Marketers have long recognized that a purchase is far more than a solitary event when the actual financial transaction between shopper and retailer takes place. This is just one point along the very nuanced consumer decision journey (CDJ). Each stage of the journey might be experienced in a matter of moments or could take years to complete. Regardless of the duration, the journey usually spans five phases:
Consideration. Consumers assemble an initial set of brands and retailers to consider.
Evaluation. The consideration set evolves and preferences emerge as the shopper gathers information from a variety of online and offline sources.
Purchase. The shopper selects what to buy, where to buy it, and how to take delivery.
Experience. The new product owner reacts to the purchase and interacts with the product and brand.
Loyalty. After owning the product, consumers decide whether or not to select the same product or brand again.
European consumers who visited competitor Web sites when shopping for consumer electronics in store
In the past, company efforts to sell more of their branded products by influencing the course of this journey have been both expensive and relatively ineffective. Operators lacked the granular information they needed to closely follow consumer activities, and they had few effective ways of interacting with customers. The rise of digital in retail, however, has made two things possible. First, consumers have new options, changing forever how, where, and when they shop. Second, the diverse set of channels has given retailers new and effective ways of interacting with and influencing their customers – close to real time – as they embark on their decision journeys.
Outside of the retail store, consumer-brand interaction along the CDJ was once limited to a catalog and an 800 number. Today, multiple channels make up the end-to-end shopping journey. Using France as an example, over 30 percent of customers buy items online and pick them up in retail stores. Nearly 25 percent have posted reviews or comments on retailer Facebook pages and exhibit high levels of loyalty to some online retailers (Exhibit 1). As a result, “going multichannel” has become an expectation among most consumers.
The consumer decision journey is already heavily multichannel
When examining the role of digital in the CDJ, no phase offers better illustration than the evaluation phase. Consumers rely heavily on digital channels as they research products on their way to making a decision. The types of research consumers do while shopping in stores varies by category. When shopping for consumer electronics in one brand’s store, for example, 27 percent of European consumers visited competitor Web sites – that’s something only 11 percent of health and beauty shoppers did. In contrast, over 40 percent of health and beauty purchasers visited the brand’s own Web site while shopping, compared with 32 percent of people looking for electronics.
At the speed of digital: The new CDJ
A woman at a dinner party spies another guest’s handbag and decides she must have one. With her smartphone, she takes a picture of the bag and searches for the brand, then links to the brand’s Web site, where she accesses videos of the celebrities who have this bag and sees how the bag is manufactured. A mobile app lets her try out the bag in the brand’s virtual showroom, which matches it with photos of her. She sends these to the social network pages of friends to get their reactions. After this, she uses her smartphone to visit the brand’s Web site to customize the bag with her initials and add other special touches, then decides whether to buy it online for same-day delivery or to pick it up at a store. Choosing the store, she uses her phone to find the closest one and schedules an appointment with a sales associate. Upon arrival, her smartphone – using near-field communication technology – automatically signals the salesperson, chosen because he has served her before. She posts her experience on a social network and two weeks later receives a personal invitation from the clerk to try a new scarf that accents her bag, thus repeating the cycle.
The trend toward multichannel CDJs is accelerating as additional enabling technologies mature. In 2008, for example, nearly 80 percent of online usage time among US consumers took place via personal computers. By 2012, PCs registered just over 55 percent of usage time, with the rest taking place via smartphones or tablets. What’s more, a number of still-maturing technologies should enhance both the in-store and online shopping experience in the future. Near-field communication, for example, enables consumers to pay for their purchases using their mobile devices or to scan products in the store for additional information (see text box above). Augmented reality can go further to allow online shoppers to test products virtually by remotely “wearing” a wristwatch. And radio frequency identification technologies can provide a seamless in-store shopping experience, offering short videos on products as consumers walk by.
Digital: Tool of influence, tool of profit
The opportunities to grow revenue are quite real for companies in the context of a retail environment in which consumers increasingly expect a seamless, multichannel purchasing pathway. In the UK, for example, McKinsey research shows that multichannel customers spend nearly twice as much on average as customers who only visit the store. Depending on the circumstances, the monthly spend per customer varies between +84 and +119 percent. Likewise in France, a leading digital retailer’s latest figures demonstrate that multichannel customers had shopping carts six times larger than those of its Web-channel-only customers.
But despite the growth in sales, the majority of market players have yet to boost their profitability based on the multichannel model. The fact is that the cost line often rises faster than revenues. Potential cannibalization of the offer – additional incremental costs associated with a multichannel CDJ, which include investments in new IT systems and training, higher delivery costs, and the like – can offset much of the extra value being generated by cross-selling, customer loyalty, and increased reach. Moreover, a variety of studies have linked the multichannel approach with a higher risk of customer dissatisfaction. For example, only 32 percent of customers said that shopping on a mobile device is “easy or very easy.” Nearly 50 percent believe that enabling stores with online and mobile access is the most important way for retailers to improve the shopping experience. Likewise, 70 percent of shoppers have stopped buying goods or services from at least one company due to poor customer service.
French customers who buy items online and pick them up in retail stores
While multichannel presents retailers with an opportunity to significantly increase revenues, its complexity also entails challenges. As companies contend with the most diverse set of channels ever – mobile- and computer-based online research, social networks, word of mouth, etc. – the winning players will have developed a consistent strategy to address all of the fragmented new touch points by investing in the most efficient ones while aligning messages across all platforms. Internally, they will also successfully coordinate messages across the spectrum of channels to ensure that they reinforce and do not contradict one another. To get there, companies can approach the challenge in three steps:
Insights. Collect the insights needed to understand each channel’s role in the CDJ. One US apparel retailer, for example, discovered that its store channel was most effective during the consideration, purchase, and experience stages of the CDJ while its Web site did well in the evaluation and purchase stages. Its mobile app, on the other hand, was superior when it came to the loyalty stage.
Strategy. All channels are not created equal. Determine the relative value of each channel as it relates to retailer and product to drive profits. One US clothing retailer, for instance, focused its stores on showcasing available clothing choices and providing sizing and fit opportunities (the consideration and evaluation CDJ stages), relying on its Web site to handle the purchase itself (purchase stage). In another case, a British wine retailer used its stores to sell a limited selection of wine (purchase stage), but offered its full catalog and an enhanced customer experience on its Web site (evaluation, purchase, and experience stages). A furniture retailer offered special software that enabled customers to design their rooms (evaluation stage) and then use the list of furniture in their virtual rooms to shop in the store (purchase stage).
Implementation. Make sure not to leave marketing money “on the table.” Companies must align marketing resources with consumer behaviors and time spent. This means shifting investments from channels owned by other companies – such as print or online newspapers (paid channels) – to those that the brand controls, such as its own Web sites (owned channels), and customer-created channels, such as communities of brand enthusiasts (earned channels). Customers have an appetite for brand offers tailored to their interests and a seamless experience across channels. Traditional paid channels have a limited ability to deliver either of these. Brand-owned digital channels along with those that feature customer-generated content, on the other hand, are highly interactive and enable a deeper understanding of the customer and are a better fit for the multichannel CDJ. This allows companies to personalize the marketing experience. Elle Magazine, for example, has created a “shopping trends” destination on Facebook that lets “fans” buy the latest products directly and share the news with their “friends.”
Central to successful execution is the digital channel and – more specifically – digital tools. Some of the tactical approaches companies can use to optimally influence the CDJ include:
Channel information consolidation. Channel management is a complex proposition. Multiple messages and offers are directed to a single customer via multiple channels in an attempt to cross-sell. These attempts, however, are often undermined because the messages and offers are not coordinated, leading to inconsistent, if not contradictory, communications and less-than-seamless interactions across the CDJ. Retailers are beginning to leverage the power of their Web sites as a central repository to ensure that each customer interaction through each channel is informed by every other customer interaction. When every channel owner knows precisely how a customer has used other channels – e.g., a salesperson at a store is fully aware of what product questions a customer asked through the Web site’s live chat feature or what their past online/offline purchases were – they can better align their scripts, offers, and recommendations with the customer’s actual histories and experiences toward a more effective sales attempt.
Analytics and big data. Conversion rates along the CDJ can vary greatly from one stage to another and across competitors (Exhibit 2). Understanding exactly where along the CDJ a company’s challenges lie is vital. Analytics tools give companies the information they need to identify sources of leakage and tailor their operations and multichannel approaches accordingly. Moreover, this enables retailers to go from macrosegmentation of their customer base to microsegments with much more tailored journeys and messaging. “Pushing” the right product on a customer who is most likely to be interested in that product yields higher con- version rates, more efficient marketing spend, and a greater return on marketing investment.
Analytic tools can point out where in the purchase process a company is
Direct, opt-in channels. Creating lasting, positive relationships with consumers is brand critical, and opt-in channels facilitate this. Some 20 percent of Facebook users now use the site to follow retailers in Europe (compared with 34 percent in the United States), and 23 percent of Twitter users rely on the service to follow brands or retailers or both. In particular, followers value the opportunity to keep up on promotions and receive coupons. Companies should reinforce their presence on these channels, create fan pages or groups, and promote their products accordingly. Walmart, for example, is building loyalty at the local level by managing Facebook pages for each of its 3,500 stores.
Smartphone- or tablet-native applications. One way for retailers to leverage the role that mobile plays along the CDJ is to develop mobile apps. Sephora to Go, for example, makes mobile shopping almost as fun as the in-store experience with an app that delivers special offers. Floor personnel actually encourage shoppers to download the mobile app and then explain its best features. This satisfies mobile users’ inclination to search for good deals via their smartphones.
The growing influence of digital retail channels is changing both the ways companies sell their products and the expectations of the consumers who buy them. Managing and profiting from this new multichannel reality requires companies to gain a detailed understanding of today’s changing consumer decision journey and develop the insights, strategies, and execution capabilities to surprise and delight their customers.