, so distribution is a stage too.

Check your understanding

Each of four funnel stages keeps 50 percent of the stage before. What share of the people at the top reach the end?

Check your understanding

Many people try a new drink but few buy it again. What should the brand do first?

Terms in this lesson

Penetration rate AOV (average order value)Contribution Numeric distribution

Sources for this lesson (1)

Recognized public explanations of case-interview concepts and terms

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