Marketing metrics explained

What is a marketing funnel

A marketing funnel is the sequence of steps a person goes through between first seeing you and becoming a customer, with the count of people at each step.

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It is called a funnel because the count falls at every stage: many see, fewer click, fewer still buy. Drawing it puts a number on each stage, so you can tell which one moved.

The stages, and the metric for each

Names vary, but for a shop or a software company the stages that can actually be counted are these:

Each metric is a ratio of two neighbouring stages, so a change at the bottom can be traced back to the one ratio that moved.

A worked example

One month of paid search, £5,000 of spend:

CPM is 5,000 ÷ 500,000 × 1,000. CPC is 5,000 ÷ 10,000. CPA is 5,000 ÷ 200. Overall, 500,000 impressions became 200 orders, which is 0.04%, the product of the two ratios in between (2% × 2%).

What it tells you, and what it doesn't

The funnel tells you where to look. If orders fell this month, the table says whether it was fewer impressions (budget or auction), a lower CTR (the ad), or a lower conversion rate (the landing page or the price). Three different problems, three different people.

It does not tell you that the stages happen in order for any one person. Someone can see an ad five times, then search for you a week later and buy from the organic listing. The funnel counts people at each stage and says nothing about the route any one of them took; marketing attribution is the separate question of which touch gets the credit.

It also says nothing about value. Two hundred orders of £15.00 and two hundred of £150.00 look identical in the table. AOV and ROAS sit alongside it.

Where it goes wrong

Optimising one stage and breaking the next. An ad rewritten for clicks lifts CTR from 2% to 2.5%: 12,500 clicks for the same £5,000, and CPC drops to £0.40. The people it pulled in were less interested, so conversion rate falls from 2% to 1% and orders drop from 200 to 125. CPA goes from £25.00 to £40.00. The top-of-funnel report shows an improvement; the business has fewer customers for the same money.

Counting each stage in a different tool. Clicks from Google Ads and sessions from GA4 measure nearly the same step and never agree, because the handover loses people to blocked tracking and duplicate clicks. A ratio can only be trusted if its two figures came from the same place.

Ignoring the time lag. Clicks today become orders over the following days and repeat orders over the following months. A funnel drawn from one week has a bottom that has not filled yet.

Related metrics

• CTR formula: the reach-to-visit ratio.
• Conversion rate formula: the visit-to-purchase ratio.
• Retention rate formula: the purchase-to-return ratio.
• CPM, CPC and CPA: the cost at each stage.
• Cohort analysis: the return stage followed over time.

Keeping it current

A scheduled Fresh Sheets report can pull Impressions, Clicks and Cost from Google Ads into one tab of your spreadsheet, and sessions and key events from Google Analytics 4 into another. Each tab's contents are replaced on every refresh, so keep the funnel table on a separate tab and find each column by heading. CTR, for instance:

=SUM(INDEX('Google Ads'!A:Z, 0, MATCH("Clicks", 'Google Ads'!1:1, 0))) / SUM(INDEX('Google Ads'!A:Z, 0, MATCH("Impressions", 'Google Ads'!1:1, 0)))

The same shape with "Key events" over "Sessions" on the GA4 tab gives the next ratio.