Exploring the Digital Path to Purchase
December 04, 2013
The digital age has dramatically changed the path to purchase used by many consumers. Consumers have found it convenient to make online purchases and have products delivered directly to their homes. In the beginning, those purchases were made while sitting in front of computer. Increasingly, mobile technologies are coming into the picture. In a report released by Ericsson AB, the world’s largest maker of telecommunications networks, the company predicted that smartphone traffic is going to grow tenfold in the next six years. It’s not just a matter of smartphone owners using their phones more, Ericsson reports, “The number of smartphones is forecast to triple to 5.6 billion globally by 2019, accounting for more than 60 percent of cellphones.” [“Smartphones Seen Tripling To 5.6 Billion By 2019,” by Associated Press, Manufacturing.net, 11 November 2013] Those predictions should convince even the most hardened skeptic that the digital path to purchase can’t be ignored.
The digital path to purchase is part of a larger omnichannel supply chain that is emerging as the standard in retailing and marketing. “Marketing was once a last-stage function, trotted out to ‘push’ products,” writes Francesco Banfi, Ewan Duncan, Ken Kajii, and Paul Magill. “Now, marketing has become the fundamental, crossfunctional force for consumer-focused companies in the digital age.” [“Out of the shadows: The Internet puts marketing in the spotlight,” McKinsey & Co. Telecom, Media & High Tech Extranet, 19 December 2012 (registration required)] The McKinsey analysts continue:
“The world is more connected than ever. To a large degree, this is thanks to the growth and unparalleled reach of digital media (particularly Internet-based social media) and the widespread adoption of mobility devices. The next five years are likely to bring a threefold increase in the number of computing devices in use, and consumer adoption of social media will exceed the scale of all previous technologies.”
The McKinsey analysts note that, as more consumers use their mobile devices, mountains of new data are going to be generated. “This volume and breadth of consumer information,” they note, “will transform the way companies interact with and serve their customers, but only to the extent that companies can make use of the data available.” Ed Hadley agrees with that assessment. He writes:
“Big data is everywhere in the digital marketing landscape, encompassing everything from transactions to marketing communications, from channel interactions and behavior to customer preferences, and so on. The information gathered through big data can provide powerful insights for how to engage customers through real-time messaging and contextually relevant content. However, many marketers struggle to harness the power of big data because it poses such an intimidating expanse of data. Without a solution or specialist or strategy to decipher the data, there’s no use for it and opportunities for better customer engagement will be missed.” [“Looking Past the Hype of 3 Digital Marketing Buzzwords: SoLoMo, Big Data, and Omni-channel,” The Cross-Channel Conversation, 2 July 2013]
Although you would think that retailers, marketers, and manufacturers would welcome new channels for their products, there has been some reluctance to embrace fully the digital path to purchase because it empowers the consumer. It is much easier for a consumer to join and leave the digital path to purchase than the more traditional physical path to purchase. Hadley puts it this way: “A digital marketing campaign with an omni-channel approach puts the customer in control; the individual chooses which device, platform, or channel they wish to interact with.” And the consumer expects to have a good experience regardless of the path or touchpoint they select. A study by UPS and comScore concluded, “Consumers want more choices when it comes to shopping online, more control over when their purchases will be delivered and a convenient returns process. They’re also using social media to shop for the best deals and expect more shipping options from e-tailers.” [“Consumers Want Choices and Convenience When Shopping Online, Study Finds,” SupplyChainBrain, 5 June 2013]
Steven Barr, Price Waterhouse Coopers’ U.S. leader of retail and consumer industry, stated in a press release, “CPG companies that engage with consumers directly through digital channels and build out their direct-to-consumer processes will have the best advantage for creating new growth. Fifty-two percent of U.S. consumers are already buying directly online from brands they trust, proving that CPG companies now have far greater opportunities to walk alongside their shoppers in real time while driving sales of existing and new products.” [“How CPG Companies Can Embrace Digital Consumers to Accelerate Growth,” by Nina Meijers, Food + Tech Connect, 26 July 2013] Hassan Bawab, Founder and CEO of Magic Logix, asserts, “The internet continues to evolve and as such, new retail business strategies are constantly being developed that take advantage of internet technology.” [“The Future of Ecommerce With Web 3.0,” Silicon Angle, 2 August 2013] He continues:
“In the first two evolutionary phases of the internet, most retail strategies chased technology; however, as the internet has firmly established itself as an integral part of retail business marketing and sales success, a much more proactive approach is being taken by ecommerce business strategists. Developers who once waited for trends are now creating internet technologies instead. The enormous customer base created by social media has been realized and now the next evolutionary phase of internet, Web 3.0, is just on the horizon and is already creating exciting new internet retail strategies and technologies that will push ecommerce to great new levels.”
Bawab obviously has a vision of what he thinks Web 3.0 will look like; but, as I noted in a post entitled Web 3.0: Does Anybody Really Know What It Will Be?, there is considerable debate about what it will really look like when fully developed. Here’s Bawab vision of Web 3.0:
“From an ecommerce perspective, the aim of Web 3.0 is to capitalize on the expansive social web network. Through new and enhanced methods of interpreting internet user’s habits, it’s possible to learn more of the specifics interests of the shopper (inside and outside of their current behavior,) and bring them a very personalized ecommerce shopping experience. Unlike today’s targeted advertising which may, for example, detect that a user performed an internet search for wedding dresses, which in turn results in advertisement after advertisement of non-specific wedding dresses. In a Web 3.0 scenario targeted advertisements may result in non-traditional wedding dresses for plus size, middle aged women, better fitting the profile of an individual and making these advertisements far more useful and likely for a sales conversion. Another example might be searching for a movie to watch. Where the last generation of movie advertisement might bring listings of local cinemas, a Web 3.0 era search might result in horror movies only playing after 10 pm at two specific cinemas, all based on historical information that has been captured and analyzed through the collection social networking and internet browsing data. Even sentence structure and behavioral data patterns of an individual that can be compared to others and yield insight. For this revolution in functionality to take place, the web in general will need to grow more accustomed to non-conventional data streams and the sharing of data across multiple applications.”
Bawab acknowledges that his vision of Web 3.0 might make it sound a bit too personal. “Where I’d like to see 3.0 go is an internet that can come to terms with the value that shared data brings, without harming their sense of privacy,” he writes. “This is idealistic, as privacy is surely important, and the value and security must be proven before the pitchforks will be put down.” Helping consumers along their digital path to purchase without seeming invasive requires companies to walk a fine line. McKinsey analysts Ewan Duncan, Eric Hazan, and Kevin Roche write, “In reality, understanding and acting on the probable contours of change requires reflection and a deep knowledge of customer behavior, industry dynamics, and feedback loops.” [“Developing a fine-grained look at how digital consumers behave,” McKinsey & Co. Insights & Publications, July 2013] It also requires sensitivity to consumer reactions. They continue:
“These insights can help players reshape their business models to exploit structural changes and cushion potential shocks. … Achieving a more refined understanding of who is doing what requires a thoughtful segmentation — incorporating data about consumers’ demographics, household characteristics, usage patterns, spending, attitudes, and needs — supported by ‘big data’ analytics. … Despite the tremendous growth of e-commerce, it still accounts for only about 5 percent of all retail sales. As connected mobile devices proliferate, they could transform the shopping experience. Already, about half of all smartphone owners use their devices to conduct retail research. We expect that more consumers will use their smartphones and tablets to complete these transactions as well. The combination of mobile retailing and true multichannel integration will transform the buying experience and begin the era of Retail 3.0.”
Clearly, the business landscape is changing and the digital path to purchase is one of its defining features.