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Customer acquisition funnel: what it is and how to optimize it

For your product or service to succeed in a crowded market, you need to understand how potential buyers turn into loyal, repeat customers.

A customer acquisition funnel does exactly that, helping you visualize how to attract, convert, and retain potential buyers.

But the process isn’t one-size-fits-all. For a customer acquisition funnel to work, you have to tailor each step to your audience and make continuous tweaks to optimize it.

Last updated

7 Jul 2023

Reading time

9 min


This guide starts with an overview of the customer acquisition funnel. We also cover:


A customer acquisition funnel outlines the steps a company must take to turn prospects into repeat customers. The funnel breaks down into four stages:

  1. Awareness: use strategies like ads and content marketing to get attention and pique the interest of potential customers

  2. Consideration: help prospects make informed buying decisions through case studies, product demos, or product comparison charts

  3. Conversion: the prospect takes action to convert and becomes a customer. Use behavior analytics tools like heatmaps and recordings to find and eliminate friction on product pages and in the checkout flow.

  4. Retention: this stage involves optimizing the post-purchase customer experience (CX). With personalized emails and support, you increase customer satisfaction and create repeat customers.

When you create your customer acquisition funnel, follow these four steps:

  1. Know your audience. Dive into your ideal customer’s demographics, behaviors, motivations, and interests to develop empathy for their needs.

  2. Choose the right channels. Once you understand your customers, decide where to focus your outreach efforts, like email, podcast ads, and social media platforms.

  3. Create and execute a content plan. Take an empathetic approach to content. Decide what information prospects and customers need at each stage, and how to package that information in the most appealing way.

  4. Optimize for conversion. Now’s the time to refine your funnel. Analyze your metrics and look for the why behind customer behavior through session recordings, funnel analysis, and A/B testing. 

Learn what works—and what doesn’t—at each stage of your funnel

Use Hotjar to optimize your customer acquisition funnel and boost conversions.

What is a customer acquisition funnel?

A customer acquisition funnel is a visual representation of the steps a company must take to turn prospects into repeat customers. It serves as a framework for understanding and optimizing the customer journey. 

Picture a standard plastic funnel—the kind you might find in your kitchen or garage. A customer acquisition funnel is shaped just like that. It opens up at the top as you cast a wide net for leads, and narrows as those prospects drop off or convert. 

Unlike a marketing funnel, which focuses on capturing prospects’ initial attention and interest, the customer acquisition funnel follows a complete path through four stages: awareness, consideration, conversion, and retention.

4 stages of the customer acquisition funnel

Acquiring customers is no easy feat—but the process runs more smoothly when you break it down into common stages. Then, you can tailor your marketing and customer experience (CX) strategies to meet your prospects’ needs and guide them through the conversion process. 

Let’s take a closer look at each stage, along with actionable tips for how to move leads from one stage to the next: 

  1. Awareness

  2. Consideration

  3. Conversion

  4. Retention

1. Awareness

Let's say someone out there needs a project management tool that integrates with Slack, their messaging platform. And you’ve built just the thing. The problem? They have no idea your company or product exists. 

In the awareness stage of the customer acquisition funnel, you change that—you market and advertise your offer to get it in front of potential buyers and pique their interest. 

This top-of-the-funnel (TOFU) stage has two substages: 

  1. Discovery: the point where a lead enters the funnel. Your potential customer has a problem, and you want them to discover your company’s solution. To do that, get to know your ideal customer (keep reading to learn how) and connect with them through the channels they frequent. 

  2. Interest: this is when your prospect learns what you have to offer. You introduce a potential customer to your company and its positioning and products, and start to nurture a relationship with them.

Try these techniques to get leads’ attention and spark their interest:

Write and publish original articles on topics related to your product or service.
Optimize existing blog posts on your website to pull in more search engine traffic.
Share tips or testimonials on the social platforms your target audience prefers.
Create television or radio commercials, direct mail flyers, social media ads, or website banner ads.
Build a welcome email sequence to send to new newsletter subscribers to introduce them to your company and offerings.

2. Consideration

Your prospect is in the middle of the funnel (MOFU) now. At this stage, you’ve captured their attention. Now, they need more information to help them make an informed decision. 

The consideration stage has two substages: 

  1. Research: your lead looks for more details about your products and services on your website and third-party review sites, and compares your offers with others

  2. Intent: the potential lead is pretty sure they know which product is right for them, but they need more information—like a case study or a free demo—to confirm they’re making the best choice

Try these techniques to help shoppers determine whether your offer is a good fit:

Add a page to your website with a detailed product comparison chart.
Create product demo videos highlighting your offer’s features and benefits. 
Interview satisfied customers to create case studies showcasing their wins with your product. 
Offer a free demo of a software-as-a-service (SaaS) product or a free sample of an ecommerce item.

3. Conversion

As they near the bottom of the funnel (BOFU), your prospect is ready to take action.

Sometimes that’s as quick and easy as clicking the ‘buy now’ button—but it could include additional steps, like negotiating to customize a package or contract. 

Note: your prospects have likely taken small actions, or micro-conversions, along the way—like clicking on a link in a promotional email or adding a product to their cart. But this stage refers to the macro-conversion, the main action you want the buyer to take—whether that’s purchasing a skillet or subscribing to a productivity app.

Try these techniques to help a buyer make their decision and increase conversions:

Use website analytics to identify where and why users drop off.
Send reminder emails to shoppers who left items behind to reduce cart abandonment.
Pay close attention to your ecommerce product pages, including everything a buyer might need to make their decision (like videos or detailed product descriptions).
Remove friction from your checkout process by shortening forms and offering multiple payment options.

💡Pro tip: use heatmaps to find and eliminate friction near the point of conversion. Heatmaps help you visualize trends in click, scroll, and move data. For example, you might see that only 6% of website visitors scroll as far as your sign-up link, or that users try to click the wrong part of the page. 

The team at Taskworld, a project management platform, used Hotjar Heatmaps to optimize conversions and acquire new customers.

“We studied heatmaps in Hotjar to understand where users were clicking during Taskworld’s signup process,” says Shiv Sharma, Head of Content at Taskworld. “The entire process revealed some great insights. We discovered a few issues which only required five minutes to be resolved. This quick fix boosted our conversion by 40%.”

Taskworld optimized conversions in their customer acquisition funnel using Hotjar Heatmaps

4. Retention

Some funnels—like the typical sales funnel—stop before this point, but the customer acquisition funnel continues to retention. 

Customer acquisition is about more than just scoring a sale; it’s about creating dedicated customers and brand advocates. Retaining a loyal customer base means you spend less on customer acquisition in the future.

To create a delightful customer experience (CX) and maintain customers’ trust, you must understand exactly what they want and need.

Try these techniques to boost customer satisfaction and improve customer retention:

Keep a close eye on metrics like retention rate, churn rate (the percentage of customers who stop buying from you over time), and customer lifetime value (the revenue earned from the average customer over time).
Incentivize purchases with a loyalty or rewards program.
Provide multiple customer support methods—like chatbots and a self-serve knowledge base—to give customers the answers they need when they need them.
Send targeted emails based on past-purchase data.

💡Pro tip: collect feedback from real customers to learn what makes them stay—or leave. Here at Hotjar 👋, some of our favorite tools to gather user feedback include: 

  • Interviews: get valuable insights by talking with individual customers. With Hotjar Engage, you can schedule, record, and share interviews. (Bonus: these interviews show customers you value their insights and care about their experience.)

  • Feedback widgets: put a feedback widget on any page of your site. Customers just click a button to weigh in on which page elements work and which cause them to exit the funnel.

  • Surveys: hear what customers really think by launching a Net Promoter Score® (NPS) Survey. An NPS survey tells you how likely people are to recommend your product or company—a great indication of customer loyalty. 

Reminder: you can collect and use feedback to guide your decisions at any stage in the funnel—not just this one. It’s a great way to keep customers’ needs front and center.

An NPS survey collects customer input to optimize your funnel and improve loyalty

4 essential steps to creating a customer acquisition funnel

You know having a customer acquisition funnel will help you attract and retain customers, saving your marketing and advertising budgets down the road. But how do you build and optimize that funnel so it works for your goals—and for your customers? 

Here are four steps to build a customer acquisition funnel that works, so you avoid losing buyers to leaks.💧

1. Know your audience

Building an effective customer acquisition funnel hinges on knowing—really knowing—your target audience. Understanding your buyers goes far beyond demographics; you also have to understand their motivation, behavior, habits, and goals.

You need to take an empathetic, customer-centric approach to know where to find leads and what will drive them to action. (Bonus: you can use the insights you gather to segment your audience to deliver more personalized messaging, too.)

Here are two great ways to gain a better understanding of buyers:

  1. Review existing user personas, or profiles of your target users. (If you don’t have this yet, no worries. Quickly collect data with our easily customized user persona survey templates.)

  2. Create a customer journey map (CJM), a visual overview of the touchpoints a customer has with your brand on their path to purchase. (Need CJM tips and advice? We got you.)

💡Pro tip: conduct market research to inform your user personas and CJMs. Surveys and interviews work well to collect data about who your customer is, and what goals and obstacles they face. 

But don’t forget to collect observational and user behavior research, too. Watching session recordings, which let you observe real users’ mouse movements, clicks, and scrolls, helps you deeply understand their experience.

As Denis Studennikov, Head of UX/UI at Turum-burum, says, "Hotjar helps us map our client's customer journey from a user's perspective. We're much more efficient in delivering value because of it."

Hotjar Recordings provides a glimpse into the customer journey

2. Choose the right channels

If you want to attract new customers, you need to be present where they are. Do they constantly refresh their email at work, or spend more time networking on LinkedIn and Twitter? 

To determine which channels to focus on, consider: 

  • Target audience: it all comes back to your customers. Before selecting channels, refer to your user personas, CJM, and market research. For example, an ecommerce apparel retailer might turn to TikTok or influencer marketing to connect with their Gen Z demographic.

  • Competitors: conduct a competitive analysis to get inspiration from other companies in the space. Where are your competitors active? Use social listening tools or search engine optimization (SEO) tools to gauge their success. Then, consider if a similar approach will work for you.

You need to be present on a mix of channels for best results. Find out where your prospects hang out, and pick a few to focus on. 

Note: you might discover that some channels work best at specific funnel stages. For example, you might generate awareness through Facebook ads and blog content, but make email your primary retention tool, sending personalized offers to tell buyers about new products or sales.

3. Create (and execute) a content plan

Once you decide on the best-fit channels, you need a content creation and distribution plan to acquire customers.

When building your funnel, break down your content plan by stage. Ask yourself: 

  • What information do customers need to help them get to the next stage? Consider when and where to include product images, descriptions, specifications, features, benefits, prices, testimonials, service plans, warranties, or return policies. 

  • How much information do you need to provide? For example, your TOFU B2B SaaS buyer might not be ready for a white paper yet—but it might seal the deal later, at the middle or bottom of the funnel. 

  • How do you package your content? What format will help you connect with customers and provide value at each stage? Think: blog posts, ebooks, explainer videos, user-generated content (UGC), case studies, or email sequences.

Remember to keep your ideal customer and their buying journey top of mind as you plan. When in doubt about your content or campaigns, gather more data. Email a quick survey link to existing customers via your email list, or launch one on a high-traffic page of your site.

💡Pro tip: speed up survey creation with the Hotjar AI Survey assistant. Tell AI your goal for the survey, and—presto 🪄—it generates a list of custom questions for you. You don’t have to deliberate about what to ask, how many questions to include, or how to word your questions. That means you can launch your survey—and start collecting valuable insights—faster than ever. 

(Bonus: our AI Survey assistant also summarizes open-text survey responses for you, and creates reports to share with your team. 🙌)

Let Hotjar’s AI Survey assistant create survey questions for your project

4. Optimize for conversion

Building a customer acquisition funnel isn’t a one-time event. Once you have the pieces in place, you need to conduct a funnel analysis and make adjustments to make it even better. 

Follow this three-step process to make conversion rate optimization (CRO) a breeze: 

  1. Start by checking your quantitative data—the numbers—to see how your funnel is performing. Depending on your company’s goals, you may look at: CLV, churn rate, conversion rate, time-to-conversion rate, drop-off rates, and lead generation rate by channel. 

  2. Dig deeper into problem areas with qualitative data, looking at customers’ behavior and opinions to determine why your funnel sprung a leak. For example, if you experience a high drop-off rate in your checkout flow, look at session recordings for signs of frustration like rage clicks, which are multiple clicks in quick succession. Or collect customer insights via a feedback widget on any page.

  3. Run A/B tests. Have a hypothesis about what the problem is? Come up with an alternative solution and test it against the original. For example, if you think a product page needs more detailed descriptions, conduct A/B testing to gauge its performance against the original to see how it fares with customers.

Once you know how to improve your customer acquisition funnel, communicate changes with relevant teams like marketing, sales, and CX.

💡Pro tip: find out where and why users drop off with Hotjar Funnels. With this tool, you can move seamlessly between graphs of quantitative data to see what’s happening, and qualitative data like recordings to see why

Mo Masoud, Director of Digital Strategy at Grimco, says, "We use Funnels to track conversions and then watch the recordings. It really helps us understand why users drop off."

Want to get even more granular? Funnels also lets you filter data by marketing channel or country and compare conversion data between segments for richer insights.

Discover where leads drop off with Hotjar Funnels

Keep your funnel flowing with user insights

An effective customer acquisition funnel creates a win-win situation: you increase your conversions and CLV, and your customers experience a quicker, easier journey to the product or service they need. Get to know your users through website analytics, rich survey data, heatmaps, session recordings, and interviews—to acquire customers who spread the word about your brand.

Learn what works—and what doesn’t—at each funnel stage

Use Hotjar to optimize your customer acquisition funnel and boost conversions.

FAQs about customer acquisition funnels