Conversion funnel is a technical term used in e-commerce operations to describe the track a consumer takes through an Internet advertising or search system, navigating an e-commerce web site and finally converting to a sale. The metaphor of a funnel is used to describe the decrease in numbers that occur at each step of the process.
Simply put, conversion funnel is the path visitors take from site entry to an online purchases or other desired actions (registering an account, upgrading service, downloading a white paper, etc.)
There are various paths that lead to a conversion. In a typical conversion funnel, visitors drop off along the way to the final step that completes the sale or achieves the desired action. The good news is that when your analytics program tracks the micro steps required to reach the final conversion act, it reveals actionable data that can be used to prevent drop-off. A microanalysis of the sales path reveals the problems that thwart conversion, leading to implementation of more effective calls-to-action at each step along the way.
There are two types of conversion funnel analysis: page-view based funnel analysis and event-based funnel analysis. Page-view based funnel is the default and traditional way of funnel analysis and it is easy to undersand, You track pages on the visitors’ conversion path and and find bottle necks. Such method is supported by Google Analytics and many other analytics produts. Event-based funnel analysis lets you create funnels based on the event you are already tracking, such method is supported by many startups and new anaytics companies, but they are NOT free. Google Analytics recently added Event Goals feature in their event tracking and they are seriously considering supporting funnel based event tracking and I look forward to seeing this great feature in the new Google Analytics soon.