The Digital Consumer Journey-GroupM Next Research White Paper

The Digital Consumer Journey The Six Types of Digital Consumers; Amazon’s Increasing Influence in the Purchase Pathway

Authors: Jesse Wolfersberger J. Patrick Monteleone, Ph.D.

May 2013

“The purchase funnel is dead!” It’s a digital declaration made for the past few years to make known that a brand cannot simply expect a would-be consumer to move seamlessly from awareness to consideration to purchase. This seemingly accurate statement is based on the new reality that decisions of what to buy and where to buy it are happening at scale online, using social and mobile tools that did not even exist 10 years ago.

A new series of consumer behaviors is forming the next-generation version of the purchase funnel.

In new research, GroupM Next, along with Compete, a Kantar company, examined more than 168,000 purchases of consumer electronics, where the consumer used digital media in at least one step, with the goal of finding where consumers go online to make their purchase decisions—and why. Nearly half (48%) of all purchases studied were heavily influenced by digital media and advertising. It’s an obvious signal to brands that the shift among consumers of time spent on and giving attention to digital continues, and investments, both in media and content, will continue to be strategic imperatives.

The research outcome suggests that a new series of consumer behaviors is forming the next-generation version of the purchase funnel. Six clear pathways emerged, defining the most common types of modern digital shoppers. Each of the six segments represents like-minded consumers who follow a given path of varying depth and duration to reach a marketer’s optimal outcome—a sale.

The Digital Consumer Journey: The Six Types of Digital Consumers; Amazon’s Increasing Influence in the Purchase Pathway May 2013

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The Six Types of Digital Consumer Journeys

The Six Segments and Their Paths Segment Name

% of Digitally Engaged Search Shoppers

Basic Digital Consumers

29%

Retail Scouts

22%

Brand Scouts

20%

Digitally Driven Segment

16%

Calculated Shoppers

11%

Eternal Shoppers

2%

TOOLS Retail Sites

Brand Sites

Mobile

Social

Local

Portal

Path Length Steps

6 3 4 5 14 35

In examining purchases made in the consumer electronics space where the consumer used digital media in at least one step, it is the journey—not the individual or ticket price of the item bought— that is the defining variable. Of the consumers who make up each segment, the average age, gender, income, education and ethnicity are remarkably similar. This suggests that, with a few exceptions, the difference in purchase pathways has more to do with behavioral factors than demographics. Average purchase price is also very similar among segments, suggesting that the type of product is not a differentiator. No segment has a majority of the market; the most prominent segment makes up 29% of all purchase paths. Because of this, marketers have to be nimble. They cannot simply play to the majority, because no majority exists. Brands and marketers need specific strategies for where to find consumers and what to say to them.

The Digital Consumer Journey: The Six Types of Digital Consumers; Amazon’s Increasing Influence in the Purchase Pathway May 2013

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The Digitally Driven Segment Basic Digital Consumers

29%

Retail Scouts

22%

Brand Scouts

20%

Digitally Driven Segment

16%

Calculated Shoppers

11%

Eternal Shoppers

2%

6 3 4 5 14 35

Using every digital tool at their disposal, these modern consumers exist in good numbers already, but within five years, this will be the dominant segment of consumers. These people embrace digital from beginning to end. They use

social and mobile more than any other segment in the study, they value convenience above all else and they do just about everything in their power to avoid physically going to a store. Of any segment, the Digitally Driven Segment is the most engaged with social media, with 29% of paths containing a branded social site. These consumers are also the most mobile, using mobile more than any other segment and for the primary purpose of doing research, as opposed to looking for store locations. This segment has the highest ratio of online to offline purchases. When asked about the benefits of buying online, the response of these consumers was that prices are better and it is faster to shop online. This segment enjoys being left alone; these consumers said they make their purchase online to avoid salespeople and crowds. This new, digital-savvy segment has another interesting trait—these shoppers like advertising. The Digitally Driven Segment is 30% more likely to find ads valuable than someone in another segment.

Reaching the Digitally Driven Segment: » Brands can reach this segment of people online. » Have a mobile and local strategy for this segment. » Surprisingly, these consumers do not watch many video ads, nor do they find video advertising valuable.

» This segment is the most likely to become a brand advocate on social media, with ~ 14% going to a branded social media site after purchase. Give them a “share” button on the product page and after checkout.

» Of all segments, these shoppers had the highest affinity for search ads. » Buying trigger: Keep the conversation going between these buyers and your brand by reaching them at multiple touch points.

The Digital Consumer Journey: The Six Types of Digital Consumers; Amazon’s Increasing Influence in the Purchase Pathway May 2013

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The Retail Scout Segment Basic Digital Consumers

Retail Scouts Brand Scouts

29%

22% 20%

Digitally Driven Segment

16%

Calculated Shoppers

11%

Eternal Shoppers

2%

6 3 4 5 14 35

These consumers have short journeys and prefer retail sites to brand sites. The Retail Scout Segment uses mobile, but these consumers are twice as

likely to use it in the home as out. They use tablets and are responsive to ads on tablets. They are comfortable buying online but did not express a preference between online and offline. This segment has the least amount of consumers who had multiple purchases (two or more) in the same category within the previous six months.

Reaching the Retail Scouts: » Brands can find this segment on tablets and mobile devices. » This segment is highly likely to use search. Brands should consider using retail sites as landing pages.

» These shoppers will be most responsive to coupons that can be used online or offline. » Buying trigger: Right product, right price.

The Brand Scout Segment Basic Digital Consumers

29%

Retail Scouts

22%

Brand Scouts

20%

Digitally Driven Segment

16%

Calculated Shoppers

11%

Eternal Shoppers

2%

6 3 4 5 14 35

These consumers have short journeys and prefer brand sites to retail sites. Brand Scouts are the spiritual partner to the Retail Scouts, except instead of

having a favorite retailer, they have a favorite brand. When asked, 72% said they start their journey with a brand in mind. Those in this segment seem to already know the brand they want to buy—now they are asking, “Should I buy it?” When they go to the brand sites, they say they are trying to understand features. Of all segments, they are the least likely to try and find a lower price elsewhere. While they are not price-sensitive, they are responsive to value-added perks. They place a high value on free shipping and free returns. Of all the segments, these consumers watch the most video and place the highest value on video advertisements. They also find display ads valuable. Additionally, when compared to other segments, they have the highest preference for offline purchases.

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Reaching the Brand Scouts: » These shoppers are already going to the brand site, so they do not need much convincing. They are responsive to non-monetary incentives.

» They are responsive to video and display ads. This could be a great opportunity for retargeting. » They use search, so brands should make sure the non-monetary incentives are apparent in the copy of their search ads.

» Buying trigger: Free shipping, free returns, minimize buying friction.

The Basic Digital Consumer Segment Basic Digital Consumers

29%

Retail Scouts

22%

Brand Scouts

20%

Digitally Driven Segment

16%

Calculated Shoppers

11%

Eternal Shoppers

2%

6 3 4 5 14 35

This segment takes several steps to research online, but they are not highly digital users. Basic Digital Consumers are comfortable with Internet shopping and research, but they are not mobile nor social and

have the second-highest likelihood of buying offline. They are not the early adopters; they are the secondary adopters. In the next few years, this segment will likely shrink as people become more mobile-centric. The right offer can make the difference—73% of those surveyed said they are looking for promotions. In terms of digital media exposure, this segment has the highest percentage of remembering a display ad, and 10% said a display ad prompted them to look up more information about the advertiser, the highest of any segment.

Reaching the Basic Digital Consumers: » The biggest opportunity for brands is in display advertising. The research path of these shoppers takes them all over the Internet, and the right display ad with the right message can be a powerful combination.

» They buy both online and offline, so give them a coupon that will work for either. » Decision is made using a desktop or laptop computer. » Buying trigger: The right offer.

The Digital Consumer Journey: The Six Types of Digital Consumers; Amazon’s Increasing Influence in the Purchase Pathway May 2013

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The Calculated Shopper Segment Basic Digital Consumers

29%

Retail Scouts

22%

Brand Scouts

20%

Digitally Driven Segment

16%

Calculated Shoppers

11%

Eternal Shoppers

2%

6 3 4 5 14 35

The Calculated Shoppers seem to know they are going to make a purchase, but they are deciding which brand to choose. They are similar to the Digitally Driven Segment, but they have no urgency to their purchase, and

they’re willing to take the time to get the best deal. About 24% watch product videos on a manufacturer’s website, the highest of any segment. While on mobile, they look for pricing and features as well as compare brands, but they are not looking for where to buy, which is why these purchases lack urgency. Consumers in this segment are likely to be showroomers; they say they use their mobile device to pricecompare when they are close to a purchase. Like the Digitally Driven Segment, these consumers find value in advertising. They are also highervolume customers, with 65% making more than one consumer electronics purchase in the past six months. The Calculated Shoppers are the second most likely to use social. It is important to give these customers easy ways to share with their network the deals and products found on brand websites.

Reaching the Calculated Shoppers: » These shoppers are responsive to advertising. They are highly likely to use search and are looking for promotions and specials.

» They go to multiple brand sites to compare price and features, so make that information easy to find and compelling.

» Of all the segments, these consumers are most ideal for loyalty programs. They make multiple purchases and are responsive to email.

» They tend to use mobile when close to the purchase decision to price-compare—make your mobile site showroom-friendly.

» Buying trigger: Promotions and special deals they can be proud of—and feel compelled to share.

The Digital Consumer Journey: The Six Types of Digital Consumers; Amazon’s Increasing Influence in the Purchase Pathway May 2013

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The Eternal Shopper Segment Basic Digital Consumers

29%

Retail Scouts

22%

Brand Scouts

20%

Digitally Driven Segment

16%

Calculated Shoppers

11%

Eternal Shoppers

2%

6 3 4 5 14 35

The consumers in this segment are trying to find answers to, “Should I buy?”, “What do I buy?” and “What brand do I buy?”—all at the same time. These shoppers have no urgency to make a purchase, and they do their research on

desktop and laptop computers, not mobile. This segment’s consumers do not place a high value on price or promotions, and they are not concerned about convenience. More interested in researching the product, they are not necessarily doing in-category comparison shopping.

Reaching the Eternal Shoppers: » This segment’s consumers are all over the map, but they use search to navigate from step to step. Search is the best way to reach this customer, but bid carefully—they could cost a multitude of non-converting clicks while they research.

» Like the Calculated Shoppers, they are responsive to email ads, so they are good candidates for loyalty programs once you acquire them as customers.

» Buying trigger: Excitement about the product. Median Times Consumers Spend at Four Major Digital Destinations

The Essential Role of the Brand Website

5

Between Amazon, Facebook brand pages and local about a brand can be found somewhere other than the company site. For some brands the role of these

4 Minutes

listings, almost anything a consumer wants to know

3 2

alternative properties has raised questions as to the

1

lasting value of a brand website. The results of this

0

research show that a brand site is an incredibly important touch point for consumers.

Brand Site

Portal

Online Retailer

Social

Source: The Modern Digital Path To Purchase; GroupM Next, 2013

The most common destinations of consumers who use online in their purchase pathway are brand sites (69%) and online retailers (50%). Portal sites (common homepages such as AOL.com, Yahoo. com and MSN.com) and social media sites are found in conversion paths five times less than brand and retailer sites.

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When consumers go to a brand site, they spend a median time of 4.2 minutes at that touch point, more than twice as long as at a retailer site. In a Compete study in 2012, it was discovered that consumers who shopped online for CPG products and eventually purchased those products were more likely to have visited the brand.com sites prior to their purchase. Collectively, this means that despite more options for both consumers and brand to connect, the core destination of a brand website remains relevant— and valuable. In addition to the paths that ended in conversion, a number of “look-alike” pathways were examined, in which a consumer hit at least two product research pages but ultimately did not make a purchase. These were consumers who were on the path to purchase but dropped off somewhere along the way. Of all of the possible destinations, the brand site was the only touch point more likely to be found in a converting pathway than in a non-converting pathway. In the survey, consumers said they look to brand sites for features, product specifications, promotions and purchase locations. Additionally, brand sites are often found in purchase pathways after conversion, often paired with social media. This is unexpected and valuable information for brands because it suggests that people return to the brand site to verify their purchase, remember what they bought and to copy the URL to paste to social media sites.

Why Amazon is More Than Just an Online Retailer In digital retail, it is becoming Amazon and everyone else. Amazon has joined Google as the two most important digital properties in consumer purchase behavior. In digital pathways leading to a purchase, Amazon.com appears 17% of the time. In comparison, every other retail site combined showed up in 34%, meaning that when consumers go to retailers, one out of every three goes to Amazon. STARTS PATH

On its way to becoming the largest online retail site, an

37%

interesting thing happened: Amazon became a trusted source of research at all stages of the conversion pathway. ONLY PATH 6%

Of purchase pathways which contain Amazon.com:

PURCHASE PATHWAYS CONTAINING

» 37% of the time Amazon starts a path that ends somewhere else.

» 35% of the time the purchase path ends at Amazon.

MIDDLE OF PATH

22%

35%

ENDS PATH

» 22% of the time the path starts and ends somewhere else, but Amazon is used in the middle.

» 6% of the time Amazon is the only destination in the path.

Amazon represents one-third of all retail site visits in purchase pathways.

The Digital Consumer Journey: The Six Types of Digital Consumers; Amazon’s Increasing Influence in the Purchase Pathway May 2013

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Our research reveals consumers are just as likely to use Amazon as a research site as they are to use it as a retailer. Amazon is seen as having trusted reviews and as a good source for price comparison. This role creates an incredible advantage. Modern consumers put a premium on convenience, and if Amazon can continue to function as a trusted research destination, many of those people will stay and purchase at Amazon. The consumers in this study repeatedly said they go to brand sites to find promotional offers. As the Kindle distribution and ad model evolves, the influence of Amazon will only increase.

The Connection Between Social and Brand One anticipated but non-material influencer is social media. Social sites, defined as brand-specific pages on Facebook and Twitter, showed up only in 4% of all purchase pathways evaluated. Those who did use social were just as likely to use it after making a purchase as they were before. In post-conversion activity, social media is often paired with brand site visits, meaning these customers would return to the brand site in order to share the product, coupon or sale with their network. This study measures the impact of branded social media, noting that click-stream data analyzed does not include personal Facebook and Twitter interactions, where there are certainly influential activities. Therefore, the overall effect of social media is unambiguously higher than the results in this study. Three of the six segments in this study regularly use social in the purchase process: the Digitally Driven Segment, the Calculated Shoppers and the Eternal Shoppers. The connection of brand visitors to social sharers is a critical link in bridging brand to earned media. These brand-social consumers are the carriers of the brand DNA to others who might not be reachable by paid media alone. Identification of these consumers as a growth target will be a good media bet for continued presence in earned media. To encourage the sharers, the next step will be to understand what and why they share. What promotions do they value? What information would others find compelling enough to generate interest in the brand when shared? Perhaps brand websites should provide something brand advocates can share to further incent both sharer and those being shared with?

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The Law of the Instrument: Why Brands Need a Bigger Toolbox The Law of the Instrument states, “If the only tool you have is a hammer, everything looks like a nail.” Modern digital consumers are fragmented and nuanced. They cannot all be treated the same, and therefore modern marketers have to be nimble and pragmatic, using the proper tool to reach the right consumer with the right message at the right time. This study reveals the most common pathways today’s digital consumers take to find information, answer questions and make purchases. Over time, the proportions of each type of path will change and new pathways will emerge, likely with mobile playing an increasingly larger role. An exciting finding of this research is that the most digital savvy customers are also the most advertising-friendly. Give the customers something useful, and they will be responsive. The purchase funnel as we knew it is dead, but in its place are countless street corners, each an opportunity to reach a customer at a crossroad in the purchase pathway.

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GroupM Next is the forward-looking, innovation unit of GroupM, the world’s largest global media investment management group that is the parent company to WPP media service agencies Maxus, MEC, MediaCom and Mindshare, as well as Catalyst Online and Xaxis. Together with GroupM agencies, GroupM Next focuses on the curation and application of insight-focused solutions across online, social, mobile and addressable channels. Through thought leadership, technology, research and education, GroupM Next delivers data-driven, actionable insights and a clear path to action to help GroupM agencies and their clients harness the right opportunities made possible in the digital technology and new media industry environments with speed and relevance. Access our work and discover our perspective at www.groupmnext.com. Contact us with questions or comments: [email protected]

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