1. The Conversion Funnel Santiago Gallino – Tuck School of Business
Toni Moreno – Kellogg School of Management
January 2017
July 2013 – LBS – London, UK

2. Learning Modules 1. Demand forecasting 2. Inventory Decisions
3. Assortment Planning
4. Pricing Decisions
5. The omnichannel customer
6. Fulfilling omnichannel demand
7. Omnichannel journeys
8. Supporting an omnichannel strategy

3. M5.2 Introduction 1
We will refer to the conversion funnel to the different steps that need to happen between the customer wanting to buy a product and leaving our store with that product.
The conversion funnel for customers used to be simple and retailers had a good strategy to take actions to improve this.
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

4. M5.2 The omnichannel Funnel
This process has a clear parallel when we think about it in the context of online stores
The challenge for Omni channel retailers is that customers don’t necessarily follow a straight path in one of the two funnel
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

5. M5.2 The omnichannel Funnel
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

6. M5.2 Funnel’s Levels 3
There is a big advantage to be the preferred entry point in this funnel.
This happens whether the entry is virtual or physical.
Customers might take a some time to decide where to buy groceries but then that becomes the routine.
Being the place where customers start there online search is immensely valuable
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

7. M5.2 Funnel’s Levels 3 From Level 1 to 2
The key is assortment and easy to navigate.
Here leveraging on the omnichannel experience can be an advantage
Once things are at the 3rd level the probability of purchase is very high. The retailer should focus on this customers. The investment and effort at this stage would very likely pay off
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

8. M5.2 Funnel’s Levels 3
Loosing transactions in the check out process is painful and expensive.
Think of all the service and effort provided by the retailer to get to this point.
This will translate into nothing if the transaction is not closed.
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

9. M5.2 When things go wrong 4 What can go wrong:
Customers don’t know me or don’t consider me as an option. I am not in the consideration set
The assortment or availability is inadequate. The store is not easy to navigate
The customer support is poor
The exit experience is slow, low quality, push customers to have second thoughts.
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

10. M5.2 Funnel Investments 5 200,000 30% 60,000 1.2% 10% 6,000 40% 2,400
Customer Base
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

11. M5.2 Funnel Investments 5
How money spend at different steps of the funnel can have very different return on investment.
Where to put the next dollar is not trivial.
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face

12. M5.2 Customer Base 6 Think of Customer Life time Value.
When looking at clues on what customer like look at customers who bought.
Customers that return
And big gaps in the funnel
Home depot – Trader Joe’s
Nordstrom – Banana Republic – The North Face