The “funnel” is the idea that as people enter your website (say, 500 potential customers) over time that number dwindles down. So imagine that 100 of those 500 click through to your pricing page, 200 to your services page, and 200 leave your website. Then of the 300 who stayed, 150 click through to your contact page, and actually only 50 send you an e-mail, or give you a call. That would be a pretty healthy funnel.
In reality, the funnel becomes a lot more narrow at the end, and I would wager that if 2% of the people who land on your website end up calling or mailing you (or any other method you have set up) you are doing relatively well. UX is the buzzword in this whole domain, and what it means (beyond just “User Experience”) is that your website traffic is “funneling” nicely along the pages, as you intend for them to, and ending up just where you want them: trapped on your very cleverly designed contact page where they “convert”, i.e. they make contact.
Setting this all up from the start both from a design perspective and literally on your website tracking (for Google Analytics and Google Ads to track) helps you ensure that you are on the right track yourself! Reason being: there is no point hoping for ten times more traffic and getting zero extra conversions. I’d rather have 50 people on the site and 10 convert, compared to 5,000 and five do. Logical, but people often miss this. The sooner you home in on the right people, the better; and, in the digital age, this has never been so easy as you can segment the chocolate crêpe out of everything nowadays. Age, gender, location, device (mobile, tablet, desktop), OS (operating system), time of day, whether they have been to your site before (that gets us into remarketing territory), and a host of other things, too. It’s marvellous. It’s also a lot of research and continuous work!
All in all, if you just want a simple thing to monitor, watch your funnel. For many of my clients I just give them about ten key metrics to watch each month, and this is certainly one of the main ones, represented in a “conversion rate %”.