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In this tutorial, Ted demonstrates how to change letters to numbers in Excel, where 'A' corresponds to 1, 'B' to 2, and so on. He explains that the process involves using the Excel function called "CODE," which assigns a specific code to each character, including letters, numbers, and special characters. This foundational understanding of character encoding is essential as Excel converts all data into numerical formats for processing. Ted illustrates these steps using an Excel spreadsheet, guiding viewers through the necessary formulas to achieve this transformation in Column B.