The New ShopperTodays Purchase Path and the Media that Influences It

THE NEW SHOPPER JOURNEYS:How Touchpoints Lead to PurchaseThis research collaboration between Carat and Microsoft sought to define the structure of consumers paths to purchase and how different touchpoints play a role in shaping decisions as to where and what to purchase.Shoppers purchase paths have changed, thanks to the recession and the influence of digital. We set out to understand todays purchase path and the media that influences it. We surveyed shoppers on their most recent shopping purchases across five key retail categories: apparel, quick service restaurants, groceries, home electronics, and home improvement. This study is unique in the comprehensiveness of its data which address these business questions: What shapes peoples buying decisions? How are shoppers influenced by both offline, online, and in-store media across key verticals? What is the relative influence of Owned, Bought, and Earned media? What innovative forms of advertising might shoppers be open to? The study was done in two phases by UK-based Essential Research. A qualitative study composed of interviews and shopper observations was fielded in late fall 2009. Its insights led to an online survey in March 2010 which queried shoppers about their last purchase occasion in each of the retail sectors covered. This quantitative phase was done just as economic recovery began to be felt. Thus the study uncovers new behaviors shoppers have adopted in reaction to tighter budgets. Further analyses reveal that many of these new behaviors will continue as shoppers have discovered the ease in which essential information can be accessed through the Internet. Here is a summary of these enduring value-seeking behaviors we found. HierarcHy of SHopperS New BeHaviorSHierarchy of tactics for coping with the recession Seeking Better Value Discount coupons used more often Price more important than brand/quality More time looking for special promotions Visiting a number of retailers to find the best deal Reading online forums/consumer Web sites Discount stores More online shopping/auctions Mobile Fewer visits to retailers Reduced Volume Peer reviews 1:1 and through social media Word of Mouth

More Advance Purchase Research

Using Different Channels

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WHaT SHaPES PEOPLES bUYiNg dEciSiONSThe process that shoppers go through has forever changed, becoming more complex and multifaceted. No longer do shoppers traverse a linear path; rather we see a highly dynamic journey to purchase, one characterized by reiterations in product considerations, i.e., a tumbler effect rather than a funnel. We identified five general drivers shaping shopper journeys, or Five Cs: the retail category, the culture of the market, the contact points or channels, the context or need states for buying, and the consumers attitude within the category.Contacts Consumer

dRivERS Of PURcHaSEContacts

Contacts

Category

Context

Culture Contacts

Category Culture Contacts Context Consumer

Product/Brand Country Touchpoints Need states Attitudes

The study revealed three basic patterns in shoppers paths to purchase across all the retail sectors we examined: Habitual: The item is one the shopper normally buys Impulse: Purchase was unplanned or did not have enough time to research or comparsion shop before purchasing Research: The shopper did some research prior to buying

The distribution of these types of journeys varies by retail sector. Not surprisingly, the more involved categories like home electronics and apparel tend to have more research journeys while lower involvement sectors like groceries and quick service restaurants (QSR) invite more habitual journeys. THe DiSTriBuTioN of SHopper JourNey Type By reTail SecTor66% 22% 12% Grocery 60% 34% 6% QSR 17% 20% 63% Home Electronics 43% 40% 17% Apparel 37% 28% 35% Home Improvement Habitual Impulse Research

MoST coMMoN NeeD STaTe By caTeGoryThe specific context or need state can also influence the journey type as the following table shows: Category Groceries Home Electronics Clothes, Shoes, and Accessories Most Common Trigger(% of all journeys) (Habitual/Impulse/Research)

Split by Journey Type

Replacement: 43% Treat: 39% Treat: 36%

85% / 9% / 6% 15% / 17% / 68% 33% / 57% / 10%

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If we understand the interplay across these drivers we can determine the shopper journey type which in turn can guide more effective creative and media strategies. Indeed, when we break up a journey into stages, we can get a broad view of how different touchpoints influence shopper decisions.

THe New STrucTure of SHoppiNG JourNeySWord-of-Mouth Feedback Loop

Need State

Research

Purchase

Post Purchase

In-store Research Pre-tailing Retailing Post-tailing

What is noteworthy is the significance of the post-purchase stage which can influence future shopping especially in highly-researched categories like home electronics. It is also at this stage where digital media are key enablers. So the new schematic in shopper journeys is one where post-purchase activity, typically word of mouth, loops back to influence succeeding purchases.

WiSdOm fROm PSYcHOgRaPHicSFor new shopper journeys, one of the most useful approaches to determining the proper media mix is through segmentation analyses which layer attitudinal variables over behavior. To understand how attitudes may further impact touchpoints influence, we segmented shoppers according to their relationship with technology: 1) Cutting Edge, 2) Early Adopter, 3) Judicious Timer, and 4) Laggard.

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We also looked at the touchpoints that influence these segments. From this analysis, we found that Cutting Edge shoppers were receptive to a wider array of channels while Early Adopters were more likely to be influenced by word of mouth particularly from experts as the following table reports. The large differences in media consumption by segment have clear implications for media strategists.

ToucHpoiNTS raNkeD By iNflueNce aT TriGGer STaGe (iNDeX)uS HoMe elecTroNicS SHopperS Cutting Edge Early Adopter 19% Advertising Word of mouth Something seen while shopping Newsletter/E-mail TV ads Internet ads Newspaper ads Expert reviews online Seeing someone with item Past experience Promotion seen while shopping Something read/seen online 145 100 151 162 182 150 144 108 157 129 165 125 23% 119 132 99 108 111 131 130 149 156 122 94 105

100=All US Home Electronic Shoppers

Judicious Timer 32% 83 100 90 97 65 70 96 114 60 78 96 113

Laggard 25% 68 71 75 49 72 70 43 30 55 85 61 60

Q: What influenced you to start thinking about your purchase?

When we combine behavioral and attitudinal variables, we get a more comprehensive view of the entire purchase path. The following model depicts how consumers and contacts lead to the final purchase decision.

THe New DyNaMic fraMework for uNDerSTaNDiNG THe purcHaSe paTHConsumer Behavioral Differentiation Thinking about the last time you bought . . . which statement best describes your actions? Three types of journeys: Habit Impulse Research Contacts Attitudinal Fine-Tuning by Vertical Multivariate segmentation based upon category-specific psychographics For Example: Home Electronics: Expert Novice Trend-Chaser Apparel: Fashionista Clueless Quick and Easy

Extensive, granular touchpoints including online, social media, word of mouth, situational settings, traditional media and advertising Consideration Touchpoints Initial Media Impetus for Purchase Process Research Source Mobilization For Information and Inspiration Factors on Final Decision Price, Location, Availability, etc. Purchase Venue Various Retail Outlets Online and Offline Post-Purchase Behavior Feedback and Word of Mouth through Social Media and Interpersonal Channels

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THE ROLES Of OffLiNE aNd ONLiNE TOUcHPOiNTSNow that we have a framework that helps us understand how purchase decisions are made, we can begin to map the appropriate touchpoints along the shoppers journey. The type of journey will indicate which touchpoints hold sway at specific points along the path. We found that offline and online media serve truly differentiated roles. This underscores the need for both in order to drive purchase. Here is an illustration of how channels serve different points along the three types of journeys in the purchase of computers/laptops:

iNflueNTial TriGGerS for HoMe elecTroNicS HaBiTualPrint media are most influential in prepurchase while mobile phones do well at the point of purchase. Habitual purchases are fueled by loyalty. So it makes sense that such journeys spur more active recommendation and online postings post-purchase.

NeeD STaTeadvertising: Online: TV: Newspaper: Magazine: Newsletter: in-store: Flyers: News story on TV: 17% 17% 24% 17% 19% 13% 11%

purcHaSe

poST-purcHaSerecommended: Brand: Retailer:

Used mobile phone: 54% Compared prices: 30% Searched for info: 20%

48% 30%

word of mouth online: Blogged online: 11% Posted on social network: 11% Posted on a review: 11%

word of mouth: Expert reviews online: 7% From friends: 15%

iNflueNTial TriGGerS for HoMe elecTroNicS reSearcHThe Internet and word of mouth dominate across all phases of the journey. Moreover nearly 2/3 of research journeys depend on the Internet for information. Interestingly, having done a lot of research prior to visiting a store, this journey type is least likely to be influenced by in-store channels.

NeeD STaTeadvertising: Online: TV: Newspaper: Coupons: 16% 15% 13% 11%

reSearcHUsed Internet: advertising: Online: TV: Newspaper: 64% 10% 14% 15%

purcHaSe

poST-purcHaSe

Used mobile phone: 26% Compared prices: 18%

recommended: Brand: 36% Retailer: 19% word of mouth online: Posted on social network: 8%

word of mouth: Expert reviews online: 12% From friends: 28%

In-store promo: 15% word of mouth: To friends: 35%

iNflueNTial TriGGerS for HoMe elecTroNicS iMpulSeAdvertising is least likely to trigger intentions to shop; rather it is coupons or a stores sales personnel that can move shoppers to purchase.

NeeD STaTeadvertising: Online: TV: Newspaper: Coupons: Talked to sales assistant: word of mouth: From friends: 6% 12% 12% 18% 18% 20%

purcHaSe

poST-purcHaSerecommended: Brand: 37% Retailer: 25% word of mouth online: Blogged online: 8% Posted on social network: 0% Posted on a review: 8%

Used mobile phone: 41% Compared prices: 18% Searched for info: 14%

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TOUcHPOiNTS fOR LOW vERSUS HigH iNTEREST caTEgORiESIn a highly engaging category like home electronics where research accounts for 68% of the journeys, the usefulness of online media is readily apparent. It is harder to understand onlines role in low involvement categories like groceries unless we have the data to explain it. Using our purchase path framework we can identify specific channels roles at each point of the path. Here is an example from the US. As this analysis shows we can account for the relative influence of various media channels, offline, online and in-store.

uS woMeN Grocery SHopperSpre-purchasefactors decided before research or shopping Which items to buy 63% How much to spend 39% Location of the store 28% Payment methods 23% Number of items to buy 22% Need state touchpoints focused on new product trial Factors that influenced you to purchase items that are new or different from what you normally buy Speaking to friends/family 46% Coupons 45% Television ads 44% Promotion seen while shopping 36% Samples/product demo 34% Sign/display, etc. seen while shopping 31% In-store coupons 27%

Shopping patterns by Shopper TypesHabitual buyers (72% of total): What inspired you to try different products or brands? Coupons 47% Speaking to friends/family 41% Promotion seen while shopping 40% TV ads 37% In-store coupons 35% Samples/product demo 28% impulse buyers (17% of total): What made you make a purchase? TV ads Promotion seen while shopping Speaking to friends/family Coupons In-store coupons Sign/display seen while shopping In-store flyers researchers (11% of total): Sources mobilized for research Newsletter/leaflets/ coupons Ads/sponsorship Discount coupon Internet Word of mouth Newspaper Ads

purchaseFactors that influenced choice of store

after-purchaseafter-purchase Behaviors What did you do after purchase? Discussed the purchase with friends/family 19% Recommended the brand/product to friends/family Recommended the retailer to friends/family

Proximity Price Quality of products Familiarity with the retailer

66% 63% 44% 40%

17%

Past positive experience 34% Deals and promotions Variety of products available 35% 32%

8%

40% 35% 33% 31% 20% 18% 16%

60% 49% 46% 31% 31% 5%

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Another interesting finding was online channels ability to influence the purchase of new brands.

iNflueNce of oNliNe cHaNNelS iN New Grocery proDucT iNTroDucTioNS45% 31% 30%

14% 7% 6%

a

B

c

Q: Thinking about the last time you bought groceries and personal care products, did you buy anything that was new or different from the items you normally buy? Bought new items Didnt buy any new items A Used cell phone in-store B Used the Internet during research C Exposed to online advertising during research

iNfLUENcE Of OWNEd, bOUgHT, aNd EaRNEd mEdia cOmPaREdHoMe elecTroNicS: reSearcH JourNeyS% of those who changed their mind about the brand after research owNeD BouGHT earNeD 56% 62% 47%

A frequent conundrum for marketers is determining the right mix of channel types. To simplify the analysis we grouped all the channels by type to see how and where they play within a journey as the following table illustrates. For example, among research journeys in the home electronics category we found that Bought media actually have a slightly heavier influence than Owned or Earned media when it comes to choosing brands or stores (contrary to conventional wisdom, this study documents the value of Bought media advertising beyond the usual considerations of audience reach). The following table compares these three types of touchpoints in their ability to shift shopper choices.

% of those who changed their mind about the retailer after research owNeD BouGHT earNeD 64% 60% 47%

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SOciaL mEdia cHaNNELS cOmPaREdSocial networks attract considerable attention among marketers because of the large audiences they draw and their perceived lower cost. Our study found that when it comes to influence it is actually personal 1:1 conversations via phones, e-mail, and instant messaging which are more heavily relied upon in purchase journeys than comments or reviews in social networks.

Below lists the top three social media forms for each retail category. raNkiNG of Social MeDia TypeS By uSaGe wiTHiN reSearcH JourNeySGROCERIES Home Phone (47%) Social Net (39%) Mobile (31%) QSR Mobile (67%) E-mail (58%) Social Net (43%) Apparel Mobile (42%) Home Phone (38%) E-mail (32%) Home Electronics E-mail (42%) Mobile (39%) Home Phone (31%) Home Improvement Mobile (48%) Home (38%) E-mail (30%)

% of all JourNeyS iNflueNceD By aN oNliNe BloG poST, foruM coMMeNT, or SoMeTHiNG reaD oN a Social NeTwork5% 4% 3% 2% 1% 0% Grocery (5%) Fast Food (2%) Home Electronics (3%) Clothing, Shoes, and Accessories (2%) Home Improvement (1%)

1 2 3 1 2 3 1 2 3 1 2 3 1 2 3

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REcEPTiviTY TO EmERgiNg fORmS Of cHaNNEL ENgagEmENTWe asked what newer forms of brand/store engagements shoppers would be most open to. We posed different possibilities to respondents and we found a greater acceptance of e-commerce followed by payments via mobile phones. % wHo woulD Be MoST williNG To Do iN THe fuTure(Top BoX MeNTioNS) 80% 60% 40% 20% 0%

Shoppers are most interested in online purchasing. The next ranked applications in desirability involve mobile communications suggesting new opportunities to impact shopper decisions closer to the point of purchase.

Make purchases online Send pictures/videos of a potential purchase to friends or family Use a mobile phone to research information while at a store

Use a mobile phone to interact with a billboards/displays Ask for views from people you dont personally know online Make purchases from a mobile phone I would be interested in making payments using mobile phone

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fiNaL WORdThe old Purchase Path is gone. Study results have clearly established the existence of a new, more dynamic Purchase Path that is driven by the power of differentiated touchpoints along a shoppers journey. Further, the type of journey depends on the segment that a consumer is in, so media must be planned accordingly. Only by fully taking into account the dynamics of the new Path, can todays marketers attain the best ROI for their offline and digital investments. The New Shopper Journeys contains an exhaustive database of media behavior and the purchasing that results from it. As such, researchers at Microsoft Advertising, Carat, and their clients can mine these data to determine effective channel mixes for offline, online, and in-store media on both global and local levels.

offliNe

oNliNe

iN-STore MeDia

For more information about this study, please contact: Beth Uyenco, Global Research Director, Microsoft Advertising, bethu@microsoft.com Mike Hess, EVP for Insights & Analytics, Carat US, Mike.Hess@carat.com

DeTailS oN MeTHoDoloGy Qualitative Study: Fifteen in-depth shopper interviews and shopping observations were conducted in the US, United Kingdom, Mexico, France, Japan, and China covering the five retail sectors. In addition, respondents completed shopping diaries. Quantitative Study: Online surveys among those aged 16 or older were completed in 17 countries. Sample size in the USA was 2,680.

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