Unraveling the pretzel

Editor's note: Russ Rubin is senior vice president, strategic account initiatives, research solutions in the St. Louis Park, Minn., office of San Francisco research firm MarketTools.

I don’t know about you, but my family shops very differently today than we did five years ago. Where we shop is different, when we shop is different and what motivates and appeals to us is different. And I know for a fact that we are not alone in all of these changes.

That means that the path to purchase – the course of events or activities that consumers follow from the first glimmer of interest in a product up through the point where they make the payment to complete the buy – has become more complex. What used to be viewed as a linear process has become more like a pretzel.

For example, a consumer making a major purchase such as a big-screen HDTV might spend extensive time researching models online; discussing options with friends and family in person, by e-mail and online via Facebook; perusing comments on consumer review Web sites; checking out newspaper circulars for weekly deals; and visiting stores to see TV performance up close. They may do price-checks on multiple Web sites before finally making the purchase using loyalty points to get an additional discount at a big-box retailer.

Even with something as routine as a regular grocery store trip, a shopper might go online to check out recipes from a product Web site or look at a cooking demo video on a food magazine site to come up with menu options for tonight’s dinner. This information helps guide her decisions about which ingredients she buys when she sees what’s in stock at the supermarket.

All that complexity makes it harder for retailers and manufacturers to identify the factors that will move the needle on sales and market share.

New twists and turns

A multitude of online resources empowers today’s consumers to do more research than ever before on the products they buy, adding new twists and turns to the decision-making process. According to a recent multimarket study1 commissioned by Oracle and deployed by MarketTools, consumers around the world have significantly increased the amount of research on brands and reading-up on product and services information that they do. The results of a survey of adult consumers from 15 countries showed that 80 percent of respondents researched goods and services online or browsed relevant information weekly, in contrast to 62 percent in a similar study from 2009. Forty-nine percent of participants said they did this daily, as opposed to 26 percent in the earlier analysis.

And consumers are continuously expanding their toolkit of research and purchasing options as they adopt new devices and applications. They are increasingly using online video to learn about products: A study2 reported that U.S. consumers who encounter product videos on Web sites watch them 60 percent of the time, with 36 percent of respondents reporting they watched five or more product videos on brand or retail Web sites over the preceding three months.

With growing smartphone adoption, consumers are eagerly turning into “omnichannel shoppers3,” and they are moving fluidly between retail channels, including Web sites, stores, mobile devices and social media. Mobile devices enable consumers to look for product information online even when they’re standing in the store aisle. Brick-and-mortar companies that offer cross-channel services such as buying online and picking up in a store have also escalated consumer expectations.

No signs of fading

At the same time, the shopping experience is also evolving with general changes in consumer behaviors. A recent MarketTools study4 showed that the frugal behaviors that consumers adopted during the global recession show no signs of fading, even as the economy shows signs of improvement. In a survey of American adults age 21 and older who are responsible for at least half of the grocery shopping for their household, 63 percent report that saving money is somewhat or much more important than just a year ago.

According to the study, 63 percent of shoppers have changed their shopping habits to stretch their grocery budgets. To save money on grocery bills, respondents report that they buy items with coupons (80 percent); buy store brands instead of name brands (62 percent); use store loyalty cards that offer discounts (62 percent); buy items only when they are on sale (58 percent); and buy more large-sized products (43 percent).

When asked how their shopping habits have changed in the last six months, they responded that they are buying more sale items (55 percent); using coupons more often (48 percent) and buying more store brands (41 percent).

The increasing popularity of loyalty card programs is also evidence of a shift in behavior, namely the willingness to share personal information, especially in return for a benefit. Customers are increasingly offering up their personal details, in stores and online, in exchange for more valuable promotions, more relevant offers and special treatment.

Far less obvious

In this environment, and with all the new ways to learn about and purchase products, what really influences a consumer’s choice is far less obvious than it once was. Do consumers still factor in traditional marketing such as television and print ads in their decisions? Some say yes, some say no. Some consumers state that in-store interactions are important in helping them consider a product but say salespeople are less objective than Internet reviews. In a landscape dominated by new media, it’s harder to hit the right audience with the right message at the right time.

The solution to this dilemma is unified research into your consumer’s entire decision-making journey. Only by understanding the ways that consumers interact with your company and your products, by building real insights into your customers’ motivations and behaviors as they shop, will you be able to make the right marketing investments.

By unwinding the path to purchase – as a whole and specific parts of it – we can illuminate opportunities to maximize a product’s impact upon the consumer. We can dig down to uncover the path’s critical elements and better understand the conscious and subconscious decision-making processes involved. Armed with this information, marketers can devise ways to influence consumer behavior within each specific phase of the path.

The actions of today’s empowered shoppers are challenging the long-cited statistic that a majority of grocery store purchases (in the 70+ percent range5) are made in the store. Those who still think the entire purchase decision begins and ends at the point of purchase are missing a rich backstory of consumer motivations, habits and preferences. It’s true that the actual physical path through a store to the shelf and to checkout is still an important aspect of a consumer’s path to purchase and it’s worthwhile to facilitate shoppers through the retail experience. However, the valuable insights that lie in the decision-making steps preceding a shopping trip can have an outsized impact on in-store results.

Marketers who understand the path to purchase – and the component steps along the way – will be able to optimize product performance, identify the right ways to expand business lines and compete effectively in the marketplace.

How to win

As we map out each phase of the path to purchase, we can provide marketers with the information to strategize how to win each one. For example, is a product a “destination buy” that gives shoppers a reason to visit a store? Or is it an impulse buy they toss into the cart when they’re already there? Which other products tend to be purchased in the same basket as a product and could provide cross-promotion opportunities? What do consumers like/dislike about shopping for a product – can you break down barriers and improve customers’ shopping experience? What can be done to assist retailers in selling a product in store, to win more distribution and shelf space? If a product is losing out to a competitor in a certain phase, how can shoppers be disrupted in the process and get them to consider an alternative instead? Have heavy buyers discovered new usage occasions that can be suggested to help convert lighter buyers?

For any product, there is no single path to purchase – few shoppers follow the exact same series and sequence of steps based on identical needs for buying any one product. But by analyzing the data you can identify customer segments that share common steps, then layer on demographic information such as age, income and presence of kids to better understand how to target them. Quantitative data findings can be supplemented with qualitative research to capture nuances in behavior.

Some examples of path to purchase learnings from our CPG customers include:

  • A breakfast product study targeting a Hispanic audience found there was much more structure to the shopping experience for this group than there was with the mainstream population in this category. The conclusion: It is important to reach Hispanics and influence their behavior before they get to the store to shop. 
  • In the baking-mix category, we’ve learned that purchases of certain items are more planned than others. Cake mixes are more of an “occasion purchase” than brownies, impacting aspects like messaging, shelf sets and cross-promotions.
  • From a recent study, we know that shoppers’ choice of margarine or butter is affected by occasion, particularly when the use is for a baked good brought to someone else or served at a party. This is particularly informative for seasonal promotions and pricing strategies.
  • Research done in midst of the recession showed an increase in the number of households that shopped for promotions first and foremost (“I’m here to buy whatever’s on sale!”). These shoppers would purchase “hot deals” and then make a second trip to fill the voids in their pantry inventory. Working with the client, we came to understand that significant price discounting was bad for business, because it subsidized purchasers who were unlikely to make repeat purchases of the brand.

A path-to-purchase analysis inevitably brings up additional questions – and follow-up shopper studies and advanced analytics can help optimize pricing, shelf sets, packaging, line and distribution. To assess the effect that marketing activities have had on the path to purchase, brand tracking research provides a way of comparing returns across a variety of media. A McKinsey article6 cites one consumer packaged goods company that uses econometric analysis and ongoing brand tracking to assemble a scorecard of short-term returns using average and marginal marketing ROIs over the most recent 12 months. The company also tracks longer-term progress by tracking brand equity and brand loyalty over periods longer than 12 months.

Impact behavior

The value of constructing the path to purchase becomes increasingly clear as more and more brands compete in a crowded marketplace. A better understanding of their customers’ decision-making journeys, both conscious and subconscious, allows marketers to devise actionable ways to impact consumer behavior.

Path-to-purchase insights also provide the kind of deep knowledge about consumer needs that fuel innovations and lay the groundwork for a lasting competitive advantage. For example, based on the understanding of consumers’ more casual and spontaneous usage scenarios for the iPad, we’ve seen e-commerce retailers benefit from creating shopper experiences specifically optimized for that digital medium. A major pharmacy chain7 has enhanced its loyalty program based on consumer insights, including launching a mobile app so members no longer have to carry a physical card to receive their program benefits. These retailers are turning their knowledge of their customers’ paths into new purchase opportunities.

These innovations can also include greater efficiencies and cost savings. For example, a study on the path for a laundry detergent brand that we did for a CPG manufacturer found that the company didn’t need to create two substantially different package types for the grocery store and warehouse store audiences. By bundling three of the grocery store detergent bottles in a cardboard box, it was able to offer the warehouse shoppers the value-oriented volume size they wanted without having to incur the significant expense of creating a brand new giant-size plastic container. With this specific bundle, the company was able to boost channel performance without a major repackaging effort.

Insights about the entire path to purchase are the key to helping both retailers and manufacturers respond to a rapidly-changing retail environment and gain a competitive edge. In a landscape where consumers have more choices than ever before, those that best understand the path to purchase stand the best chance to win in the marketplace.

References

1 “Consumer views of live help online 2012: a global perspective,” Oracle Consumer Research Study, March 2012. www.oracle.com/us/products/applications/web-commerce/live-help-on-demand/oracle-live-help-wp-aamf-1624138.pdf

2 “Product videos prove their worth to online shoppers,” eMarketer, April 9, 2012. www.emarketer.com/Article.aspx?R=1008959

3 “Omnichannel shopping puts a new spin on ecommerce,” eMarketer, March 30, 2012. www.emarketer.com/Article.aspx?R=1008939&ecid=a6506033675d47f881651943c21c5ed4  

4 “Discount hunters reshaping the grocery shopping experience,“ MarketTools Shopper Study, April 12, 2012. www.markettools.com/company/news-events/press-releases/discount-hunters-reshaping-grocery-shopping-experience

5 “2012 shopper engagement study,” Point of Purchase Advertising International. www.popai.com/engage/docs/Media-Topline-Final.pdf 

6 David Court, Jonathan Gordon and Jesko Perrey, “Measuring marketing’s worth,” McKinsey Quarterly, May 2012. www.mckinseyquarterly.com/Marketing/Digital_Marketing/Measuring_marketings_worth_2971

7 “CVS aims to personalize retail experience,” Chain Drug Review, April 23rd, 2012. www.chaindrugreview.com/inside-this-issue/news/04-23-2012/cvs-aims-to-personalize-retail-experience