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How Much Has Digital Changed Marketing And Shopping Behavior?

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It’s been nearly two years since Jim Lecinski at Google published ZMOT – Winning the Zero Moment of Truth. This week I met with friends at Google to talk about their new research into the way shoppers are using the internet here in Asia. Our conversation turned to how much has actually changed since Jim coined the term ZMOT and what that means for the modern marketer.

ZMOT – a new mental model and how it’s changed shopping behavior

The big insight in ZMOT is that the internet has dramatically changed the way we plan our purchases. In the past shopping happened almost exclusively in stores; today, for even the simplest purchases, many of us spend time learning more about the products we are considering buying, online. This is the new mental model that ZMOT introduced to the marketing community.

Shopping Behavior - ZMOTequation

As our ability to access larger volumes of information about the products and services we intend to buy has expanded, so has the influence of this information on our purchase behavior.

This creates the opportunity for deeper, more directed and ultimately more effective interactions between brands and their targets. If the way we choose a product has changed, the way we market that product must also change.

Everyone is shopping, online

Whilst not everyone is buying online, when someone is searching for information about a product’s ingredients; seeking a product review or checking out deals and offers, she is actively engaged in the process of shopping. All of these activities help shoppers to interpret what they need to buy more clearly, to establish how their needs as buyers might be best met and to define where they should go to make a purchase. These decisions dramatically shape a family’s consumption behavior.

What this means for marketers is that the internet creates a myriad new ways of influencing purchasing behavior, all of which can support the growth of their brand’s consumption. To make the most of these opportunities though, the way in which most marketers approach digital needs to change.

Help people buy, online

Given all the hype and hyperbole surrounding digital I can’t think of a brand that hasn’t done some work to build a presence online. What’s interesting is how much of this work has simply involved transferring consumer communication online. Don’t get me wrong, I’m not suggesting that consumer communication is unimportant – messages in media that create the desire to use a brand which fuels demand are essential. BUT, if people are using the internet to find information about which product to buy, cool messages that enhance brand awareness can only take them so far.

What people need when they are shopping is information that tells them why they should buy the brand and not just why they should ‘like’ the brand. This is where shopper behavior can be influenced. Many marketers are still leaving too much of this to chance, by failing to manage or respond effectively to product reviews or by allowing information about where best to buy a product to be driven by retailers.

Making the most of ZMOT

I believe there are three things that marketers should be prioritizing as they consider ramping up spending online:

  • Learn more – particularly about who is using digital resources to support their purchase decisions, how valuable they are to your brands and what is needed to capitalize this value.
  • Target more – develop more granular segmentation models so that you can target more specific niches of the shopping population and encourage purchase behaviors that are more likely to support your brand
  • Engage more – expand the focus of your approach to digital beyond education about the brand’s ideals to encompass specific messages that will help target shoppers to buy. This might include more active engagement in peer review environments but equally it might include driving shoppers towards specific retailers and increasingly creating the opportunity to buy immediately.

There’s a huge amount being written in this space currently so if you’d like to know more about this, I’d recommend you download the original ZMOT e-book from Google as a start point but also keep an eye out for the new Asian edition of this which should be available soon. You can also read more on the subject in The Shopper Marketing Revolution which I published with Mike Anthony recently.

Is Retail Dead?

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I was recently invited to speak to a group of entrepreneurs in Singapore, and searching for a topic that might be of more general interest, I decided to ask the question of whether retail is dead? I broke my presentation into three parts: the case against retail; the case for retail; and the implications of the new reality of retail – you can access the slides here.

Why traditional retail might be dead

Given the massive volume of words written weekly on the subject of digital, e-commerce and mobile, you could easily be forgiven for thinking that the blogosphere has decided that bricks and mortar retail is dead. Here in Asia there is loads of evidence suggesting we love online shopping.  Asians want to shop online – a recent survey by Nielsen suggested that intent to shop online in the next three months ran at over 30% for apparel and travel and more than 25% intended to buy phones, food and beauty products online in the near future. In China, T-Malls’ recent Singles Day promotion overwhelmed couriers all over the country as more than US$3 billion dollars of sales were recorded in a single day.

Given the massive volume of words written weekly on the subject of digital, e-commerce and mobile, you could easily be forgiven for thinking that the blogosphere has decided that bricks and mortar retail is dead. Here in Asia there is loads of evidence suggesting we love online shopping.  Asians want to shop online – a recent survey by Nielsen suggested that intent to shop online in the next three months ran at over 30% for apparel and travel and more than 25% intended to buy phones, food and beauty products online in the near future. In China, T-Malls’ recent Singles Day promotion overwhelmed couriers all over the country as more than US$3 billion dollars of sales were recorded in a single day.

Is Retail Dead

With 44% of the world’s internet-connected population, and with the world’s largest and fastest growing middle class population, there’s no doubt that more and more Asians will shop online in the coming years. This is reshaping the Asian retail landscape, especially in China where brands like T-Mall, Yihaodian and 360Buy are vacuuming up larger shares of the market (and complicating brands’ e-retail strategies!). At a more micro-level opening an online retail site today is practically free, so more and more sole traders are moving to supply products this way. There is no doubt that this will hurt regular retailers – the demise of many retailers in US and Europe has proven this to an extent.

So IS retail as we know it dead?

You had better hope not! Retail is probably the biggest business on the planet; consider the following:

  • There are probably well over 65 million shops in the world
  • It is estimated that retail sales account for nearly 20% of global GDP
  • The world’s biggest retailers account for fully 7% of the total retail sales and have more than doubled in size in the last decade
  • Retail is the world’s largest private sector employer – Wal-Mart alone is the world’s 3rd largest employer after the US department of defense and China’s PLA and more than 3 million Americans are employed in independent retail alone.

It’s a stretch therefore to right-off this industry as being dead; especially when much shopping is done in physical stores. Forrester (the research company) reckon that 90% of all retail sales in the US are in regular stores and a tiny proportion of the world’s grocery sales are made online. In actual fact we love shopping in stores; here in Asia the volume of traffic in malls, hypermarkets and traditional wet markets is consistently high. In Asia grocery shopping online is tiny: a recent survey published by Bergent suggests that just 1% of Korean and Singaporean housewives shop for groceries online and that none do in Japan, Hong Kong or India.

So no, retail is not dead. But, it has changed!

A different way to shop

The biggest impact of the internet revolution on retailing is not so much where we shop but how we shop. It used to be possible to clearly define the aspects of the marketing mix that influence us as consumers of a product and those that affect our behavior as shoppers. Traditionally the former happened outside the shopping environment. But today, the use of connected devices runs through almost every aspect of our lives. This exposes us to millions of targeted messages that form and influence what we want to concern and how we will buy almost concurrently. Effectively we are always shopping!

The likely reality is that multichannel retail will become much more normal – a true combination of clicks and bricks. Some savvy retailers have already adopted this model: Debenhams, the UK-based department store has been tremendously successful in blending  a compelling in-store offer with an online one, and online players like Ebay have begun to capitalize on the love of retail space by using pop-up stores.

A new marketing model

With so many changes afoot, manufacturers could be caught napping and that could have some very negative impacts. This requires a change in the way we think about marketing. Today, marketers who have a superior understanding of the segments of consumers and the shoppers they are chasing get ahead of their competition. So these marketers have moved away from a singular focus on the consumer and now consider a more complete view of the world.

We call this broader view ‘Total Marketing’. This model looks at the relationships between consumers, shoppers and retailers to define the best way of driving growth efficiently. Our new book The Shopper Marketing Revolution explains why this new model is so important, introduces the key concepts that underpin it and provides a field guide to individuals who want to apply it. You can buy the The Shopper Marketing Revolution at Amazon  now.

What Is Great Shopper Marketing?

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I love the way sites like Vimeo and YouTube give me access to shopper marketing cases from around the world. The thing is, how do you know the cases you come across are examples of ‘great shopper marketing’?

Let’s take two examples. The first is a case a friend shared with me from P&G in the UK a couple of weeks ago, titled “P&G Neat Cuts – Win 1 of 100 £100 haircuts – Shopper Marketing by Capture”. The offer is simple – buy any hair care product at a 33% price discount and claim the opportunity to win a free haircut.

Is this ‘good’ shopper marketing? 

In our new book, “The Shopper Marketing Revolution“ Mike Anthony and I lay out the case for shopper marketing to be defined as:

“The systematic creation and application of elements of the marketing mix to affect positive change in shopper behavior in order to drive consumption of a brand”.

At first blush, you could argue this promotion is an example of a marketing activity targeting shoppers: it targets shoppers of hair care brands, gives them an offer (which is part of a marketing mix) to induce them to buy from a selection of brands which presumably will be used by consumers in the home.  Is it shopper marketing though? Well not really, it’s only actually an example of part of the potential marketing mix used to change a purchase behavior. This is a bit like saying that advertising is ‘consumer marketing’ – it’s just not!

But semantics aside, is this case actually any good? 

Well, if the goal of shopper marketing is to increase consumption of a brand, one has to test this by asking, “how many existing consumers will use more of the brand more often?” or “how many new consumers will it acquire?”  The answer to the first question is “unlikely”: Giving me a price cut or indeed, a haircut is very unlikely to drive me to wash my hair more often, so no new consumption will come from this.

The activity may attract new consumers, BUT, what sort of consumers will it acquire? Deep price cuts appeal most to a segment of the population known as ‘deal buyers’. These guys either choose the cheapest product on offer, or choose from a portfolio of brands based on the best available price. In most cases this means that the ultimate consumer who uses the product is not likely to be brand loyal. The net effect then is a temporary blip in market share that is quickly eroded as the next brand in the portfolio offers a deal.

You might argue that this is a reasonable short-term outcome, but since most brand managers are responsible for brand profitability, this sort of activity can have pretty ruinous effects on the bottom line. P&G is a profitable company, delivering a 23.5% EBITDA margin, but slashing prices by 33% guarantees a loss of at least 9.5%. This is a heavy price to pay for short-term market share gain don’t you think?

What is great shopper marketing then?

Now my second example, the Old Spice “I’m on a horse commercial”; of course the appeal of this advert is it’s bizarrely fun, but behind it is a fantastic shopper marketing case study.

It’s such a good example because it meets the four criteria I lay down for great shopper marketing:

  1. Great shopper marketing is insight led: Clearly the team behind the Old Spice ad had two killer insights which drove the campaign:
    1. Women buy shower gel for their male partners, and;
    2. Males in a relationship with females will often wash with whatever is in the shower, even if they end up smelling like a girl!
  2. Great shopper marketing encourages a change in purchase behavior: This campaign, and the many that followed, encourages the girl to buy something specifically for her guy. This increases her portfolio as a shopper, driving new sales.
  3. Great shopper marketing encourages new consumption: Whether guys saw the ad or not, and indeed, whether they liked Old Spice or not, with a ‘male’ product in the shower, they are likely to use this instead of the ‘female’ one. This drives new consumers to the brand, a sure-fire way to boost consumption.
  4. Great shopper marketing delivers superior returns on investment: The Old Spice team choose to use prime-time TV and viral videos as the lead element of their marketing mix, which indicates heavy investment. But think about what this investment delivers: literally hundreds of thousands of incremental purchases of shower gel. These new sales, and the profits they create massively increase the probability of real ROI.

What’s great about this case is that it shows that getting shopper marketing right is not rocket science; it’s simply about knowing what consumption you want to create, how shopper behavior needs to change and then defining what activities will make that happen.

Read “The Shopper Marketing Revolution” (available for the Kindle now on Amazon.com) to get practical, step-by- step advice on how to make your shopper marketing great.

Hunting For Retail Innovation In Barcelona

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Hunting-for-Retail-Innovation-in-Barcelona-image

I recently returned from a relatively rare business trip to Barcelona, Spain. Excited to be back in the market after a few years, I persuaded my client to take me on a tour of nearby stores. Predictably, of course Carrefour was on the list of stores we would go to, but so were Eroski’s Spanish subsidiary Caprabo and Spain’s own Mercadona. [Read more…]

How To Ruin A Brand

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If, like me, you’ve been following the backlash against comments by Abercrombie and Fitch’s CEO Mike Jeffries, you’ll have seen how in today’s connected world that bad PR can have a huge impact on a brand. I have to admit that I have little sympathy for Mr. Jeffries and no affinity to the A&F brand at all but I do think that anyone who wants to learn exactly how to ruin a brand can learn a lot from what has happened. [Read more…]