“Growth has slowed. Complexity has increased. At least this is the story for consumer packaged goods (CPG) companies in North America,” writes Lora Cecere. “The complexity of changing product portfolios and the increase in demand-shaping programs (price and promotion) have distorted demand signals and made supply chain planning more complex.” [“Digital Path to Purchase: An Outside-In Opportunity,” Supply Chain Shaman, 12 February 2014] The digital path to purchase has certainly added to the complexity to which Cecere refers. Traditionally, marketers depicted the path to purchase as a funnel into which consumers entered at the top and purchasers emerged from the bottom. With the advent of online and mobile technologies, that funnel now has holes and consumers leak out of it all over the place. In fact, most analysts argue that the funnel is no longer an apt analogy. The “purchase path” has replaced the “purchase funnel.” I’m not sure who coined the term “digital path to purchase” but they made the right choice by selecting the word “path” rather than “street” or “highway” or “road.” When you hear word “path,” it conjures up scenes of lavish gardens garden, thick woodlands, or overgrown jungles. Explorers in such places must meander over the landscape as they advance towards their destination. Some paths are hard to discern and it’s easy for travelers to get lost. The same is true with the digital path to purchase. Fortunately, if consumers leave the path or get lost, it’s also easy for them to jump back on the path at any point in their journey. The ease with which consumers can “get on” and “get off” the digital path to purchase is one reason that demand signals have become distorted.
As messy and complex as the digital path to purchase can be, businesses now recognize that implementing a digital strategy is an imperative for success. Cecere reports, “Today, 63% of consumer manufacturing organizations have a digital path to purchase initiative.” McKinsey & Company analysts, Nicolo Galante, Eric Hazan, and Pierre Pont, assert, “Marketers have long recognized that a purchase is far more than a solitary event when the actual financial transaction between shopper and retailer takes place. This is just one point along the very nuanced consumer decision journey (CDJ). Each stage of the journey might be experienced in a matter of moments or could take years to complete.” [“The multichannel journey: Profitably shaping the path to purchase,” Telecom, Media, & High Tech Extranet, 20 November 2013 (registration required)] They go on to claim that “regardless of the duration, the journey usually spans five phases.” Those phases are: consideration, evaluation, purchase, experience, and loyalty. They agree that the digital path to purchase has added significant complexity to the consumer decision journey. “Outside of the retail store,” they write, “consumer-brand interaction along the CDJ was once limited to a catalog and an 800 number. Today, multiple channels make up the end-to-end shopping journey.” Each of those channels must provide the consumer with a unique and integrated experience if they are to going to stay on the path to purchase. In some way or another, digital technologies are involved in every channel.
Hazan and two other McKinsey analysts, Ewan Duncan and Kevin Roche, conclude from their research that there are “six major ongoing consumer trends that are further compelling this shift to digital.” [“Digital disruption: Evolving usage and the new value chain,” Telecom, Media, & High Tech Extranet, 14 August 2013 (registration required)] They label each of these trends a “shift” and they include: device shift; communications shift; content shift; social shift; video shift; and retail shift. Concerning device shift they write:
“Device shift – from PCs to mobile/touch devices. Smartphones are fast becoming ubiquitous, with penetration of about 60 percent in the US. Just over 30 percent of US Internet-equipped households now have a tablet as well, and the rest of the developed world is close behind. Mobile phones and tablets now account for around 44 percent of all personal computing time, having nearly doubled since 2008. Most device manufacturers and their major retail partners are already experiencing the implications of this shift.”
Nearly every article you read about the future of retailing contains something about the importance of mobile technologies. In fact, many (if not most) analysts believe that mobile technology must be at the heart of any digital strategy if retailers expect the strategy to be successful. Concerning the communications shift, Duncan, Hazan, and Roche write:
“Communications shift – from voice to data and video. E-mail and telephonic voice have fallen from over 80 percent to about 60 percent of the telecoms ‘communications portfolio,’ while time spent on social networks has doubled to take over a quarter of all user communications time. And when consumers do use their phones, only about 20 percent of the time is for talking (down from over 60 percent just five years ago). The majority is used for more data-centric activities such as streaming music, browsing Web sites, and playing games.”
These first two shifts — device and communications — highlight what some analysts have called the “Tetherless World.” For more on this phenomenon, read by post entitled “Taking Advantage of the Tetherless World.” Concerning content shift, the analysts write:
“Content shift – from bundled to fragmented. Thanks primarily to powerful search tools, the ‘long tail’ of media and content (whether text, video, classifieds, products for sale, etc.) is accessible to anyone. Thus, some of the value in traditional ‘bundles’ (newspapers, network TV stations, or big-box retailers) has been eroded. The way mobile phones are used illustrates this well. The number of apps installed (typically for a specific, single purpose) has doubled to over 30 per phone from 2008 to 2012. Spending on these apps is, however, highly fragmented, and growth potential remains very uncertain. Challenges abound for both content owners and marketers in reaching and engaging audiences that access such eclectic, fragmented media.”
Although Duncan, Hazan, and Roche are talking about “content” on mobile devices (e.g., apps), the fact of the matter is that “content” in the broader sense of that word is becoming even more critical in the mobile age. Ryan Donegan, who is a member of the important consumer demographic known as Millennials, writes, “Don’t insult our intelligence. … We’re quite possibly the most informed consumer generation ever to face marketing professionals. You can bet that, before we’ve made any major purchase, we will have researched it, asked our friends about it on social channels, and searched your reviews online.” [“5 Tips for Marketing to Millennials From a Millennial,” Huffington Post The Blog, 7 October 2014] The bottom line is: content matters. Concerning social shift, the McKinsey analysts write:
“Social shift – from growth to monetization. Social networking represents almost a quarter of all Internet time (up 10 percentage points since 2008) and reaches over 75 percent of all Internet users. Yet for the first time, we have seen small declines in both total audience and levels of engagement in developed economies. This is a remarkably fast climb to maturity, given that major players like Facebook, LinkedIn, and Twitter have yet to celebrate their tenth birthdays. Facebook and LinkedIn now face the quarterly earning pressures of the public markets as well. At the same time, businesses of all shapes and sizes are actively trying to use social media as part of their marketing efforts. Achieving real and measurable returns on these efforts will be a continuing challenge for players across the TMT spectrum.”
Even if social networking sites never challenge Amazon as an online retailer, they remain critical touch points in the consumer digital path to purchase. They are also a good way for manufacturers and retailers to relate in a more personal way with consumers. Manufacturers and retailers that ignore social media do so at their peril. Concerning video shift, the analysts write:
“Video shift – from programmed to user-driven. Traditional live, linear television consumption remains relatively flat on an absolute basis, but has slipped on a relative basis. It now represents just 65 percent of all video viewing for US consumers on their television screens and 52 percent across all screens. Time-shifted DVR content – watching video on PCs and over-the-top Internet video services such as Netflix – makes up much of the balance. The increase in all varieties of time-, place-, and device-shifting video options will continue to pressure traditional advertising-supported business models for distributors, advertisers, and content owners in the value chain.”
If you don’t think that video matters, you haven’t been paying attention. The big challenge for companies is to figure out how to use videos to their advantage — not simply by providing good content but also by learning how to analyze video content provided by consumers. Concerning the final “shift” — the retail shift — the analysts write:
“Retail shift – from channel to experience. Despite its tremendous growth and transformation of the retail landscape, e-commerce only accounts for about 5 percent of all retail sales. As connected mobile devices proliferate, their potential to transform the shopping experience (both in the store and online) is the next opportunity. About half of all smartphone owners now use their devices for retail research – and although only few today, significantly more consumers will soon be using smartphones and tablets to complete their transaction as well. The combination of mobile retail and true multichannel integration will have a transformative effect on the retail experience and ring in the era of Retail 3.0.”
Although e-commerce still represents only a small percentage of retail sales, the impact that e-commerce has had on retail has been enormous. For more on that topic, read my post entitled “Retail Stores and the Digital Path to Purchase.” The digital path to purchase will only become more important in the years ahead. Manufacturers and retailers that embrace rather than fight this trend will be the ones that survive and thrive.