How the Digital Path to Purchase has Changed Consumers

Stephen DeAngelis

September 16, 2015

“The digital path to purchase is the next logical step in the path to purchase evolution,” Tom Furphy (@tomfurphy), chairman of IdeoClick, told Bill Bishop (@BrickMeetsClick). “Segmentation and broad messages were necessary when we didn’t have the tools and technology to enable individual consumer connections. Now we’re beginning see the technology that will drive these connections and better measurement, too. … With the digital path to purchase (DP2P), success is measurable down to the most granular level. DP2P is an ‘always on’ connection between brands, retailers and shoppers that’s enabled by a range of digital touch points.”[1] In a previous article [“The Digital Path to Purchase: Complex and Growing“], I noted that the paths used by consumers are often unique to individuals, an observation Furphy would likely support. In that article, I cited an article by Tyson Goodridge (@goodridge), a marketing contractor for Compete, who reported that a study released a couple of years ago by GroupMNext and Compete, tried to simplify the discussion about consumers who use the digital path by grouping digital consumers into six groups.[2] According to the study, these groups contain “consumers who utilized digital at least once in their purchase pathway.” The segments are:

 

  • Basic Digital Consumers: These are not highly digital users. They are comfortable with Internet shopping and research, but they are not mobile or social and have the second-highest likelihood of buying offline.
  • Retail Scouts: These consumers have short journeys and prefer retail sites to brand sites. They use mobile, but are twice as likely to use it in the home as out. They are comfortable buying online but did not express a preference between online and offline.
  • Brand Scouts: Brand Scouts are the spiritual partner to the Retail Scouts except instead of having a favorite retailer, they have a favorite brand. When asked, 72% said they start their journey with a brand in mind.
  • Digitally Driven Segment: They use every digital tool at their disposal. They use social and mobile more than any other segment in the study, value convenience above all else and they do everything in their power to avoid physically going to a store. The Digitally Driven exist in good numbers already, but within five years this will be the dominant segment of consumers.
  • Calculated Shoppers: These shoppers seem to know they are going to make a purchase, but they are deciding which brand to choose. They are similar to the Digitally Driven Segment, but have no urgency to their purchase and they’re willing to take the time to get the best deal.
  • External Shoppers: These are non-mobile shoppers. They want the answers to, ‘Should I buy?’, ‘What do I buy?’ and ‘What brand do I buy?’ — all at the same time. These shoppers have no urgency to make a purchase and they do their research on desktop and laptop computers.

 

In a more recent article, Pini Yakuel (@Pini_Yakuel), Founder and CEO of Optimove, offers a slightly different taxonomy of digital consumers. Rather than segment consumers like GroupMNext and Compete, he believes that consumers go through lifecycle stages that mirror many of the same characteristics noted above.[3] Yakuel writes, “Managing your customer relationships based on lifecycle stages is a powerful way to increase engagement and loyalty. Deploying data-driven retention campaigns improves your ability to engage, monetize and retain customers, resulting in long-lasting customer relationships and an improved bottom line.” Yakuel’s lifecycle taxonomy involves five stages, with each state describing a different consumer behavior (much like the framework described by Goodridge). Yakuel also provides some suggestions that can help retailers convert digital shoppers to buyers.

 

Stage #1: The Browser — Yakuel describes the Browser as a potential customer who recently started browsing a site, registered as a member, or signed up for an account, but have yet to make any purchases. He notes, “Our data shows that 80% of all customers make their first purchase with an online retailer the same day they register for an account or provide their email address. 7% of shoppers will make their first purchase within a week of registering, but after that your chances of converting them drop significantly.” How can you convert the Browser to a buyer? Yakuel suggests, “As a retailer, your objective during this period is to get the shopper to become a customer by making their first purchase within seven days. … Leverage the data you have on browsers who have given you their email address — referral source, initial product interest, other browsing data and more — to deliver targeted, custom campaigns and promotions on popular items that have attracted similar shoppers.”

 

Stage #2: The New Customer — The New Customer is one who completed his or her first purchase on your site. Yakuel observes, “More than half of all New Customers will never make a second purchase on your site. That’s the bad news. The good news is that most of the customers who make a second purchase will go on to make a third, and that their chances of becoming loyal customers continue to climb with each subsequent purchase. Also, the likelihood of them making more purchases in the future goes up based on the number of items bought in their first order.” To convert the New Customer into a loyal customer, Yakuel suggests, “Your goals should be to (A) get New Customers to make a second purchase, even if it’s an inexpensive item or a loss-leader, and (B) try to increase the number of items they order during their first purchase, perhaps by recommending related items or offering special discounts on impulse items.”

 

Stage #3: The Active Customer — The Active Consumer could also be called a loyal consumer. Yakuel describes this customer as one who has made multiple purchases, and is not considered as churned due to a lengthy period of inactivity.” He adds, “You should further segment your Active Customers using RFM (Recency, Frequency and Monetary) clustering. This helps reveal who your highest-value and lowest-value customers are, which customers are at high risk of churning, and more. It is critical to understand the different types of Active Customers and to deliver your engagement campaigns based on their RFM profile. In the sample RFM chart below, the ‘Mid-Tier, High Risk of Churn’ group has a very high risk of churn because it’s been 33 days since their last order, yet they usually place an order every seven days. These customers would benefit from a tailored marketing campaign to encourage them to re-engage.”

 

Stage #4: The Churned Customer — Churning in business is not like churning cream into butter. According to Yakuel, the Churned Customer is one who hasn’t made a purchase beyond a specified factor of the average number of days between their past orders.” Either they have stop buying your products or have gone elsewhere to obtain them. Neither situation is ideal. Fortunately, Yakuel indicates that there is hope. “On average,” he writes, “20% of customers who made their last purchase between four and six months ago will reactivate within three months. However, the more time that passes, the harder it is to get Churned Customers to re-engage.” What can you do? He suggests, “Churned Customers can be the easiest to re-engage with proper marketing efforts, because not only do you have customer data that can help you target them effectively, but you have a pre-existing relationship that makes it easier to get their attention. It is important to use the data you have to segment your Churned Customers into small groups based on their previous activity levels, past shopping behavior and other data.”

 

Stage #5: The Reactivated Customer — Obviously, the Reactivated Customer is one who had previously been considered churned, but who have since returned to complete another purchase. Yakuel notes, “Our data shows that the future value for Reactivated Customers is very close to that of New Customers. Similarly, Reactivated Customers tend to remain active at a nearly identical rate to that of New Customers (35% for Reactivated Customers compared to 36% for New Customers within the same time period). However, your window of time for re-incubating these customers is limited.” In other words, courting customers is much like keeping romance alive. You need to ensure that your customers receive continued assurance of their importance to you. Yakuel suggests, “You should conduct marketing and engagement campaigns to Reactivated Customers just as you would to New Customers, since they exhibit similar spending and retention behaviors. Give your Reactivated Customers special treatment such as exclusive offers and bonuses in order to maximize the lifetime value of this extremely valuable customer segment. Just be sure to do so quickly—once they’ve reactivated, you have a limited opportunity to turn them back into active shoppers.”

 

Matt Tanner agrees that customers need the right kind of attention. “Everyone likes to feel special,” he writes. “And delivering that all-important personal touch to consumers has always been a great way to generate loyalty and drive sales.”[4] He reports, “A new study by marketing and automation software business Marketo shows that consumers now demand a personalized experience and will tune out from those brands that don’t deliver.” The digital path to purchase has increased the number of touch points between sellers and buyers and, at each of those touch points, customers need to have a good experience. That’s what they now expect. Furphy concludes, “The DP2P is in full force today. If you are not engaging in the DP2P, you need to dive in.”

 

Footnotes
[1] Bill Bishop, “Exploring the digital path to purchase with Tom Furphy,” Brick Meets Click, 16 March 2015.
[2] Tyson Goodridge, “The 6 Types of Digital Consumers and Their Paths to Purchase,” Compete Pulse, 30 May 2013.
[3] Pini Yakuel, “The 5 Lifecycle Stages of an Online Shopper,” Multichannel Merchant, 27 July 2015.
[4] Matt Tanner, “Taking It Personally,” MediaPost, 26 August 2015.