Funnel Charts: What They are and How to Use Them

Depending on your source, there are anywhere from 30 to 80+ data visualization types out there. Each of them helps portray data effectively for a different audience and use case. Funnel charts are some of the most popular chart types for showing stages in the sales process.

But just because it’s available in your favorite data visualization tool, it does not mean you can use funnel charts for just about any data point you can think of. Today, we show you what funnel charts are and what (not) to use them for in your dashboards.

What are funnel charts?

A funnel chart is a type of data visualization used to represent linear processes that involve multiple stages. The chart is literally shaped like a funnel, with the widest part at the top and the narrowest part at the bottom, showcasing how data or entities move through each stage of a process.

When to use funnel charts

For some use cases, funnel charts are the best way to visualize a piece of data. In others, something simpler such as a bar chart may work better. These are the best situations to make use of a funnel chart.

To analyze the sales funnel and pipeline

Visualize your sales process, from lead generation, all the way to closed deals. This allows you to spot bottlenecks and find room for improvement in your sales process.

Besides that, you’ll see the conversion rates at each stage, so you’ll be able to investigate what causes customers to drop off and never complete the sales process.

To track the customer journey

Funnel charts can be used to track the stages of a process that someone goes through to become a customer. For example:

• Visiting a website
• Filling out a demo form
• Attending a demo
• Booking a sales call
• Signing a contract

A funnel chart helps you keep track of the various stages in the customer journey and helps identify bottlenecks and opportunities to increase conversions at different stages in the journey.

To track marketing campaign performance

With funnel charts, you can track and measure the effectiveness of marketing campaigns, from the initial point of contact e.g. a website visitor to a paying customer.

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For example, you can use it to track email metrics for your subscribers and leads, from open and click-through rates to conversions, when someone finally buys from an email sequence you send out.

To oversee the product onboarding process

Onboarding in a SaaS product can have many points of friction and drop-off. A funnel chart is a great way to visualize this linear process. From the initial sign-up to exploring the key product features, to converting from a free trial to a paid account, to becoming a regular user.

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With the right dataset and data visualization tools, funnel charts can show you how to make your product stickier, and increase retention and customer lifetime value while reducing churn.

To track and visualize your recruitment process

Funnel charts can be used to visualize a recruitment workflow, from the first touchpoint an applicant has with your job opening until the moment they sign a work contract. Similar to tracking sales conversion progress, these funnels track how well candidates are progressing through different stages of the hiring process.

To oversee the e-commerce purchase funnel

A funnel chart can be adapted for use in the e-commerce sales funnel. The sales funnel looks slightly different since customers shop through categories, product and landing pages. 

Besides tracking sales, e-commerce funnel charts can be used to improve order fulfillment, inventory management and other internal store processes.

To do a lead conversion analysis

If you have a complex sales funnel, you’ll want to understand at which point leads become customers. But also, at which point a marketing qualified lead (MQL) becomes a sales qualified lead (SQL). 

With the right templates, a funnel chart can show you what you can do to turn more marketing leads into completed sales.

When not to use funnel charts

As versatile as funnel charts may be, they have certain limitations and situations where they should not be used.

Comparing multiple categories: funnel charts are best used to describe linear processes. They do not work well for comparing different categories. Instead use: bar charts or radar charts.

Displaying non-sequential data: if your data does not follow a clear, logical sequence, a funnel chart is not a good fit. Instead use: scatter plots or bubble charts.

Visualizing detailed trends over time: line charts or area charts work better for this use case. Funnel charts are not well suited for time-based trends or patterns. 

Analyzing data with equal stage sizes: if all of your stage sizes have the same or similar values, the funnel chart will look like a rectangle and not a funnel, which completely misses the point of this visualization type. Instead use: funnel charts or waterfall charts.

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Showing cumulative data: funnel charts are not designed for cumulative data that increases or decreases over time. Instead use: area charts or waterfall charts.

Describing highly complex processes: if your process has multiple stages or branches, a funnel chart will do more harm than good when visualizing it. Funnel charts do not handle complex processes well, and something like a Sankey diagram or a Gantt chart will be a better fit in this situation.

Presenting absolute numbers: funnel charts are better for showing relative proportions or conversion rates between stages instead of absolute values. Instead use: bar charts or column charts.

Top tips for using funnel charts

When you create funnel charts, there is a certain set of rules to make them truly valuable to your target audience. 

Keep the stages clear and logical

Split up the stages (e.g. in a sales funnel) in a clear and logical way so that they’re separate from each other. The progression from one stage to the next should be easy to follow.

Limit the number of stages

The ideal number of stages in a funnel chart is 3 to 7. Anything more than that and it will become cluttered with an odd shape of the funnel. Anything fewer than that, and you’re better off using something simpler such as line charts.

Use proportional sizing

The size of the stages in the funnel should be proportional to the data values. The bigger the value, the larger the piece of the funnel, which makes for a great user experience and the chart is easier to understand.

Highlight your drop-off points

Use annotations and data labels to highlight the points where potential customers drop off, e.g. in a sales pipeline visualization. This way, the viewer can see where the issues are at a glance.

Consider adding percentage labels

When you add percentages to the first and subsequent stages, the reader can see a clear progression in numbers, besides looking at the size of the funnel stages.

Use clear titles and descriptions

Give your chart a name and label each of the stages in the funnel, ideally with a short description of what it is. This ensures the viewer understands the context and the purpose of the funnel chart.

Combine with other charts for deeper, more granular insights

Funnel charts are a great way to tell a story but sometimes, your target audience needs more information. Bar charts, line charts, or even a well-designed pie chart can provide additional context and deeper insights.

Double-check your data for accuracy

From the first stage to the end of the funnel, the effectiveness of this visualization relies on the accuracy and quality of your data sources. Before you create and embed a funnel chart in a dashboard, make sure the data is standardized, clean, and accurate.

Visualize your data with Luzmo

If you need to insert an embedded dashboard into your software, there are many great options, such as Tableau, Power BI, or Qlik. But while these tools are powerful, they are not omnipotent, and the embedding is treated as an afterthought in most cases. Instead, give Luzmo a try.

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We have a large number of visualization options available to showcase the most important metrics and KPIs in your product. Engage your end-users, drive higher retention and customer lifetime value by giving everyone access to key data from your product, embedded in the form of a dashboard.

Book a free demo with us to learn more!