The Purchase Funnel Survives the Consumer Decision Journey

The journey metaphor is almost irresistible. All one needs is a starting point and a finish line, plus some notion of progression. Thus, life is a journey, and so is love. Why not apply the metaphor to your next purchase? McKinsey & Company takes such a metaphoric leap in their very popular paper on the consumer decision journey. They start with a purchase trigger and move through four primary phases that they see as four potential battlegrounds:  initial consideration, active evaluation, closure (purchase), and post-purchase. If you are thinking that this seems to be a variation of awareness-interest-desire-action (AIDA) or the purchase funnel, as it is also known, you would not be wrong. In fact, McKinsey & Company begin with the purchase funnel but reject its claims that consumers move sequentially through invariant stages with a narrowing of the number of brands considered until only one victor remains.

According to the consumer decision journey, the pathway is no longer linear or invariant, nor is the momentum consistently forward. The notion of progression remains, but progress can be piecemeal with one step forward followed by two steps back. The internet makes a lot more information available and transfers control of marketing activities from the brand to the consumer. Consumers are in command and can seek information as they wish from any source and in any order.

Yet, the journey metaphor maintains the goal of narrowing options and selecting what is best for each consumer. The prize for the brand remains loyalty as indicated by continued purchase and advocacy through recommendation and positive word of mouth. Brand awareness still matters, as does customer satisfaction and support services. Competitive pricing and new offerings have not lost their ability to steal away customers. The outcome that we seek to maximize has not changed whether you call it brand equity, attachment, involvement, engagement or loyalty. Moreover, that outcome retains its status as a latent variable that can be observed only through its effects on consumer responses to the brand, such as awareness, interest, desire and action. In fact, as Joakim Nilsson shows in the diagram below, this latent dimension has an impact after the purchase with social media enlarging the funnel and amplifying the reach of each satisfied or dissatisfied customer. By beginning and ending the process with impressions, one gets the sense that the consumer decision journey evolves over time as more customers join and usage diversifies.

So why is the purchase funnel dead? Are consumers considering products with which they have no awareness? Are they purchasing products without considering them first? If a sizable percentage of your customers reported that they have recommended your brand to others, cannot we conclude that your brand has made it to the end of the decision-making process with a more or less stable customer base? On the other hand, would you not agree that your brand was stuck in the starting blocks if most consumers had a difficult time naming your brand when asked about the product category?

When one wants to intervene in the purchase process to improve its brand's standing, it is important to know the different paths that consumers are taking to learn about the brand. However, improving your brand's status means that you also need to know how well the brand is doing, which is what the purchase funnel provides. Brands that fail to achieve awareness among prospective customers will not succeed, so we measure brand achievement by asking customers about their brand awareness. Brand awareness is good, but consideration is better, and purchase is best. The percentage of prospects lost as we move from awareness to consideration to purchase would seem to be a good indicator of brand value. We assess the brand by measuring consumers. Therefore, the purchase funnel is not dead, at least not as an instrument for brand appraisal.

Thinking Like an Item Response Theorist

An item response theorist sees people lined up, single file, one after another with each person possessing more of some property than the person before but less of that property than the next person in line. "Alright, everyone in line with the shortest person in front and the tallest at the end." But what if the property were not visible, such as one's location along the consumer decision journey? How would the item response theorist know which consumer was farther along and which had just started the trip? Would they not write items for an achievement test?

We already have some idea of what to measure based on the battlegrounds identified in the McKinsey & Company article. Successful brands are those that come to mind when making a purchase and are able to maintain a loyal customer base. The item response theorist would place a "sensor" at each of these locations:  one item measuring awareness and another item measuring recommendation. If a brand activated the awareness sensor but not the recommendation sensor, we would know where the brand fell along the path. In fact, we would want to put a "sensor" at each gate leading from one stage to the next (e.g., attention, positive image, consideration, purchase, and recommendation). These stages are achievement milestones along the consumer decision journey.

Brand equity is found in the value that consumers see in the brand. Thus, the brand appraisal process proceeds by asking for consumer ratings. The items assess the final achievement for the brand and not the consumer learning process. We measure if the brand is considered, but not whether that consideration results from an advertisement or a showroom visit or an online review or a YouTube video. The first step is brand appraisal. The next step is tracing the journey or at least assessing the impact of touchpoints on brand standing.

Item response theory (IRT) will guide us in the brand appraisal process. We begin looking for an underlying continuum, a latent variable that will account for our observations. Brands attract consumers. The strength of this attraction is what we wish to measure. Small levels of attraction appear initially in awareness by getting the brand noticed. Does the consumer follow-up and get acquainted? Stronger attraction places the brand into the consideration set, and the strongest brands pull us even closer to them so that we continually purchase more and more frequently. At the highest levels of attraction, we become advocates and begin spreading the word. The black hole pushes the analogy too far, but the image ought to make the point memorable.

On the other hand, if you would like a more formal justification for this hierarchy, you can find it in the literature on consumer-based brand equity (the CBBE model). Simply replace the purchase funnel with the brand resonance pyramid since a funnel is nothing more than an inverted pyramid.

I have provided the code in previous posts showing how the r package ltm will perform the analysis for checklists or rating scales. To learn about item response theory, it is best to start with binary items (e.g., yes/no or present/absent). This is because ratings follow the same logic as checklists by treating the rating as if it were an ordered sequence of checklists. While a binary item divides brand attraction into two parts, a rating scale partitions the same continuum into the number of values on the scale. In both cases an item response model will give us some number of cutpoints for each observed indicator of the underlying latent variable, either one cutpoint for a checklist or the number of scale values minus one ordered cutpoints for rating scales. The same data generating process is responsible regardless of the type of scale.

The brand attracts consumers with milestones indicating the strength of that attraction. The item response model calculates the position of these transition points from inattention to interest to consideration to purchase to satisfaction to retention to advocacy. Then, it positions each respondent along that same continuum showing the strength of the brand's attraction for that respondent. The distribution of consumers for each brand is a measure of the brand's total attraction yielding not only a central tendency but also showing the nature and shape of the heterogeneity among respondents.

It's Alive!

The purchase funnel has survived as a reliable tool for measuring brand strength. Yet, I have offered no guidance for how to assess the impact of the consumer decision journey. The number of predictors explodes when the consumer is in charge. There are hundreds of possible touchpoints where prospective customers can learn about the brand. This figure is but a start.

Yet, each individual is likely to have only limited contact with only a subset of all possible touchpoints, yielding a high-dimensional predictor space that is quite sparse (not unlike what we see with recommendation systems like Netflix). Moreover, if we take the journey concept seriously, then touchpoint effects depend on where we are in purchase process. It's a continuum in the sense that first comes awareness and then comes consideration followed by purchase, but what gets a prospect from awareness to consideration is not the same as what gets them from consideration to purchase. All this will need to wait for a later post.