So in the last class we learned about the Business Model Canvas.

You’ll remember I described it as a powerful mental model for understanding how any business or any organization works.

And I said that the Canvas was a map with 9 elements and that you could use those elements to describe or plan out any business model.

And as we were going through the Canvas, we talked about Customers—

We said that they were the people or other businesses who buy products and services from a business.

I said that you can't have a business unless you have a customer.

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In this class we’re going to talk about how businesses get—and keep—customers.

We call the process of getting and keeping customers: Sales and Marketing

And, of course, we all know all about marketing, right?

I mean we live in a world where, by the time we learn to walk, it seems that someone is trying to sell us something most of the time we’re not asleep.

We see advertising everywhere—on TV, on our phones, in our cities, on our roads, in our mail, in video games, at sporting events, even in our schools.

But promotion and advertising are only one part of the marketing puzzle, which is why I didn’t call this class Advertising and Promotion.

I called it “Creating a customer”.

And I didn't make that phrase up.

It comes from a guy named Peter Drucker (“Peter Drucker (1909-2005)”) who was one of the most important business thinkers who ever lived.

It’s a funny phrase “creating a customer”. What does it mean?

Obviously the business doesn't create the person—although I bet many businesses wish they could…

No the person is out there living their life, with their needs and their wants and their preferences and their desires.

What the business does is it turns that person into a customer – someone who buys the products and services that the company sells.

And that’s what we’re going to talk about.

How businesses create and keep customers.

So hopefully you’ll remember that the Business Model Canvas was split into two sides:

A “supply side” and a “demand side”.

Well it’s probably not too surprising that marketing – “creating a customer” happens on the demand side, the “customer side” of the Canvas.

Marketing is a big part of what businesses do.

And there’s so much more to say about marketing than we can cover in this class.

So we’re going to focus on some key ideas—some fundamental ideas—that will give you a sense of how this stuff works.

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First off, you’ll sometimes hear people talk about the “4Ps of Marketing”.

This is an idea that’s been around a long time.

It was first written about in a book that came out in 1960….

The 4Ps describes the fundamental building blocks of all marketing…

They Ps are Product, Price, Place, and Promotion….

We can map them out on the Canvas

Product is the Offering, the goods or services that the company sells and that customers buy

Price is what the customers pay for the Product–the Price of these goods and services results in the company’s Revenues

Place is another word for the distribution Channel where the customer buys the product…whether that’s in the digital world or real world, whether it is owned by the business or by another business

Promotion are the things that the company does to the target customer, including advertising, digital marketing/social media, etc.  

All of these things need to come together in just the right way to turn a person or a business into a customer.

So the 4Ps are a great way to understand a company’s marketing strategy.

But they’re not the only way.

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Another tool that marketers use is the marketing funnel or pipeline.

This is an even older idea… one that dates back more than 100 years

So in the real world, a funnel is a tool that we use to get a big amount of a substance or a liquid—into a smaller container…

So the marketing funnel is a metaphor that describes a similar process…

And if you do a web search for “marketing funnel” you are going to find lots and lots of different examples of marketing funnels…

some of them much more complex than what we’re looking at today..

Today we’re looking at the OG marketing funnel

The AIDA funnel was first developed in the 1880s when newspaper advertising was exploding as a way of creating customers.  

It’s simple and classic—it covers all of the basics steps you’ll find in any other funnel

AIDA is an acronym

It stands for Awareness, Interest, Desire, Action

The funnel is 4 steps…

The first step is Awareness.

Obviously you can’t buy a product or a service that you don't know about.

Building awareness means putting a company's products and services in front of people in an attractive way, so they become aware of it.

Companies are willing to pay an average of $7 million for a 30 second ad in the Super Bowl, because about 130 million people watch the Super Bowl and many of them actually watch the ads…

The funnel is fatter at this end, because more people will be aware of something than will take the next steps.

Not everyone who sees that Super Bowl ad for example is going to be a potential customer…

The next stage is Interest.

This is when some people who are aware of the product or service say, “Hey, that’s something I could really use.”

Or “That product seems like it was made for people like me.”

This is the stage when marketers try to get someone to take a next step.

Maybe you see an ad on television and then you go online to read some product reviews…

Or you see an ad on social media and you click through to the company’s website to get more information.

Or maybe you ask a friend who you know has bought that product or service in the past about their experience

The point is that you’re interested in finding out more…

And if you like what you learn, you take the third step which is Desire.

And this can be a subtle thing, the move from Interest to Desire.

It’s the difference between wanting to learn more about something and actually wanting that thing

I challenge you in your own life to try and suss out the point when that change happens—it’s not so easy…

It can be difficult to know when we make that switch

It often happens on almost on a subconscious level.

But Desire on its own doesn’t do anything for the company, until there is an Action taken

The customer doesn’t become a customer until they actually buy from the business

Usually that means buying the product or service--making a purchase.

On the fence and something tips you over…

So what's missing?

It seems pretty complete.

We’ve “created a customer…”

But I said earlier that Creating a Customer was more about sales than marketing.

But mostly that’s what we’ve been talking about.

The thing that’s missing, that we haven’t talked about is anything at all about the product or service that is being sold.

Awareness of what?

Interest in what?

Desire for what?

Action on what?

The true role of marketing—of creating a customer—is to develop products and/or services that deliver value to the customer in ways that are different than what they could get from someone else.

You can’t do that if you don’t have a deep and clear understanding of who your customer is and what they actually want and need.

When you have a really clear sense of who your customer is, you're able to continually innovate in the products and services you offer to them.

This is the foundation of Value creation (remember the thing I said was the more important idea in business and one of the most important ideas in life?).

Well the Meaning of Value is what we’re going to be talking about in the next class.

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