Making the Digital Path to Purchase Profitable

Stephen DeAngelis

July 1, 2015

The rapid spread of mobile technologies (especially the smartphone) has mostly obliterated the traditional path to purchase for both business-to-business (B2B) and business-to-consumer (B2C) transactions. Like it or not, the digital path to purchase and omnichannel sales are here to stay. Unfortunately, Eric Johnson (@AmShipEric) reports, “A new PwC study, commissioned by the supply chain solutions provider JDA Software, has found that only 60 percent of companies are able to fulfill omni-channel demand profitably.”[1] That means a significant number of companies are struggling to find their way in the digital world. Andrea Ward (@awatpa), Vice President of Marketing at Oracle Marketing Cloud, warns, “If you haven’t started to establish a customer-centric infrastructure by now, you might be left in the dust by your competition.”[2] A customer-centric infrastructure is one that embraces mobile technologies since consumers are using mobile devices whether they are making purchases online or in stores. Below are a few areas that are essential to master if your company is going to make the digital path to purchase profitable.

 

Mobile Conversations

 

Companies should be asking themselves, “How easy is it for customers to reach us by phone?” Let’s face it, most companies’ automated phone systems are a pain in the neck. Yet a study by Invoca that analyzed more than 32 million phone calls placed to businesses across 40 industries in 2014 concluded, “Mobile marketing is driving high-intent buyers to call businesses at a rapid rate.”[3] The last thing you want to do is irritate a high-intent buyer by making them struggle to reach a real person. Eric Holmen, president at Invoca, stated, “We know that phone conversations are important, but we wanted to really dig in to our data to determine what actions motivate inbound calls to businesses, and how those conversations impact businesses on the other end of the line. Our data shows that industries emphasizing the call channel and making it easy for their customers to move seamlessly from digital to voice interactions will come out substantially ahead.” The study went on to note, “As call volume increases, so do the opportunities for marketers and ultimately, salespeople. Calls are high intent interactions, so it’s important that marketers understand who is calling, and how and when they are dialing, to make the most of those conversations.” Some of the more telling results of the study included:

 

  • The average call duration is 16 times longer than a website interaction, at 4 minutes, 7 seconds (compared to 15 seconds, as reported by data analytics company Chartbeat in 2014).
  • Businesses receive the highest total volume of calls on Tuesdays, more than any other weekday and an average of 48 percent higher volume than on Sundays. Tuesdays are also the peak time for mobile call volume, in particular. As businesses monitor these trends, they can target customers with call-based ads during days and time with peak mobile call volume.
  • 75 percent of all calls to business originate on a mobile phone. As marketers increase mobile usability of digital content and websites, this will continue to increase.

 

Mobile Marketing

 

Mobile conversations are closely tied to mobile marketing. According to the Invoca study, “Mobile use initiates billions of consumer phone calls to businesses each year, and findings show that mobile marketing efforts spur more than half (54 percent) of all calls to businesses. Industries that use mobile advertising to drive call volume, not just clicks, drive more conversions.” In spite of how important mobile marketing has become, Al Urbanski (@AlUrbanski) asserts, “Marketers continue to fly blind with direct offers made to shoppers, especially in the CPG arena, where customer data from retailers can be difficult or even impossible to come by.”[4] He reports that a study by 4INFO revealed “that mobile campaigns drive more than double the sales that desktop campaigns do. Mobile executions produced about $30 in sales per 1,000 impressions versus only $13 for desktop, with average return on ad spend for mobile hitting 257%.”

 

Mobile Research

 

When some people hear or read about the digital path to purchase, they assume that it refers to online sales (i.e., e-commerce). In fact, online sales are only one part of the omnichannel environment included in the digital path to purchase. Increasingly, in-store shoppers are using mobile technologies to research products. According to Deloitte Digital’s latest study, Navigating the New Digital Divide, “Digital interactions are expected to influence 64 cents of every dollar spent in retail stores by the end of 2015, or $2.2 trillion.”[5] Kasey Lobaugh (@klobaugh), a principal at Deloitte Consulting LLP and Deloitte Digital’s chief retail innovation officer, stated, “Retailers often use the wrong metric — e-commerce sales — to indicate whether their digital strategy is working. Last year, e-commerce sales represented $300 billion, or just seven percent, of total retail sales, while digitally-influenced store sales were over five times higher, topping $1.7 trillion. Retailers that prioritize and design digital functionality with the sole purpose of driving sales in the e-commerce channel marginalize the consumer experience and risk ceding authority to competitors.” Perhaps the most important conclusion from the study was this:

“Consumers who use digital while they shop convert at a 20 percent higher rate compared to those who do not use such devices. Consumers that access social media during the shopping process are four times more likely to spend more, and almost one-third (29 percent) of those surveyed are more likely to make a purchase the same day they turn to social media before or during their shopping trip.”

 

Order Fulfillment

 

Order fulfillment for consumers who make an in-store purchase is the easiest transaction to understand from a profitability standpoint. It’s how retailers and consumers have interacted for time immemorial. According to the PwC study, order fulfillment in other channels’ are causing consternation among companies that haven’t yet discovered how to make omnichannel operations profitable. The study notes, “A quarter of respondents to the survey, and more than a third of top 250 global retailers, see omni-channel fulfillment as a top priority. Transportation and logistics was the most commonly cited function requiring additional attention from companies in order to achieve true omni-channel fulfillment.” PwC executives note that retailers quickly learned that offering a variety delivery options became a very expensive (and unprofitable) course of action. The answer to this conundrum is technology, particularly optimization solutions guided by artificial intelligence (AI).

 

To combat these new challenges, Wayne Usie, senior vice president of retail at JDA, insists that “systems now must be trained on getting beyond the static, rules-based constraints upon most which most optimization engines are founded.” He explains:

“These optimizations that had been done in bulk, are now being done on an individual basis, as customers’ orders are flying the through system, then it decides where to allocate. The challenge is it has no visibility to certain things that could affect the right choice. Say you live in St. Louis, so I’m going to distribute from that store. But I need to know if I have forecasted sales in that location for this weekend for that item. Am I cannibalizing sales in that store? Do I have a labor cost issue to fulfill that item from that location?”

AI systems can automatically deal with a large number of variables to help reach the right decision for a particular situation.

 

Summary

 

Describing today’s consumer journey as a digital path to purchase gives the mistaken impression that there is a single course to be followed. In fact, the digital path to purchase is convoluted and consumers find easy to jump on to and off of at myriad touchpoints. The most important touchpoint, however, is the smartphone. By making the mobile experience both informative and user-friendly, manufacturers and retailers can achieve a substantial competitive edge. They can lose that edge, however, if they are unable to master the intricacies of omnichannel order fulfillment. Great customer service, complemented by a good AI-driven optimization system, can help them keep their edge along every point of the digital path to purchase from research to fulfillment.

 

Footnotes

[1] Eric Johnson, “Companies struggling with omni-channel profitability,” American Shipper, 14 April 2015.
[2] Andrea Ward, “The Customer Journey to the Known,” 1to1 Media, 17 April 2015.
[3] “New Research from Invoca Reveals Key Drivers in Omni-Channel Path to Purchase,” PR Newswire, 6 May 2015.
[4] Al Urbanski, “Study: Mobile Campaigns Drive Twice the Sales of Desktop,” Direct Marketing News, 11 May 2015.
[5] “Digital interactions drive brick-and-mortar sales,” Retail Customer Experience, 15 May 2015.