New Shopper Journeys

New Shopper Journeys The Important New Role of Digital Media

This 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. d

NEW SHOPPER JOURNEYS: How Touchpoints Lead to Purchase This 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. 19,000 shoppers in 17 countries were queried on their most recent shopping occasions in four key retail categories: apparel, quick service restaurants, groceries and home electronics. A fifth category, Home Improvement Centers, was done in the US. This study is unique in the comprehensiveness of its data which address these business questions: What shapes people s 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 five countries in late Fall 2009. Its insights led to a 17-country 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 in some of countries we surveyed. 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 Behaviors Hierarchy of tactics for coping with the recession Seeking Better Value More Advance Purchase Research Using Different Channels Reduced Volume Word-of-Mouth» 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 websites» Discount stores» More online shopping» More online auctions» Mobile» Fewer visits to retailers» Peer reviews - 1:1 and through social media 1

What shapes people s buying decisions The 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 C s: the retail category, the culture of the market, the contact points or channels, the context or need states for buying, and the consumer s attitude within the category. Contacts Category Context Culture drivers of purchase Contacts Contacts Consumer» Category» Culture» Contacts» Context» Consumer» Product/Brand» Country/Region» Touchpoints» Need states» Attitudes Contacts The study revealed three basic patterns in shoppers paths to purchase across all the retail sectors and countries we examined: Impulse: Purchase was unplanned or the shopper did not have enough time to research product or shop around before purchasing Habitual: The item is one the shopper normally buys 2 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 Sector 14% 52% 66% Habitual 39% 18% Impulse 40% 22% 42% 12% 6% QSR Grocery 68% Research 21% Home Electronics Apparel But even within a category, the specific context or need state can also influence the journey type as the following table shows: Most Common Category % of all Shopping Journeys Need State Habitual Impulse Research (% of all journeys) Groceries Ran out (48%) 76% 14% 10% Home Electronics Replacement (27%) 13% 16% 70% Apparel Treat (38%) 37% 44% 19% And the distribution can also differ across countries as the data on QSR trips reveal below: QSR JOURNEYS BY CONTEXT ITALY FRANCE TREAT HUNGER Habitual 54% 60% 37% Impulse 40% Research 6% 3% Habitual 48% 46% Impulse 45% 47% Research 7% 7% 3

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 Journeys WOM Feedback Loop Need State Research Purchase Post Purchase In-store Research Pre-tailing What is noteworthy is the significance of the postpurchase stage which can influence future shopping especially in highly-researched categories like home electronics. It is also at this stage where digital media are 4 Retailing Post-tailing key enablers. So the new schematic in shopper journeys is one where post-purchase activity, typically word-ofmouth, loops back to influence succeeding purchases.

Wisdom from Psychographics For 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) After-Jones. We then looked at these segments shopping journeys by type: Home Electronics Shopper Journeys by Tech Psychographic Cutting Edge Early Adopter Judicious Timer After-Jones All Category Shoppers 19% 23% 32% 25% Impulse 28% 16% 18% 22% Research 49% 64% 69% 63% Q: Thinking about the last time you bought home electronics, which statements best describe your actions? 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 U.S. Home Electronics Shoppers 100=All US Home Electronic Shoppers Cutting Edge Early Adopter Judicious Timer After-Jones Advertising 145 119 83 68 Word of Mouth 100 132 100 71 Something seen while shopping 151 99 90 75 Newsletter/Email 162 108 97 49 TV ads 182 111 65 72 Internet ads 150 131 70 70 Newspaper ads 144 130 96 43 Expert reviews online 108 149 114 30 Seeing someone w/item 157 156 60 55 Past experience 129 122 78 85 Promotion seen while shopping 165 94 96 61 Something read/seen online 125 105 113 60 Q: What influenced you to start thinking about your purchase? 5

When we combine behavioral and attitudinal variables in segmentation analyses we get a more comprehensive and granular view of the entire purchase path. The following model depicts in greater detail how the drivers (the Five C s) lead to the final purchase decision. It better accounts for all influencing factors within the new shopper paths than do classic models like AIDA (Attention >Interest >Desire >Action >Satisfaction). The New Dynamic Framework for understanding the purchase path Consumer Behavioral Differentiation Thinking about the last time you bought... which statement best describes your actions? Three types of journeys: Habit Impulse Research Attitudinal Fine-Tuning by Vertical Multivariate segmentation based upon category-specific psychographics Example: Home Electronics: Expert Novice Trend-Chaser Example: Apparel: Fashionista Clueless Quick & Easy Contacts Extensive, granular touchpoints including online, social media, WOM, situational settings, traditional media & advertising Consideration Touchpoints Initial Media Impetus for Purchase Process Purchase Venue Various Retail Outlets Online & Offline Research Source Mobilization For Information & Inspiration Factors on Final Decision Price, Location, Availability, etc. Post-Purchase Behavior Feedback & WOM through Social Media & Interpersonal Channels Context Need States Category Retail Sectors Culture Regions/Markets The roles of offline and online touchpoints Now that we have a framework that helps us understand how purchase decisions are made, we can begin to map the appropriate touchpoints along the shopper s journey. The type of journey will indicate which ones 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: 6

HOME ELECTRONICS Habitual Journey in the US Print media are most influential in pre-purchase 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 state purchase post-purchase Advertising: Online: 17% TV: 17% Newspaper: 24% Magazine: 17% Newsletter: 19% In-store: Flyers: 13% News story on TV: 11% WoM: Expert reviews online: 7% From friends: 15% Used mobile phone: 54% Compared prices: 30% Searched for info: 20% Recommended: Brand: 48% Retailer: 30% WoM online: Blogged online: 11% Posted on Social Network: 11% Posted on a review: 11% HOME ELECTRONICS impulse journey in the us Advertising is least likely to trigger intentions to shop; rather it is coupons or a store s sales personnel that can move shoppers to purchase. Need state purchase post-purchase Advertising: Online: 6% TV: 12% Newspaper: 12% Coupons: 18% Talked to Sales Assistant: 18% WoM: From friends: 20% Used mobile phone: 41% Compared prices: 18% Searched for info: 14% Recommended: Brand: 37% Retailer: 25% WoM online: Blogged online: 8% Posted on Social Network: 0% Posted on a review: 8% HOME ELECTRONICS Research Journey in the US The 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 state research purchase post-purchase Advertising: Online: 16% TV: 15% Newspaper: 13% Coupons: 11% WoM: Expert reviews online: 12% From friends: 28% Used Internet 64% Advertising: Online: 10% TV: 14% Newspaper: 15% In-store promo: 15% WoM: To friends: 35% Used mobile phone: 26% Compared prices: 18% Recommended: Brand: 36% Retailer: 19% WoM online: Posted on Social Network: 8% 7

Touchpoints for low versus high interest categories In 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 online s 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 for a typical FMCG brand: U.S. Women Grocery Shoppers Pre-purchase Shopping Patterns by Shopper Types Purchase After-Purchase Factors 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 arom what you normally buy Habitual 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 to make a purchase? Factors that influenced choice of store Proximity 66% Price 63% Quality of Products 44% Familiarity with the retailer 40% Past positive experience 34% Deals & Promotions 35% Variety of Products Available 32% After-purchase Behaviors What did you do after purchase? Discussed the purchase with friends/family 19% Recommended the brand/product to friends/family 17% Recommended the retailer to friends/family 8% 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% TV ads 40% Promotion seen while shopping 35% Speaking to friends/family 33% Coupons 31% In-store coupons 20% Sign/display seen while shopping 18% In-store flyers 16% Researchers (11% of total): Sources mobilized for research Newsletter/leaflets/ coupons 60% Ads/sponsorship 49% Discount coupon 46% Internet 31% WOM 31% Newspaper Ads 5% As this analysis shows we can account for the relative influence of various media channels, offline, online and in-store. With similar information for multiple countries, we can define how touchpoints influence vary thus enabling global strategies to be more easily localized. The following chart shows how the same type of journey can yield different media influences by region and retail category. 8

reach of major touchpoints by sector and region Base: Research Journeys Reach within last Purchase Occasion Home Electronics Apparel Fast Food Groceries USA The Internet 65% The Internet 50% The Internet 43% Discount coupons 51% AMERICAS The Internet 58% Advice from friends 37% Advice from friends 45% TV ads 38% ASIA The Internet 61% The Internet 49% TV ads 52% TV ads 57% EUROPE The Internet 64% Internet 43% Advice from friends 37% Internet 37% Home electronics Online Researchers. Unduplicated reach of the top channel. Another interesting finding was online channels ability to influence the purchase of new brands. Indeed, one of the most fascinating discoveries is the influence of mobile touchpoints at the moment of truth particularly in Asia. Influence of Online Channels in New Grocery Product Introductions USA AMERICAS ASIA EUROPE 54% 52% 31% 45% 30% 30% 30% 24% 21% 26% 34% 40% 24% 26% 38% 35% 7% 14% 6% 14% 13% 10% 11% 2% A B C A B C A B C A B C Bought new items Didn t buy any new items A B C Used cell phone in-store Used the Internet during research Exposed to online advertising during research 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? 9

Influence of owned, bought, and earned media compared 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. Classification of Various Online Media Channels Owned Bought Earned Retailer Websites Search engines Reading customer reviews on website Brand websites Magazine websites Experts reviews or comments E-mail newsletter from a retailer or brand Online shopping websites (for example Amazon) Reviews from trusted blogger Coupons I received online Auctions websites (for example ebay) Posting messages on online blogs or forum websites Video demonstration of how to use the product Price comparison website Reading messages on online blogs or forum websites Online circulars (these tell you the items on promotion this week) Portal websites such as MSN, Yahoo, AOL Seeking opinions of someone I don t know using a social networking site Sponsor links on a website 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. 10 The following table compares these three types of touchpoints in their ability to shift shopper choices across the four regions. It shows that Bought media channels were best at influencing choices on brands and retailers. The one exception is in the US where it was the retailer-owned media which can shift store choice.

Home Electronics: Research Journeys USA Americas Asia Europe % of those who changed their mind about the brand after research owned 56% 54% 48% 54% bought 62% 58% 61% 66% earned 47% 36% 51% 52% % of those who changed their mind about the retailer after research owned 64% 52% 51% 54% bought 60% 55% 61% 59% earned 47% 33% 51% 41% Social Media Channels Compared Social 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, email 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 by region. Only in the US do social networks rank among top 3 and only for groceries and QSR categories. Ranking of Social Media Types by Usage within Research Journeys GROCERIES Europe Asia Americas USA 1 Mobile (59%) Mobile (76%) Home Phone (43%) Home Phone (47%) 2 Home Phone (59%) IM (56%) Email (41%) Social Net (39%) 3 Email (54%) Email (52%) Mobile (39%) Mobile (31%) QSR Europe Asia Americas USA 1 Mobile (44%) Mobile (74%) Mobile (47%) Mobile (67%) 2 Email (42%) IM (55%) Home Phone (44%) Emails (58%) 3 IM (36%) Email (49%) Email (41%) Social Net (43%) Apparel Europe Asia Americas USA 1 Mobile (54%) Mobile (71%) Home Phone (41%) Mobile (42%) 2 Home Phone (48%) IM (53%) Email (40%) Home Phone (38%) 3 Email (46%) Home Phone (47%) IM (35%) Email (32%) Home Electronics Europe Asia Americas USA 1 Mobile (40%) Mobile (71%) Home Phone (42%) Email (42%) 2 Home Phone (40%) IM (53%) Email (41%) Mobile (39%) 3 Email (39%) Home Phone (47%) IM (31%) Home Phone (31%) 11

Social networks get the greatest usage in Asia where at the start of the journey, content read in a social network site may trigger intent to purchase a product or service. The incidence of this is quite low (4% or less) in other regions. % of all Journeys influenced by an Online blog post, forum comment or something read on a social network 20% 16% 12% 8% Grocery Fast Food Home Electronics Clothing, Shoes, Accesories 4% 0% ASIA USA AMERICAS EUROPE Receptivity to emerging forms of channel engagement We 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. This was consistent across all regions. % who would be most willing to do in the future (Top Box Mentions) 80% 60% 40% 20% 0% USA Americas Asia EUROPE 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 whilst at a store Use a mobile phone to interact with a billboards/displays Ask for views from people you don t personally know online Make purchases from a mobile phone I would be interested in making payments using mobile phone 12

final word The old Purchase Path based on an AIDA funnel 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 shopper s 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 today s marketers attain the best ROI for their offline and digital investments. New Shopper Journeys contains an exhaustive database of media behavior and the purchasing that results from it. While there are many patterns and similarities across the globe in our findings, cultural differences also appear. 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. 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 Caroline Vogt, Head of Insight, Aegis Global, caroline.vogt@aemedia.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 sizes are as follows: USA 2,680 Taiwan 1,073 Italy 1,118 Canada 1,089 China 1,546 Germany 1,012 Brazil 1,023 Japan 1,015 Spain 1,031 Mexico 1,006 India 1,065 United Kingdom 1,141 France 1,063 Argentina* 581 Hong Kong 1,032 Colombia* 493 Singapore 1,034 * Combined as one market The original intent was to include a South American composite of markets: Argentina, Chile and Colombia. Chile was dropped following a devastating earthquake that paralyzed communications making contact with prospective respondents extremely difficult. 13