A 'website funnel' gets its name because, much like a physical funnel, it narrows toward the end—so the volume of visitors at the top is larger than the volume of visitors at the bottom.
Visitors flow through your website every day, but somehow all of that traffic funnels down to just a trickle of conversions, sales, and signups. Funnel analysis can help you spot where users are leaving your website, so you can optimize it and increase conversions.
Funnels are widely used across various marketing functions because they help identify barriers that cause users to leave before reaching a conversion point.
It will show you over time whether users are doing what you want them to do. This usually means reaching a goal that is important to your business, like signing up to a form, downloading some content, making a purchase, etc.
Importantly it will show you where they are having difficulties on the way to reaching that goal, by showing you the steps that convert at the lowest rate.
It may also give you details of where users are going instead of your intended next step in the funnel. Depending on the software you can set it up to measure how many users are going onto different pages/URLs or you can measure different events that have been triggered, such as button clicks/taps.
For example: a lot of people might visit the homepage of an e-commerce website, but only a few will eventually go on to see a thank you page after a purchase. A basic e-commerce funnel conversion path will look like this:
homepage > category page > product page > cart > checkout > thank you page
Funnel analysis tracks user actions throughout the funnel and tells you how many visitors make it through each step, highlighting problems or areas for improvement in the customer journey with the goal of increasing conversion rates and revenue.