In This Edition

• 🔎 What is a Funnel?

• 🎯 Utilizing the Funnel

• 📝 Funnel Applications

• 🎓 Links for the Learners

• 💡Tip of the Week

• ⌛Recap From Last Week

• 🙌 Sharing is Caring

When something happens, I’m not satisfied knowing what happened. I want to know why it happened. If I don’t know the why behind something, my knowledge of the event/subject feels incomplete and useless. To me anyway. 🤷‍♂️

This trait largely has served me well, but if I’m being honest, it has also created some challenges over the years. Frustration from co-workers? Almost certainly. Wasted time chasing data on some quixotic quest to find the perfect solution? Definitely. 

I find it way too easy to get “lost” in data. I’ll spend time chasing details only to realize that what I find doesn’t really make an impact. Or - even worse - I realize that I have no idea whether it will be impactful or not. 

I’ve learned over the years that the best analytical tools are often the simplest ones. We’re going to embrace that hard-earned knowledge today and focus on perhaps the simplest tool: the concept of funnels. 

If you’re new to this concept, read on. I hope you’ll make this a cornerstone of your analysis strategy moving forward. 

If you live for funnels and already have your dashboard with them open as you read this, stick around for some important reminders and some new twists on the concept. 

Let’s get started.

🔎 What is a Funnel?

The funnel is a visual representation of how many accounts move through each stage in a process. By analyzing how many accounts reach each step in the funnel, we can find “leaks” and improve our processes over time. 

The beauty of the funnel is its simplicity. It reduces complex processes down to their component parts. 

You know the old adage about how you don’t really understand something if you can’t explain it simply to a novice? That applies here. Thinking in terms of funnels allows us to easily understand the exact impact that changes to our processes will have on outcomes. It also forces us to design simpler processes that are by nature more repeatable.

To illustrate, let’s look at an example:

This the most basic possible recovery funnel. We have a pool of consumers we are trying to reach. We’ll be able to contact some portion of them (Right Party Contacts or RPCs). A portion of these RPCs will result in promises to pay. A portion of these promises will turn into actual payments. If we multiply the bottom of the funnel (payments) by the average payment amount, we will find the total amount collected. 

The funnel is a nice visualization, but the true power of it comes from the (very basic!) math behind it. The result - total amount of payments - is the outcome of a simple algebra equation:

Total Amount Paid = # Consumers X RPC Rate X Promise to Pay Rate X Payment Conversion Rate X Average Payment Size

This allows you to predict the future and see the exact impact that potential changes would have on your recoveries. When you have dozens of potential options, it’s hard to know which lever to pull. This helps you make the right decision consistently.

🎯 Utilizing the Funnel

I find that three frameworks work best when using the funnel to drive decision making:

1. Plugging the “leaks” in your funnel

2. Find the improvement that will have the biggest impact

3. Find the improvement that is easiest to implement

Let’s break these down in kind: