techtalk: the retail edition

Copyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012

the retail edition 2

Welcome to our first 2012 edition of TechTalk which takes a closer look at the customer purchase journey for technology products, with a particular focus on retail. Retail, both online and offline, represents the part of the customer journey where value is ultimately generated and money changes hands. Understanding how this part of the journey works, and what challenges and chances arise, is the key to success for technology brands and retailers alike.

It is hardly surprising that, given the current tough trading environment technology brands are facing across markets worldwide, there is so much interest in how retail is evolving. In particular, retailers are feeling the effects of disruption, as technology itself changes the way in which consumers shop for technology products. It is this which sets the topic for the lead article where we explore the nature of these changes and set out a vision for ‘bricks and mortar’ through an omnichannel approach.

In a number of articles we then dissect different aspects of bricks and mortar including the importance of the sales person in the purchase process and the way in which smartphones are rapidly becoming indispensable shopping companions for many.

Beyond this, we explore the entire customer purchase journey beyond the context of the traditional yet restrictive linear process, and review the significance of initial online brand relationships within this process in forming consumers’ purchasing preferences: the potential of the so-called Zero Moment of Truth. To put the customer journey in a broader context, we present five emerging consumer-led trends for 2012, a shortened version of our annual consumer trends analysis, ‘Tech Trends: The Harmonisation of Digital Life’.

Enjoy the read…and the shopping!

Anette Bendzko

Global Lead Digital Technology, GfK Consumer [email protected]

the retail editionTECHnOLOGy TREnDs, OpInIOn AnD InsIGHT | EDITIOn OnE - 2012

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bricks & clicks: the start of a budding relationship?

What’s in store for the future of retail staff?

hoW smartphones are changing the Way We shop

hoW customer purchase journeys stopped being linear

becoming a hero at the zero moment

digital psychology: What smart data says about you

so What is behavioural economics?

tech trends 2012 –harmonisation of digital life

retail disruption through mobile payments

disruption, and What consumer research can learn from henry ford

contact

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By Friedrich Fleischmannand Colin strong

The pressure on offline retail is growing with online retail’s move onto mobile platforms creating instant price transparency. The GfK finding that customer journey patterns are mixing online and offline in the purchase process means that retailers now need to invest in a truly omnichannel approach where both online and offline retail complement each other. By taking this creative route, bricks and mortar will continue to have a successful role in the market for tech products.

There seems to be gloomy news on an almost daily basis concerning the future of offline retail, which can often lead to the impression that it struggles to compete with its online retailing counterpart. The accelerating success of online retail is largely attributed to some undeniable advantages of the channel: it is straightforward to find what you are looking for from a vast selection of goods, prices are very competitive, and it is easy to shop around for bargains. not having to drag yourself out in the rain, no spending money on high petrol prices, and no wasting time circling for a parking space when online delivery, and even returns, are

often free. Indeed, online retail has been getting progressively better at creating positive experiences for consumers through innovations such as one-click shopping, personalised recommendations and linkages to social networks to not only see what your friends have bought but to show off your own purchases.

yet we are now entering a new phase which has the potential to impact physical retail spaces more than ever, thanks to the introduction of new mobile-based apps that enable instant price comparisons. Flow, for example, is an iphone app launched by Amazon subsidiary A9.com

bricks & clicks: the start of a budding relationship?

5 the retail edition



2. Increased complexity = need for guidance: The nature of the products which are dominating tech sales perhaps provides some clues about how traditional sales channels may continue to have an important role. GfK data shows strong growth in smartphone and tablet sales whilst observing declines in sales volumes of other, more traditional, technology products such as satnav and plasma TVs. A key feature of these growth product areas is that they clearly rely on ecosystems that will typically interconnect devices in order to operate optimally. previous research from GfK has shown that consumers want to evolve the mobile experience and benefit from accessing content across different devices.

And it is surely here that there is a very clear role for technology retail as consumers look for good quality advice in the face of the growing complexity of the products they buy. More confident consumers who will typically figure it out themselves often want to go in store to ‘road-test’ the technology and quiz the sales staff to make sure that it delivers on the points that are important to them. Less confident consumers will frequently want to go in store to get reassurance about their purchase.

3. Touch and feel: There is a long standing tradition among consumers of wanting to ‘touch and feel’ goods before they buy them. This is true in many categories such as food, where

shoppers often still want to see the fresh products before they buy, and clothing, where consumers continue to try them on before they purchase. In the technology sector this trend is also evident, with consumers increasingly wanting to experience the products of interest. The Apple store is the prime example of this with a theatre for presentations, a studio for training with Apple products, a Genius Bar for technical support as well as free workshops available to the public. Another example is the way in which shops selling gaming products frequently have zones that allow shoppers to play with the latest consoles and games. The limited data available on the success of such approaches are compelling. A recent study (1) estimated that Apple makes $5,626 per square foot of floor space from its Us stores, thus making it more sales per square foot than any other U.s. retailer.

Rethinking the customer journey so if we are right and these factors do indicate a clear role for tech products via offline retail, then how does this interact with online retail? Discussion of the consumer purchase journey often appears to infer a fairly linear process, with consumers researching online, perhaps going in store to check the look and feel of the product, and then probably closing the transaction online.

“Whilst purchase journeys have

clearly changed in response to cutting-edge online retail

initiatives, the overWhelming

majority of tech products are,

still purchased through offline

retail

Figure one*: Percentage sales of technical consumer goods by online vs offline in European markets**

* 1) GfK Retail panel and the figures are based on full year 2011 B2C sales for technical consumer goods.

**European markets covered AT, BE, CH, CZ, DE, GB, Es, FR, IT, nL

which allows users to scan barcodes of items in store to display the Amazon.com product information. so rather than buying the product from the store, shoppers can purchase immediately from Amazon. E-Bay is among a number of other brands that have launched similar apps, and more will inevitably be released in due course.The spiralling costs of offline retail (rents, employee costs etc.) means that the increased price pressure this creates could make it even more challenging to compete effectively with online channels.

So what is the role for offline retail? Whilst purchase journeys have clearly changed in response to cutting-edge online retail initiatives, it is important to note that the overwhelming majority of tech products are, in the end, still purchased through offline retail (see Figure one). Whilst online will clearly continue to encroach, GfK forecasts are not indicating a sudden decline in the offline channel.This evidently raises the question of why consumers continue to purchase

technology products from bricks and mortar stores when there are so many good reasons to shop online. We have identified three key reasons why the offline retail environment is proving to be resilient for tech products:

1. Convenience: Whilst online is certainly useful in terms of search and purchase, it can be hard to beat offline for the convenience of other aspects of the customer journey. Offline is, for example, the only way you will get your hands on the highly desired piece of kit straight away without having to wait for at least a day. And despite the ever-improving delivery speeds of online stores, this is clearly a tough one to beat. Related to this, if there are problems with the purchased product there is an undoubted ease when returning the device to a shop for refund and repairs compared to having to package up the item and organise return delivery.



There are, however, significant challenges for brands adopting an omnichannel approach:

•Developing an effective role for offline is an expensive business: purchasing the right space on the street, fitting out the shops, buying the necessary kit, and training sales people to the appropriate standard all comes at a high price.

•Breaking down the barriers between online and offline: brands will typically use sales as the marker of success of a channel, with sales per square foot being a well known measure of the effectiveness of a particular store for example. The adoption of a successful omnichannel approach involves ensuring that each

channel performs a complementary role for generating sales and that the success is measured in terms of total sales and not as a function of the source of the sales.

perhaps the biggest vote of confidence in an omnichannel retail environment is the apparent move of previous Internet-only brands into retail. Microsoft has been steadily rolling out a successful experiential store format across the Us, eBay is growing business drop-off stores which support prospective sellers in the physical world, and there has been plenty of speculation that Google or Amazon are about to launch a physical store. If brands that are predominantly digital are seizing the opportunity then surely we can take this as a strong signal that when combined effectively, both online and offline can continue to have a crucial role in boosting sales.

Sources1) Us firm Retailsails: http://retailsails.com/2011/08/23/retailsails-exclusive-ranking-u-s-chains-by-retail-sales-per-square-foot/

2) GfK Retail panel and the figures are based on full year 2011 B2C sales for technical consumer goods.

Want more information on retail and tech?-> Colin strong [email protected]

“today’s shopping experience means

that aWareness of products

and increased footfall can be raised through

online marketing using tools such as coupon codes, location-based promotions and

optimised search terms”


However, recent research from GfK, which tracked pC tablet purchase journeys of a representative sample of the online population, challenges the assumption that this process is as undeviating as has been suggested. First, the study found extensive movement between channels with people switching from store to online and back again, and not necessarily in a consistent and linear fashion. Indeed, the myth that different channels deliver discrete functions was completely dispelled by the research findings as consumers were found to be moving across both online and offline channels at each stage of their purchase journey.

The implication of this is that tech companies need to ensure consistency of message across multiple channels which complement each other moving forward. For example, whilst both online and offline channels are used extensively for all types of research, we found offline-only tablet buyers were much less satisfied with the level of detailed information available. The online environment has geared up expectations that large amounts of information will be available to assist in

making their purchase – why would they not expect this to be available in store as well as online?

When it comes to making a purchase, although there was no clear preference for purchase channel amongst the tablet purchasers, it is clear consumers need to be reassured they are getting the best deal regardless of which channel they purchase through. no matter how useful and enjoyable the bricks and motar experience, there is still a significant risk that consumers will simply use the offline channel to try out the products and then purchase online.

Adopting an omnichannel approachIn this light, the challenge for retailers is to understand how to ensure their online and offline channels are complementing each other, thereby leveraging their respective benefits to generate sales. Today’s shopping experience means that awareness of products and increased footfall can be raised through online marketing using tools such as coupon codes, location-based promotions and optimized search terms. products can increasingly be reserved online before going in store to check the product out and make the purchase. In store online tools are becoming more common providing more information to allow customers to purchase items quickly and efficiently without having to queue.

This mix of channels enables retailers to take a more targeted approach to different parts of the market, some of which will continue to be served in the traditional manner, whilst others may need a focused effort to encourage consumers to visit stores more regularly. Brands are now in a much stronger position to craft multi-channel strategies to meet the needs of specific consumer segments.

“tech companies need to ensure consistency of

message across multiple channels Which complement each other moving

forWard”



the retail edition 1211 the retail edition


In an age when consumers research their purchases thoroughly online, talk to their friends for recommendations, and test out their potential purchases in store, exactly what role do store staff have to play beyond facilitating the experience? Recent research by GfK shows that the suitable mix of in-store recommendations and demonstrations, achieved by store staff training, can be highly effective at increasing sales.

By Rachel White and Matt Fisher

A new GfK research programme has provided some unique insights into the ROI of store initiatives by combining mystery shopping results with individual store-level sales data. The programme reveals how the in-store experience translates into sales and shows the average uplift in sales resulting from different types of in-store activity. This is highly useful for brands that want to understand how to prioritise in-store marketing budgets, benchmark against competitors, negotiate better rates for display space, and calculate the ROI on in-store marketing spend.

so what are some of the key findings of this programme that are useful for marketes?

Recommendation drives market share, but not all recommendations are equal As expected, there is a significant correlation between in-store recommendation and share. However, this is not consistent for all brands.; brands with a relatively high price point are more resistant to recommendation turning into sales and brands with a very high appeal will achieve a high share with low recommendation.

What’s in store for the future of retail staff?




having a freestanding display unit which may well be cheaper to implement than a dedicated area.

Pile ‘em high?The research splits stores by high, medium and low sales volume outlets . Whilst there are fewer high sales stores (they are likely to be flagship stores) the research perhaps surprisingly finds that advisors in these stores are not always the most knowledgeable or enthusiastic. This may be because they host a wider product range resulting in diluted advisor knowledge. nevertheless, these stores do sell more, partly because they are in high footfall areas, but also because they create an exciting environment for brands.

ConclusionThis programme clearly shows that recommendation is important and that there are opportunities to maximise return on investment in store, turning

advocacy into market share. This data is hugely useful to support brands in making informed choices about how to spend in-store budgets that would not otherwise be possible. The study is currently conducted in the UK but we believe it has direct relevance for other markets. Future research programmes will be exploring other geographies.

SourcesGfK study tracker piloted in 2011 and involved conducting mystery shopping at 150 stores, for the top five handsets and comparing with sales data from the same 150 stores.

Want more information about the research in this article? -> Rachel White [email protected]

Don’t bother to demonstrate the cameraEven the most enthusiastic brand advocates can sell more if they are trained to demonstrate the features that customers most want to see and use. Demonstrations can increase sales by 6.8 per cent on average, although showing only the camera gains a feeble 3.9 per cent increase., consumers typically now know how a camera works. Where advisors demonstrated how to use social networking sites, this led to a sales uplift of 8.3 per cent. stores can use these sorts of findings to develop advisor training programmes to focus on the features of most interest to customers, thereby driving up sales.

Pay and displayThe area where most of the in-store marketing budget goes is in visual presence. Any sort of visual presence at point of sales results in an uplift in sales. The biggest uplift of 10.9 per cent comes from having a dedicated in-store display area. However, it is interesting to note that an uplift of 8.2 per cent can be gained from

The programme reveals that it is not enough simply to be recommended; what is said is just as important. Consumers are more likely to buy in store if they are given a number of reasons to buy. On average, advisors gave 14 reasons for recommending a handset, with the most frequent reason being that the phone had good Internet access. However, when advisors recommended the brand itself, the greatest uplift in sales was achieved.

Additionally, knowledgeable and enthusiastic advisors sell more. The Holy Grail for a brand is to turn advisors into brand advocates, and to get them to actually use and love their handsets. For customers it is very powerful to hear an advisor say “this is a great phone, I have one of these”. such findings are crucial to helping brands calculate the impact of getting their devices into the hands and hearts of store advisors. As well as giving out phones, brands can work with stores to customise phones for advisors, and include free apps that will convince them to actually use the handsets.




The irrepressible tide of smart, connected, mobile devices is changing the way we shop at every stage of the purchase process. This poses new opportunities and challenges for product marketers and retailers in both the online and offline world.

By Ryan Garner and Alex Kozloff

The ‘always on’ nature of smartphones - not just in your pocket but also connected to the Internet - makes them the perfect companion for shoppers throughout the entire purchase journey, both online and offline. Recent research by the IAB and GfK shows that while pCs (laptops and/or desktop computers) are still the most used devices throughout the online purchase process, smartphones are an increasingly important complement to existing methods of shopping. The number of shoppers using smartphones will inevitably increase, but this usage will in many cases

be in conjunction with the pC or an aid to the consumer while in store. Indeed, the research showed that the most common behaviour was for the smartphone and pC to be used together in the purchase process rather than independently.

Shopping in a multi-screen worldThe smartphone and pC offer consumers very different but complementary benefits. With its larger screen, the pC is better suited to high value, high consideration research and purchase activity. In comparison, the smartphone is perfect for

hoW smartphones are changing the Way We shop




purchasing habits become. In particular, the way consumers are turning to their mobile phone in store should be a strong call to action for retailers to get prepared to this growing trend.

For more information about the IAB’s Mobile Online Journey Observation (MOJO) study please visit their website by scanning to QR code to the left or get in touch.

conduct an Internet search about products or services. Faster networks, more tactile screens and localised information will only accelerate this trend in the future. In addition to Internet search, location-based services and price comparison apps will provide consumers with almost complete price transparency while shopping. In terms of service provision we’re not quite there yet, however nearly half (49 per cent) of those who used their phone in store did so to conduct price comparisons with other retailers.

The use of smartphones in the purchase process is a very present reality which is affecting all brands and retailers to a greater or lesser degree, and clearly demonstrates the importance of a cross-device digital and retail marketing strategy. The greater number of connected devices consumers own, the more their behaviours change and the increasingly complex their

-> Want to contact the author? Ryan Garner [email protected]

transaction through an online retailer (scan the QR code below to watch the video).

The most striking thing about this particular purchase journey is that from trigger (seeing the advert on the XBOX) through to purchasing the

game, there was not a physical retail store or a pC involved. From a retail perspective, Amazon won this sale through combining an easy-to-use optimised interface for smartphones, convenient payment options (one click) and pre-order promotions.

Smartphone: the perfect in-store shopping companionToday’s shoppers hit the high streets armed with a wealth of knowledge in their pockets. The research shows that 38 per cent of respondents use their smartphone in store and of this group, 55 per cent

looking up information quickly and while on the move. A great example of this is when consumers are watching TV. 44 per cent of respondents in this study stated that they reach for their mobile when wanting to follow up a TV advert. In general, they are often looking for more price and product information to supplement what they have just been told by the TV advert. The introduction of the smartphone in the purchase process means that from trigger through to transaction, the journey becomes more complicated for product marketers and retailers. When considering all the channels, devices, and information sources the variety of routes through the purchase journey seem infinite. Take, for example, a young gaming enthusiast who sees an advert for a new game on his XBOX. He discusses what he has seen with his friends and decides to purchase the game, using his smartphone to make the

Figure one: Device usage throughout the purchase journey

UK Smartphone owners who have purchased something in the last month (n=800)




By Iain stanfield

Logic dictates that consumers cannot consider a brand unless they are aware of it; they are unable to use a brand they have never considered. However, we feel that this model needs to be updated to reflect the way that today’s consumers shop for technology products, entering the brand funnel at any stage, and walking through it at any speed. This means that if your brand has a better consideration score than a competitor at a certain point in time, it no longer follows that you will sell more products. Disruptive elements are lingering all along the decision-making process, leading consumers to deviate from the linear process, jumping stages, and going back and forth.

An example would be as follows:John goes online to look for a laptop. He is interested in Brand A and Brand B, but he puts ‘laptop’ into Amazon’s search engine. As he scans the results, he sees that Brand C, which he hasn’t heard of, is getting 5 stars in all the reviews.

John has just gone straight to consideration of a shiny new Brand C 2012XyZ laptop. He checks youTube and finds a review video shot by a techie from Brand C development labs, which helps him feel confident about the brand.

He checks pricerunner for some more reviews, and the best deal, and then he buys Brand C. Brand C was not even in the consideration set initially.

There are some things that have to happen in the right order. you can’t build a house starting with the roof. Dinner is soup to nuts, life is cradle to grave. We tend to assume that a consumer’s decision making process is a similarly linear process. Classic market strategy therefore uses a funnel or pyramid model to assess brand and communication performance (see Figure one) but does this need to be updated?

hoW customer purchase journeys stopped being linear




2. Use the brand funnel as a measure of brand strength, rather than for driving purchase and purely for focusing on sales (Our suggested funnel does not include a purchase stage).

3. Decide what you want to achieve at each stage. For example, you may wish to redefine consideration as ‘My brand is the OnLy brand you will consider.

4. Compare your performance at each stage against your main competitors – this will highlight any disconnects and show you where to focus your effort.

Rethinking the brand funnel in this way will help you to lay down the foundations of a robust and strategic brand and comms strategy. Underpin the strategy with actionable research and you are on your way to building profitable brand relationships with your customers.

Want more information on branding and retail? -> Iain stanfield [email protected]

How can brands control this non-linear decision making process?so does this mean that it is not important to develop a strong brand? should all brand and comms activity be focused on driving recommendation and on search engine optimisation? And is the brand funnel dead?

Whilst understanding the purchase journey in the category is important, we argue that a strong brand is the only way to fight back. Technology is personal; your smartphone says something about who you are (or who you would like to be). In technology markets where there is so much change and choice, the goal for any brand must be to build a strong relationship, and not merely to drive sales. The brand funnel is alive and kicking but what it consists of and how it is analysed must be considered in a different light.

1. The brand funnel should be a flexible tool that should be tailored to meet the needs of your product category.

sue is looking for a new smartphone online. she knows exactly what make and model she wants and she plans to stay with her current network operator. As she searches she sees that a rival network operator has a great deal on her chosen phone.

she hadn’t considered changing but it is too good a deal and the rewards are appealing. Whilst she doesn’t know much about the new operator, she thinks

it is worth switching. The new network operator has just gone from passive consideration (I would not reject this brand) to being actively considered and purchased.

she has signed up for 24 months on a high-end tariff. sue has entered the brand funnel at ‘attachment’.

Disrupting the linear decision-making process: reviews and recommendationsConsumers have always trusted recommendations from a friend, but now they have access to the aggregated opinions of millions of ‘friends’ via social networks, price comparison sites and specialist review sites, forums and blogs. In technology markets, recommendations and reviews are becoming even more important and can be a greater influence on consumers at point of purchase than a carefully-crafted campaign.

The pace of technology development increasingly leads consumers to look for guidance. Five years ago smartphones were mostly bought by early adopters who understood the technology and compared brands according to features and functions. Today, as high-end technology has gone mainstream, a much higher proportion of smartphone buyers may well instead be attracted by the look of the handset. These less knowledgeable consumers

are more likely to look for advice and reassurance when researching a purchase, particularly as the number of available products proliferates. And finally, retailers play a huge role in this disruptive process.

Disrupting further: the ‘Zero Moment of Truth’It is not only recommendations and reviews that can divert your potential customers from their orderly procession down the brand funnel to become lifelong customers and advocates of your brand. Any purchase journey that includes online research exposes your customer to a wealth of offers, promotions, search term results and Google ads. (see next article, ‘Becoming a hero at the zero moment’) Each of these is a touchpoint with a competitor. The following is a good example.

Figure one: A traditional brand funnel


Copyright GfK | TechTalk Edition One 2012Copyright GfK | TechTalk Edition One 2012

70 per cent of buying decisions are made at the shelf…or so we are told. This information has been at the forefront of retailing strategies ever since p&G expounded the idea of the First Moment of Truth (FMOT) in the Wall st Journal back in 2005, but a new theory is now challenging this accepted mantra as a result of the rise of the, largely unforgiving, online brand relationship.

By Wendy Jonesbecoming a hero at the zero moment

The FMOT concept is that whilst brand communications serve the dual purpose of raising awareness and increasing propensity towards the product, it is ultimately in the three to seven seconds after a shopper encounters the product on a store shelf that the brand has the best chance of converting a considerer into a buyer. It is then down to the product performance to convince the consumer that they made the right choice, and to repurchase the brand at a later date (otherwise known as the second Moment Of Truth).

Underpinning this idea is the notion that the brand itself controls the vast majority of messages a consumer receives. Whilst marketers have always been aware of the influence of word-of-

mouth on purchase decisions, traditionally consumers would only talk to a small circle of friends and family. Other sources of information such as pR, reviews and expert recommendations, whilst also influential, were usually controlled to some extent by the brand.

However, in the last few years, the digital revolution has changed the balance of power between brands and consumers. This has led Google to assert that the Zero Moment of Truth (ZMOT) is now the killer moment in the purchase decision making process. ZMOT refers to when a consumer encounters a brand online, often in the form of others’ opinions, which influences their perception of the brand, thereby affecting the decision they go on to make at the point of sale. This is not to say that




Other companies take it further and use the digital arena as a platform for co-creation, which increasingly involves ‘gamification’. This can be as simple as the game on a leading ice-cream brand’s website that invites visitors to create their own flavours, or as complex as the energy company that gives visitors the opportunity to play a sIM-style game creating their own eco-world with the objective of saving as much energy as possible. The Internet offers brands the opportunity to conduct a two-way dialogue with their consumers that can deepen the brand relationship beyond product experience and conventional marketing stimulus. Customers benefitting from this type of brand relationship are significantly more likely to become advocates, elevating the brand to ‘hero’ status. By taking the time to comment on the experiences they’ve had, and including the emotional impact of these in their reviews, customers create powerful ZMOT experiences that influence other users.

Like any tool in the marketing mix, ZMOT alone isn’t sufficient to drive substantial growth for any brand, but it is becoming increasingly influential. In order to maximise ZMOT opportunities brands need to create not only positive product experiences that live up to the brand promise, but also engaging brand experiences and a platform for the distribution of the advocacy they generate.

SourcesGfK study conducted with 300 adults via UK Consumerscope panel with LeoTrace, between Dec 2011-Jan 2012.

Want more information on ZMOT?-> Wendy Jones [email protected]

from a friend or family member early in the journey were less likely to conduct extensive research in the first place, suggesting that ultimately, a personal recommendation from someone you trust is still the most powerful form of word-of-mouth.

nonetheless, it is important to recognise that online word-of-mouth (or what is now often referred to as earned media) is an increasingly influential tool, in particular for those whose category experience, or that of their friends, is limited. Indeed, our study showed that most tablet buyers only received advice from one source or the other.

Becoming a Hero at the Zero Moment of TruthWhere the digital arena really excels is as a platform on which brands can deliver ‘experiential marketing’. Just like the offline version, this type of marketing is designed to drive greater engagement with the brand by supporting brand stories in interesting and often unexpected ways. Where digital differs is in its ability to offer a truly interactive experience to consumers. It goes beyond the opportunity to merely participate, instead encouraging consumers to play an active role in the creation, development and distribution of these branded events.

The gaming company that provides back-stories to characters, the airline that asks its frequent fliers to upload photos for its advertising campaign, and the tech company that provides video tutorials and a forum for users to share experience are all examples of how digital is facilitating improved brand perceptions and deeper consumer loyalty through online experiences in a way that cannot be achieved through other, more traditional media.

half of those who sought information did so online. Despite this high level of activity, 51 per cent claimed they did not find all of the information they required .The majority of product comparisons in tablet purchase journeys were conducted using retailer websites: a great one-stop-shop for finding and comparing the range of products and price points available in the marketplace, for reading user reviews and ratings, and for the ability to purchase if all buyer conditions are met. It seems retailers offer a certain level of objectivity that manufacturers cannot always lay claim to, but it is still the opinions and experiences of those deemed to be ‘in the know’ that are perceived to be the most trustworthy.

Importance of online word of mouthThe issue that leads brand owners to lose sleep is the simple truth that, largely thanks to the Internet, they have decreasing levels of control over what a consumer sees or hears about their brand. We found that amongst tablet buyers who claimed reviews and recommendations were influential in their decision making, as many read online reviews and recommendations as received them from offline friends and family. Additionally, a similar proportion cited an online review as being most influential in their decision as the proportion citing friends and family as having the greatest impact.

This suggests that online can be just as important as offline when it comes to recommendations. The Internet has provided access to a multitude of other users, whose humble opinions and descriptions of brand experiences often count for far more than the ‘official’ communications coming from the brand itself.

However, the value of online research may be greater amongst those who require extensive research to validate their purchase decision. For example, those receiving a strong recommendation

subsequent interaction with the brand is unimportant but that initial contact is potentially much more pivotal than previously thought.

Exploring the role of digitalConsumers have growing access to a proliferation of brand touch-points, both official and unofficial, which are reforming the way brands are perceived and considered. These changes manifest themselves in three key forms:

1. the ability for consumers to find and compare detailed product descriptions and other information they require to support their decision making.

2. the broadening of word-of-mouth circles through peer-to-peer exchange of brand experiences in the form of recommendations and reviews.

3. the new ways in which the digital space allows brands to interact with customers and engage them in two-way dialogues .

At GfK we decided to look at these issues in the context of a real-life purchase journey. Conducting research with consumers who purchased a tablet pC, we looked at how they used the wealth of digital information available to help formulate their product choice. The research combined online surveys with over 300 recent tablet buyers, and tracked the online browsing behaviour of a sub-set of these using our LeoTrace* software for a four week period prior to their purchase.

Information underloadThe results revealed that shoppers do make widespread use of the Internet to gather information, helping them make up their minds about their potential purchases. Overall, 84 per cent of tablet buyers claimed to have actively sought information relating to the category in the four weeks prior to their purchase: 25 per cent said they ‘researched extensively’. More than


Copyright GfK | TechTalk Edition One 2012Copyright GfK | TechTalk Edition One 2012

By Colin strong

As I started planning my summer holiday, I was struck by the sheer scale of the digital footprint that I alone was creating. Using Google to search for potential destinations, I skimmed through holiday reviews and local destination websites, tried to see the facades of various apartments using Google Earth, shopped around travel sites to book flights, used comparison sites for my car hire and insurance, let everyone know about it on Facebook…and this all before I had even set foot outside of the front door. When I finally do go on holiday, I will of course leave digital traces all the way to and from my destination, from attending to my messages and updates on social networks, to showing up on all manner of travel systems. On my return I will upload photos, share my thoughts online, update Facebook again...and the list goes on!

Much of what has historically been a human-to-human activity is now increasingly digitised, not only by people, such as me, trawling the Internet, but also through the digitisation of back-office systems. This means, for example, that I now receive my airline booking automatically via email, that the plane capacity is instantly updated and that the prices are accordingly re-estimated (or should I just say hiked up!), all without the involvement of any human being.

As life becomes more digital, what we know about people is progressively going to come from the digital form, thereby creating valuable opportunities for consumer researchers. Indeed, with the numerous traces I have (evidently) left scattered across the digital landscape from

digital psychology: What smart data says about you and hoW brands can use it to build exciting online relationships




smart Data involves the creation of new methodologies across the consumer researcher spectrum but in areas which are familiar to those working in this industry – identifying and creating data collection methods, designing data capture tools, analysis and modelling etc. It also involves the creation of a whole new set of metrics which not only accurately summarise the digital behaviours being exhibited but also start to tell us something much more insightful about the people behind these behaviours.

The real power of smart Data lies in the integration of the digital and ‘traditional’ market research approaches to create a coherent understanding of the consumer. Those that can best harness the power of integrated digital data will add tremendous value to business strategy and decision making, far beyond the industry’s current level.

on the inevitable myriad of data in order to create any meaningful metrics. Currently, there are few industry-standard digital metrics that accurately reveal consumer mindsets in the way, for example, that ‘customer satisfaction’ has in more mainstream consumer research.

3. Integrate: By retaining the more traditional tools in the consumer researcher’s kit bag (e.g. surveys, qualitative interviews) we can not only help to fill in some of the inevitable gaps in our understanding, but also get more insight into what different digital activities actually mean (e.g. what does it mean if people sometimes spend a long time before they confirm actions?).

4. Model: A critical challenge is to understand the relationship between different forms of digital activity. For example, are there digital activities that brands undertake which lead to particular consumer outcomes (e.g. change in brand perception)? Frameworks are being developed here that have their legacy deep in areas such as social psychology but can be applied to the digital world.

5. Transform: The end point of smart Data is to recognise how brands can build more effective digital experiences. The crucial question is how can brands generate new, more facilitating relationships with consumers by using digital profiling? If brands can better understand the ‘digital psychology’ of consumers then we should expect an enhanced digital experience.

Want more information on Digital psychology?-> Colin strong [email protected]

understanding of consumers themselves, thereby reaping even bigger benefits for brands wishing to create the best possible digital experience for consumers.

so, for example, we can deduce the way in which consumers research and buy products or how they are influenced by digital marketing or social media content concerning brands. If analysis is limited to the brand’s digital assets then, at best, very limited information can be gleaned about the wider digital lives and behaviours of consumers.

We believe there are five cornerstones for brands to succeed in transforming Big Data into smart Data.

1. Capture: Although brands are able to capture the digital activity that passes through their own assets, they do not see the activity that sits outside of these. This gap in knowledge is, nevertheless, critical for generating a holistic view of consumers’ digital lives beyond the mode of interaction with one brand. The challenges here are immense but in making use of large global panels of consumers we can achieve this. GfK, for example, uses electronic means to track consumer’s digital activity across devices, as well as collecting a range of personal and attitudinal data through more traditional survey methods.

2. Measure: A key challenge is how we go about generating measures or ‘metrics’ from digital data. Contrary to traditional consumer research approaches, we have to create and impose our own structures

this year’s summer-getaway research, it wouldn’t be difficult to determine quite a bit about me and my holiday preferences. In short, it is becoming easier to build a picture of consumer lives, mind-sets, attitudes and motivations from their digital footprints.

Of course, digital analytics has long been an area of investment for brands to optimize their web-sites, search terms and so on, enabling them to increase the flow of site traffic and to maximise sales, although the full range of brands digital assets is often under exploited. There has recently been much discussion of the merits of ‘Big Data’, that is the use of large-scale data gathering and analytics to shape strategy.

At GfK, we fully support this thinking but have a somewhat different emphasis. Our ‘smart Data’ approach is about putting the consumer at the centre of the analysis as opposed to the brand’s digital assets. By doing this we can gain a greater

“much of What has historically

been a human-to-human

activity is noW increasingly

digitised”




...And what does it offer to technology brands to improve the influence in all stages of the customer journey.

Market research has long been about understanding the way consumers behave in order to develop successful market strategies for brands. An area that is getting increasing recognition for having a key supporting role to play at each stage of the customer journey is Behavioural Economics.

By Colin strong and prof peter Ayton

Watch the video on youtube now, scan the QR code below

Although a current hot topic, Behavioural Economics has, in fact, been around for a long time, informing much of our understanding of consumer behaviour, particularly in the area of consumer choice when researching and developing retail strategies.

Behavioural Economics is highly useful for market researchers as an approach to understanding human behaviour which accepts that economic theory is unable to deliver the whole story about what influences consumers’ economic behaviour. The idea that people do not always make rational decisions is what the core of Behavioural Economics is about. Conversely, Economics is based on the premise that people do make rational decisions and that market forces will resolve everything in the most efficient way. An important figure in the field of

Behavioural Economics is nobel Laureate Daneil Kahneman. A key contribution of his work has been to argue that the model of rationality held by many people is not always correct but that we are irrational in ways which, in most cases, meet our broad requirements. This is known as ‘bounded rationality’. so within the limits of our brainpower and our ability to process all the information that is relevant to the problems that we have to solve, we are able to function effectively for the majority of our needs. But because this is done by making shortcuts (simple rules of thumb) and not always using optimal strategies, we occasionally get things wrong.

so let’s explore how this is relevant to the customer journey in technology markets.

so What is behavioural economics?...

http://www.youtube.com/watch?v=riCF7yZiRWQ&context=C43ca435ADvjVQa1PpcFOeBf1gUh1sKg3U_USq7otMMS8Qw713Isg=




the way in which pricing is presented to consumers:

1. Fair pricing: Our perception of what might be a fair price for an item is often determined by a mechanism called ‘anchoring’. This is a widely researched phenomenon which indicates that consumers’ perceptions of what is a reasonable price are often determined by an earlier reference. For example, real estate agents were asked to value a house that was on the market. They visited the house and were given a booklet of information about the property which included an asking price. One half saw a high asking price, the other half saw a low asking price. When they were subsequently asked what their estimate was of a fair asking price for the house, the results were clear – the listed price consistently influenced their assessment despite their repeated claims to the contrary.

2. Free: Offering goods for free has a disproportionate impact in the market, to the extent that consumers will often choose free goods as opposed to spending small sums for much higher quality goods.

3. Overvaluing discounts: This is classic

territory for retailers who have long been aware that strategies such doubling prices and then marking them down by 50 per cent will result in many more sales than otherwise would be the case.

implications for the way in which tech brands create their portfolio, with the recommendation being to limit the offering to manageable numbers for consumers.

Behavioural Economics also shows that consumers struggle to juggle a large number of pieces of information at a time. One study illustrated this effectively by looking at the way in which magistrates (a court official in UK courts) make decisions concerning whether to allow defendants to have bail (go free until their next court appearance) or whether to retain them on remand (keep them in jail until their next court appearance). Although magistrates are instructed to make their decision based on a wide range of different variables (and indeed they consider that this what they do), in the vast majority of cases the researchers found that it was ultimately only one or two pieces of information that influenced the decision (in this case the advice of the prosecution).

This ‘fast and frugal’ means of decision making is a useful adaptive skill as we do not become over-loaded with the complexity of the everyday decisions that we might have to make. This is especially pertinent for tech companies which often provide consumers with a large amount of information concerning the variety of features that their proposition may offer The ‘fast and frugal’ rule means that it is critical to understand which features are consumers focus on in order to make their purchase decision. At retail, for example for smartphones, we therefore often see only three or four main features on the display.

Price evaluationThere are a wide range of issues in Behavioural Economics that underpin

photographer’s dream became the middle-range option. However, in this new context, this camera improved its market share with more than 50 per cent of respondents choosing that item. And the secret to its success? Despite having the same features and same price as in the previous context, it won over more customers because it was presented as a good compromise option – a deal hard to pass by.

Therefore, consumers’ preferences are clearly governed by the context of options that they do not choose, a finding that has implications for the way technology brands seeks to position their products in the market both relative to competition and indeed within their own portfolio.

Consumer choicesWe generally believe that we like choice – the more choice the better and the assumption is that our desire for a larger range and our ability to navigate it is unlimited. The reality is that consumers can often struggle with the extent of options available to them, as illustrated by the classic ‘jam sandwich’ study. This research involved setting up an ‘exotic jams’ tasting booth at a high-end grocery store in California. On one occasion there were six jams at the tasting booth, whilst on another occasion there were 24 jams. Consumer reaction and subsequent purchase was tracked with compelling results; despite the initial appeal of the wider choice of 24 jams, in this case only three per cent of consumers actually purchased a jar. By contrast, of the consumers browsing the tasting booth when it had six jams available, a staggering 30 per cent went on to purchase a jar.

This ‘choice overload’ again has significant

Forming preferencesprior to making a purchase choice, consumers generally review the market and begin to identify their preferences. Behavioural Economics research increasingly demonstrates that preferences are actually very malleable and influenced by all manner of contextual effects. A good example of this is a classic experiment which offered people a choice of two cameras; one was an upmarket camera boasting various special features, the other was a much cheaper, basic model. Broadly equal numbers of people were interested in each camera.

Another study was then undertaken using the same two cameras but this time with the addition of an even better, more feature-packed model. In this scenario, the camera that was previously a

“consumers’ preferences are

clearly governed by the context of options that they do not choose, a finding that has

implications for the Way technology brands seeks to

position their products in the

market ”




the duration of the examination, a real commitment to the cause of research! When the patients were asked to relay their retrospective evaluation of the experience, researchers found that the average or total amount of pain was much less important than peak pain experience or the level of pain that was experienced at the end of the procedure.

This finding is key for technology brands which need to make sure that the in-life management of their customers has some key positive experience, particularly towards the end of their contract (where applicable) and that this is reflected at a micro-level within the brand touch-points such as call centre calls.

Behavioural Economics has a lot to offer technology brands at each stage of the customer journey. some of the findings above are already implicitly recognised by tech brands and we can see examples of the way in which these are playing out. By making these mechanisms explicit, it is clearly possible to develop ways brands can engage with consumers in a more positive way.

students chose not to make the exchange. This neatly illustrates how consumers, once in possession of an item, endow it with a greater value than they otherwise would have done.

The implications for the tech market are to give consumers a sense of ownership of their purchase. It is clear this happens when a device is purchased but perhaps less so when it comes to services, such as mobile apps, where there is often a much less obvious sense of possession.

Satisfaction with the experienceFinally, Behavioural Economics has interesting things to say about the way in which people subsequently report their perceptions of an event.

studies have shown there to be a distinction between what consumers have actually experienced and what they remember experiencing. This is a subtle but critical distinction which has significant implications for how brands manage customer experiences.

An important, if rather wince-inducing, study from the early 1990’s looked at the experience of patients undergoing a painful medical procedure At the time, this was a treatment which was carried out without the benefit of an anaesthetic and was considered to have been very painful. patients were asked to report their pain levels every 60 seconds throughout

Want more information on Behavioural Economics?-> Colin strong [email protected]

An example of the impact of these mechanisms for technology markets is the way in which the Internet influences consumer willingness to pay for online services. Very often, content is available free of charge which makes it difficult to persuade consumers to start paying for alternative content, even if it is of a high quality. Conversely, a tech brand may benefit from a competitor offering goods at a higher price, because assuming that the goods are considered to be in the same category, consumers will have their perceptions of pricing ‘anchored’ and will therefore be willing to pay more.

The point of purchaseThe psychology of the individual at the point at which they actually make the purchase is increasingly under scrutiny within Behavioural Economics. An interesting issue here is related to people’s emotional states at the point of purchase. When a new product is launched people are frequently found queuing outside stores, often in what is called a ‘hot emotional state’ which is when they are particularly craving something. In these circumstances consumers may appear to act irrationally. Indeed, there is evidence that when people are bidding for products in auctions, they will sometimes pay higher than retail prices for some goods because they are so desperate to acquire them in the auction context, even though they initially thought they were going to get a really good deal.

Whilst, of course, brands will not wish to encourage consumers to act irrationally, there is evidently more that can be done

by retail outlets to generate experiential involvement on the part of consumers to engage them further with the brand.

Post-purchase evaluationOnce consumers have made their purchase, taken it home and started setting it up, what does Behavioural Economics have to say about the way they think about their purchase?

A phenomenon that is relevant here is the ‘endowment effect’. This indicates that once consumers own an item and it is theirs (rather than something that they might covet in a shop) they revalue it, often becoming reluctant to give it up or exchange it for any other item.

An example is a study where participants in three different groups were offered a choice between the same two goods, a coffee mug and a bar of swiss chocolate. In the first group, upon completing a short questionnaire, students were asked to choose between the mug and a bar of swiss chocolate. There was a roughly equal split in preference.

Meanwhile, all students in group two were given the coffee mug at the beginning of a session as a reward for completing the same task. At the completion of the task, the students were shown the bar of chocolate that they could immediately receive in exchange for the mug. The students in the final group were offered an opportunity to make the opposite exchange after first being given the chocolate bar. In each case the majority of




By Hannah Tierney tech trends 2012 –harmonisation of digital life

At a time when innovation in devices, mobility and connectivity continue to drive the way we use everyday services, socialise and communicate, what can we expect to emerge in the forthcoming months? Using GfK data to explore how technology is likely to evolve throughout this year, we’ve identified five consumer-led trends to watch out for.

1. Reaching the CloudThis is the year that cloud-based solutions will creep into the mainstream; Internet-based computing where shared information, software, and resources are accessible on demand is largely driven by the ever-increasing use of smartphones, tablets and other connected devices, as well as advanced mobile applications. As such, it is an essential development to complement the ecosystem as it facilitates consistent service usage and storage across any device.

However, these solutions must go hand-in-hand with educating consumers on how they can organise their increasingly complex digital lives, with simplicity and value being key. As such, we may see the rise of a new business opportunity around the management of digital life for a fee, as tech companies translate technology solutions into consumer benefits.

2. Excellence as standardWell-managed, easily-accessible content is no longer enough; consumers want consistent high quality and a seamless user experience. With more consumers accessing content from a greater range of devices, HTML5 looks to be the computer language of the future. Worth its weight in gold for the consumer experience, it is simple for developers and therefore easily-accessible for all.

The use of this code alongside cloud technology to create app-like functionality for browsers is significant as apps continue to be popular and integral for driving loyalty to operating systems, thereby dictating device choice. In this light, the high expectations of consumers should not be taken lightly. The use of blogs, forums and review sites provides products and services with a whole new world of influence that brands need to beware of and manage.




In light of these five Tech Trends, do you affiliate with these emerging into the mainstream, or are there other trends you identify as rising to prominence throughout 2012?

you can read and download a full copy of ‘Tech Trends: Harmonisation of Digital Life’ by scanning the QR code below or contacting the author.

5. Gate keepersThere is increasingly awareness of the scale of personal information that is now stored online. While consumers expect tailored content and recommendations, security will be a key driver of loyalty in the future.Trusted brands will be in a strong position to balance ease of access and usability with growing security concerns. A completely new revenue stream may also be available to these ‘trusted’ brands, with operators in a strong position to affiliate with partners who will help to streamline consumer experience whilst additionally providing customers with a safe and secure solution to their digital lives.Finally, the EU is currently revising its privacy policy which is likely to have significant implications for consumers and businesses alike.

Want more information on Tech Trends?-> Hannah Tierney [email protected]

4. Right here, right nowDemand for instant gratification is not a new trend, but advances in technology enabling tailored, instant and relevant information means that expectations are on the rise for instant everywhere.Location-based service (LBs) is likely to change the way we behave and shop, as technology provides relevant content to consumers based on their latest geo-marketing coordinates. near Field Communication (nFC) will additionally enhance the consumer experience, empowering devices to immediately and securely pass information over a short distance, authorising payment by simply ‘tapping’ a reader.

3. Seamless existenceThe Internet has emerged as the key enabler in a wireless ecosystem to facilitate real-time communication. The importance of being connected socially and having a constant connection has implications for providers. Operators now have the chance to take advantage of their relationship with the consumer by offering enhanced data connectivity by subscription rather than by device. Of course, device refers not only to mobiles – the desire for fully integrated in-home experience is set to rise in the coming months, with laptops and tablets becoming increasingly housebound, used as localised mobile devices as part of the home ecosystem.




nicholas peppiatt interviews stanford University’s

Francisco Guzman

Defining the payments landscapeJapan is frequently cited as the early mover on contactless payments, beginning with e-cards pre-loaded with cash before expanding to include mobile phones (known as osaifu-keitai, which literally translates as “wallet phone”). “First of all Japan in general is very, very open to new kinds of technology”, Guzman says. “Right now there are several [contactless payment] systems in Japan; Edy, suica and pAsMO. Those are the primary digital e-cash cards with digital counterparts on the mobile phones.”

And this early adoption was driven primarily by the transportation system, he elaborates, “Most of the people in Tokyo, around 90 per cent, commute to work every day. Mobile payments are an integral part of that process. The way people pay for their tickets, the different surrounding vending machines, and the different convenience stores within the train station all accept mobile payment methods.”

Influence of cultureAs Guzman explains, some aspects of Japanese society actively contribute to the popularity of such payment systems. “There’s definitely a heightened sensitivity towards not causing commotion for others and what other people are thinking of you as you do things”, he says. “Transportation is something where time is very important. If you’re taking time to refill your card and making other people wait, that’s frowned upon.”

It is this area, he adds, where a phone that automatically charges your bank account has an advantage over e-cash cards, which require physical recharging. However, the popularity of mobile payments also mirrors an aversion towards credit cards, and by extension, the concept of debt. “It’s because of the forward-looking nature of the culture - there’s definitely much more of a concern for the future and your future state in Japan than there seems to be here in the United states, where it’s much more about the short term.”

Despite its potential to disrupt the retail sector, adoption of mobile payments systems has been slow in the Us and Europe in contrast to the popularity of such methods in parts of Asia, particularly Japan.

To help us explore the elements which contribute to this disparity, TechTalk spoke to Francisco Guzman, a researcher at stanford University studying the sociocultural factors that influence payment behaviour. Below we have selected some extracts from the interview.

retail disruption through mobile payments




The futureMusing on the future, Guzman senses a need for re-evaluation in Japan. “How do we take all this fragmentation and make it more unified? How do we change people’s mindset, from using mobile payments to make small purchases, to increasingly [getting them] to make bigger purchases?”

While he predicts continued development in the Us and Europe, it is clear that trust will need to be a cornerstone of the whole process. “I think within the next five years different kinds of partnerships will develop and we’ll see which one gets the most traction. something that’s come across frequently, [in regard to] money specifically, is trust. When consumers think about their money, who do they trust and how can we get those players more involved?”

“Mobile payment can allow for a closer relationship between customer and merchant. With all of the information we share, and smartphones that are able to bridge our digital and physical worlds, it is easier to make the payment experience feel more personalized, which is exciting because of all the possibility!”

About Francisco Guzman is a senior and researcher at stanford University in the Department of Management science and Engineering and the program for science, Technology and society. His final year Honor’s thesis is on the topic of mobile payment and behaviour, under the guidance of his advisor professor Robert McGinn.

For more information on his research, please contact: [email protected]

Despite this threat, Guzman points out that the speed of smartphone technology development means mobile payments should prosper in the long term. “you’ll eventually have [a smartphone] that’s nFC capable and able to make payments. That’s when carriers and merchants are going to try and make the push to get people to actually use the technology as opposed to simply having it dormant on their phone.”

The next stepWhile existing payment methods in western markets are well established, it is clear that the increasing ubiquity of smartphones is changing the nature of people’s daily lives. “When you’re in the store you’ll see people checking the price of things online, seeing if there’s somewhere they could find [products] cheaper or find complementary ones.”

This interaction goes beyond the individual, enabling consumers and retailers alike to draw on a potentially staggering amount of information. “A phone is able to tap into your social networks and see what kinds of things you like, what kind of things your friends are buying”, Guzman explains, “but it’s going to be hard to balance because of privacy concerns. [This sensitivity has] been heightened, with companies like Google and Facebook increasingly pushing the boundaries of what people share online and how people’s information is being used.”

The danger of fragmentation must also be addressed, and there is a clear need for a unified system. “Instead of having loyalty cards from 20 stores, you manage them digitally. It becomes more of a free marketplace where everyone can use the same system.”

“However”, Guzman continues, “Are these even loyalty benefits anymore, because it’s so easy to just download a loyalty card? If [acquiring a loyalty card] becomes too easy there really is no benefit for retailers because you’re not really being loyal anymore.”

Want more information on mobile payments?-> nicholas peppiatt [email protected]

“One of the frustrations is the fact that so many stores have their own mobile payment system and they don’t work together.” Guzman elaborates, “Transportation companies are working together to make this process frictionless. For retail, it’s not so much the case.”

The full pictureAnother aspect Guzman is keen to point out, is the reality of mobile payments adoption in Japan. “It’s very easy to get swayed by all the different publications, making it seem that mobile payments are much, much more popular in Japan than they actually are”, he explains. “About 20 per cent of the people that have the mobile payment functionality on their phones are actually using it. On a global level that’s high, but [for the] other 80 per cent of people, why aren’t they using it?”

Guzman expands that balancing convenience against the security risks around data has played a key role in this. “That became the more interesting question. As opposed to saying ‘Let’s talk about why you use this’, I’d say ‘Let’s talk about why you don’t’. That’s probably more helpful when we think about how we’re going to design future mobile payment systems.”

The smartphone threatIn the short term at least, Guzman believes the current system of mobile payments in Japan is under threat from the increasing global popularity of smartphones. “These osaifu-keitai phones are also called Galapagos phones because Japan is known [to release] advanced new technologies that haven’t really been able to make their way outside the country.”

“[These phones] have advanced functions like high-def cameras and Internet access”, he continues, “but they’re not the touchscreen smartphones we’ve come to know today - the iphone, the Android phones - which are becoming much more popular in Japan. people are giving up the option to pay with their phone to switch to a smartphone.”

Retail tacticsso in that context, how are consumers in Japan incentivised to spend their money? Importantly, incentives are not limited to purely financial rewards – the design of the interaction is also key, with payments triggering an array of lights and sounds which all provide added sensory confirmation of purchase. “Even little things like that contribute to the greater experience of getting something for doing something that you would have to do anyway”, Guzman adds.

Alongside this, there is an abundance of loyalty points systems. However, as highlighted by Guzman, these have their own intriguing dimension. “The points systems are extremely popular in Japan. But most people actually don’t redeem them, which is something else that’s interesting. It’s just the feeling of knowing that you’ve got something for nothing, knowing that you have these loyalty points to use whenever you like, that is appealing.”

ChallengesDespite all these advancements, retail brands are still experimenting with implementation, and fragmentation is a big challenge facing all parties. “Mobile payments are restricted to smaller types of purchases, mostly for buying train tickets, a bottle of water, or things of that nature. We haven’t really seen big retail adopt that yet”

“instead of having loyalty cards

from 20 stores, you manage

them digitally. it becomes more of a free marketplace Where everyone can use the same

system”




By Oliver Robinson

I’m a relative newcomer to the ideas behind disruptive innovation (when Clayton Christensen first published The Innovator’s Dilemma, which provides an evidence-based framework for how new entrants to a market can displace the incumbents by introducing products and services that compete asymmetrically, I was still at school). When I did, eventually, come across Christensen’s work, I could probably have skipped over the majority of the evidence part; as a market researcher in the tech sector, I only had to look around at the changes taking place in the computing and telecoms markets.

“If I’d asked my customers what they wanted, they’d have said a faster horse” Henry FordAs a framework for understanding how markets evolve, disruption is a seductive idea. Just looking at the theme for this issue of TechTalk (retail), it is possible to quickly reel off a list of innovations that either are, or could potentially, disrupt the retail space in the coming years. As a starting point, how about contactless payments, 3D printing, or the continuing growth of mobile and e-commerce, and resultant changes in the nature of bricks and mortar retail stores?

However, identification is only halfway to application. With my market researcher hat on, I was left with more questions than answers; in particular, when reading around the topic I kept coming across the quotation above. The truth behind Ford’s sentiment, so the argument went, was that consumer research has little role to play in innovation.

so how, if at all, should disruptive innovation harness consumer insight?

Ask a silly question, get a silly answerRegardless of whether their input is directly sought, consumers sit at the heart of the product development process. Ultimately, their needs can only be met in the finished product if they are correctly identified and understood from the outset. But what’s the best way of understanding those needs?

Taking a step back from disruptive innovation, the majority of products and services are developed as small variations or enhancements to existing products. In the best part of these cases, consumers understand the original product, appreciate how it fits into their lives, and are therefore able to provide often specific input into

disruption, and What consumer research can learn from henry ford




The speed of the horse doesn’t matter if it’s heading in the wrong directionUltimately, disruptive innovation, as with sustaining innovation, is reliant on consumers. Their experiences and perceptions underpin what the product or service is setting out to achieve, and a development process that does not involve them from the outset risks misinterpreting those same needs and frustrations that it aims to meet and solve.

By the same token, in the realm of disruptive technologies, consumer input needs to be carefully managed. They cannot guide innovations they are unable to conceive, and as a result, their feedback will often be framed in the context of the same marketplace that brands are trying to disrupt. Understanding what consumers want to do is more important than how they envision doing it.

While the importance of observation has traditionally enabled new entrants with limited resources, the businesses most vulnerable to disruption – established brands – typically already have a wealth of consumer data that can be mined for these insights. Leveraging them effectively can ensure that businesses are strategically aligned with potential disruptions, preventing the asymmetric competition that empowers new entrants.

Henry Ford’s quotation should not be taken as a dismissal of consumer perspectives, but as a reminder not to take them at face value. If he had asked one of his customers what they wanted, they might have said a faster horse, but if he had asked enough of them the right questions, he would have ended up with the list of problems that his Model T went on to solve, (and maybe even the smell!).

Much of this observation can take place ‘live’, gathering anecdotal evidence from the people around us as we go through daily life. What are they trying to achieve? What problems are they encountering while doing so? The results can provide a more accurate picture of how people interact with products and services than recalled behaviour. While the speed of the horse may be what springs to mind for a consumer who is asked what would improve their experience, observation might suggest reliability and maintenance (not to mention smell…) are more pertinent problems in day-to-day usage.

Good market research (which can, of course, include a range of observational techniques) adds depth and clarity to the more subjective, anecdotal evidence we observe as part of daily life, but the nature of disruptive innovation can make it hard to know what to look for. It is here where the dominant market players hold the strongest, but most rarely-played, cards.

Typically, established businesses have access to numerous consumer insights, collected from countless research projects. Many of these projects were most likely driven by specific business questions relating to sustaining innovations (those minor improvements to existing products and services), but taken together, and mined for further insight into unmet consumer needs, they constitute a richer web of consumer experiences than anyone outside the market has access to. When placed in the context of a needs-based framework, such as Techneeds, these experiences become building blocks for disruptive innovation.

Want more information on disruptive innovation?-> Oliver Robinson [email protected]

what would improve it. Typically, this is in the form of additional features or functionality, and market research has a widely acknowledged role to play here.

However, input isn’t available for disruptive innovations. By definition, products and services with disruptive potential exist outside established markets, meaning consumers can neither visualise their experience with the product nor how it would fit into their lives. They might want a car, but until they know what one is they can only describe a faster horse.

should we therefore exclude consumers from the disruptive product development process altogether? not necessarily, but it does necessitate a more considered approach to framing their input. Rather than focusing on features and functionality, conversations with consumers should be orientated towards the underlying needs they want to fulfil, and, in particular, the problems they encounter with existing solutions. The disruptive solution may be inconceivable to them, but a nuanced understanding of their current experiences and frustrations offers the first signpost for getting there.

A needs model such as Techneeds, which we use at GfK, is especially useful for brands to help navigate this space. Based on significant research input, the Techneeds model maps consumer needs

to key dimensions that remain consistent across different contexts and tech categories.

Beneath the cornerstones of the model sit a sub-set of dimensions, so in security, for example, we will have a range of dimensions including safety, privacy, reassurance etc. Our work has shown these to be consistent drivers of successful product innovation.

This allows us to:

•Work with brands to ensure that their product road map is meeting genuine needs in the market.•Build an international framework for

innovation, critical in the technology sector.•Visually map the opportunity for

development – what needs are being catered, where is the white space – so we can rapidly start identifying new opportunities.

Actions speak louder than wordsOf course, asking consumers about their needs and problems isn’t the only research approach. Indeed, disruptive innovations have often emerged from new entrants to the market. Typically limited by much smaller research budgets, their innovations tend to be derived from observation rather than direct consumer interaction.

Figure one: TechNeeds model as used in GfK

Copyright GfK | TechTalk Edition One 2012


Copyright GfK | TechTalk Edition One 2012

If you would like to speak to us about anything featured in TechTalk, simply get in touch by contacting our editorial team [email protected].

Alternatively, you can keep up to date with TechTalk by visiting our blog at www.gfktechtalk.com

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