[MUSIC] Hi, welcome back. In the last lecture we introduced a concept of the customer experience journey and we discussed how important it is to achieve success for your business. The focus of this lecture is to discuss a tool that will help you design a compelling customer experience. We call it the purchase funnel. Let's begin by having you think of the last relevant purchase you made. For example, for me, it was my last holiday trip. Once I decided that I was going on a trip, I needed to decide where to go. If you're an avid explorer like me, you want to go to a new place. But the only way to get me to research potential destination is if I am aware of their existence. Thus the first step of the purchase funnel is having your target customers be aware of your brand. After I was aware of various destination brands, I began to research them. And narrow down my choices to only consider two options. This is the stage we call consideration, the second one in the purchase funnel. Afterward, I decided to purchase my trip to South Africa. And this is the third stage of the purchase funnel. Once I traveled to South Africa and came back, depending of my experience, I could share enthusiastically with others and encourage them to go. I could also say it was a nice, but I would erase it from my bucket list. Or I could simply didn't say anything or even rant about it. However, if I did share it enthusiastically and even travelled there again many times, I became a loyal fan of South Africa. Loyalty is the last phase of the purchase funnel. How do we take this example and apply it to our marketing world? If you think of it, the effectiveness of an organization's marketing efforts can be assessed by examining the absolute level of awareness of your target consumer and the rate at which those target consumers convert from awareness to loyalty. In my example, imagine that 99% of the avid explorer's target group, like me, is aware of the brand South Africa. But only 67% of those people actually consider to travel to South Africa on their next holidays. It means that only 66% of the total target group moves to the consideration text because 99% times 67% is 66%. However, that 66%, after research in South Africa and other destinations, only 33% actually bought the holiday to South Africa. This means that only 22% of the original target customers aware of South Africa brand have actually bought a holiday for that destination because 66% times 33% is 22%. Let's say that of those 22% who travel, 75% became loyal to the South Africa brand and repeat every year. This means that 17% of the total target population converged through the entire funnel. If we analyze what happens in this funnel, the 33% rate of conversions from consideration to purchase is low relative to the conversion rates at other stages and represents what we call a bottleneck. This analysis highlights and begins to diagnose where your marketing activities are having impact in which phase of the funnel and where there is an opportunity to improve. With this information, you can make more strategic decisions about what your marketing approach should be. And it gives you a benchmark for knowing when you've been successful. A relative low conversion from one phase to the next indicates a bottleneck. And you may want redistribution of investments to remedy that. Understanding customer conversion should be part of a larger effort to turning inside into action. Think about it. We could identify the customer revenue value of addressing each prioritized bottleneck. Since based on the average purchase of your target customer, you can estimate the additional revenue you could capture if you improve just 1% in any phase of the funnel. You can also know how does your brand compare versus competitors or your opportunities in different segments. See, you should calculate the funnel for each of these, and compare the conversion rate at each step of the purchase funnel. This is especially useful when you're launching a new brand or product, because you can use your competitor's information to know where you can turn their weaknesses into your strength. Lastly, let me clarify two points. First, that purchase funnels vary by industry since the process that customers use for buying in different categories is different. Secondly, McKinsey, the management consultant firm, did research some years back that proved that the funnel in certain markets and in certain categories doesn't have a funnel shape anymore. Why? Because there is so much information nowadays that consumers can be aware of certain brands and even consider them. But as soon as they begin to research on the Internet or in stores, they might discard some brands in their considerations, say. But the salesperson, or even friends, might convince them otherwise and bring them again into their consideration segment. Even after your purchase, when you share your experience through a review site, the social networks, this have an influence on future buyers. In summary, one of the most relevant uses of the purchase funnel is to identify where should the brand invest in customer experience. Higher conversion rates result from focusing on the bottlenecks, through a branded customer experience that addresses customer needs at each step of the funnel. Now that you know what is a purchase funnel and how to use the information to improve the bottlenecks, let's talk about the touch point concept. If you're interested, go ahead and watch the next lecture. See you there. [MUSIC]
