DM Chapter 3 - Market Sensing PDF

© Noordhoff Uitgevers bv 69 3 Market Sensing Authors: Marjolein Visser (3.1 to 3.4 and 3.7), Lucas Hulsebos (3.5) and Frank van Delft (3.6)...

© Noordhoff Uitgevers bv 69 3 Market Sensing Authors: Marjolein Visser (3.1 to 3.4 and 3.7), Lucas Hulsebos (3.5) and Frank van Delft (3.6) 3 The previous chapter describes how organisations formulate a Digital Marketing strategy and business model. In order to make the right choices, it is necessary to understand the expected behaviour of future customers. This is done by market sensing, ie. getting a sense of what is happening in the market. The ‘market sensing process’ is the process whereby the organisation makes sure that it is continuously up-to-date with the needs, developments and trends in the market. Only when an organisation knows the market intimately, can it offer products online that will be successful now and in the future. This chapter will cover: internet usage online shopping behaviour online buying process and the Digital Marketing funnel brand-related activities on social media digital market research data analysis and customer insights relevant trends for Digital Marketing After studying this chapter, you will be able to: describe the main characteristics of internet use and buying over the internet indicate the main reasons why people shop online, why they switch channels and illustrate with concrete examples describe the different stages in the online buying process of the consumer, explain how they relate to the Digital Marketing funnel and what the critical success factors for each of the steps of this funnel are indicate the advantages and disadvantages of the most important offline and online channels for market research, which online and offline research methods are suitable for measuring the effectiveness of Digital Marketing and how social media monitoring can be used explain how data and analytics can be used to formulate customer insights indicate how the leading trends in digitisation affect Digital Marketing 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 69 26/11/20 4:55 PM  70 © Noordhoff Uitgevers bv § 3.1 Internet usage The rise of the internet and specifically the world wide web (www) as a medium for communication has dramatically changed the purchasing behaviour of consumers in recent decades. All competitors are collected in one place (ie. the web) and consumers can consider many alternatives within a short time. An offer in a store can be compared to online offers within a few minutes. This means that consumers are often very well informed and therefore are in a very strong bargaining position. It’s important that marketers get to know their potential customers well so that they can respond to their needs and wishes. In this section you will find more information about the growth of internet usage, digital lifestyles and the 3 influence of the internet on the buying behaviour of today’s digital consumer. 3.1.1 The state of the internet British physicist Sir Tim Berners-Lee invented the web in the early 1990s while he was working at CERN; his idea was to build a network of connected computers based on the internet and using the common standard language HTML so that information could be shared effortlessly and globally between users via a ‘World Wide Web’ (www). More than 4.5 billion people use the internet, while social media users have passed the 3.8 billion mark. Nearly 60% of the world’s population is already online and the internet and worldwide web, increasingly accessed via a smartphone, have fundamentally changed the ways we connect with friends, family and colleagues, how we entertain and educate ourselves and how we buy things. FIGURE 3.1 People spend increasingly more time on the internet using their phone JAN MOBILE’S SHARE OF TOTAL INTERNET TIME 2020 DAILY TIME THAT INTERNET USERS AGES 16 TO 64 SPEND USING THE INTERNET VIA MOBILE DEVICES AS A PERCENTAGE OF TOTAL DAILY INTERNET TIME 49.5% 50.1% 45.8% 37.6% 39.2% 33.0% +14% +4.3% +17% +8.1% +1.2% Q3 2014 Q3 2015 Q3 2016 Q3 2017 Q3 2018 Q3 2019 Source: wearesocial.com More highly educated people are online more often than people with a lower level of education. They also use the internet for different things. Eg. the percentage of highly educated people who participate in social discussions online, take online courses, download and upload documents and sell goods or services online, is more than twice that of people with a lower level of 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 70 26/11/20 4:55 PM  © Noordhoff Uitgevers bv MARKET SENSING 71 education who are using the internet for this type of activity. There are also significant differences between people aged over 65 and younger segments. In developing countries, internet penetration is generally lower (but growing sharply). It is very important for a Digital Marketing professional to carefully analyse the target audience’s internet behaviour before making decisions about Digital Marketing. There is a global switch to mobile (smartphones and tablets) away from desktop PCs. New technologies like AR are taking off and hardware and connection speeds improve. Marketers need to stay close to these trends. FIGURE 3.2 Average time spent on mobile devices worldwide per category 3 JAN SHARE OF TIME SPENT IN MOBILE APPS BY CATEGORY 2020 AVERAGE TIME SPENT USING MOBILE DEVICES EACH DAY WORLDWIDE, WITH SHARE OF TIME SPENT IN TOP MOBILE APP CATEGORIES AVERAGE TIME SHARE OF MOBILE TIME SHARE OF MOBILE TIME SHARE OF MOBILE TIME SHARE OF MOBILE TIME SPENT USING MOBILE SPENT IN SOCIAL & SPENT IN VIDEO & SPENT PLAYING GAMES SPENT USING OTHER DEVICES EACH DAY COMMUNICATIONS APPS ENTERTAINMENT APPS (ALL GAMES) KINDS OF APPS 3H 40M 50% 21% 9% 19% Source: wearesocial.com 3.1.2 Buying on the internet a shrinking brick-and-mortar landscape as Amazon/ecommerce grows Walmart is sprinting to catch up online the new retail is mobile-savvy location-driven advertising is becoming more targeted and accountable What are the reasons people do/do not buy online? What causes a channel switch? What obstacles are there for internet purchases? What determines whether someone shops on the internet? We will now elaborate on these questions. The internet is especially important for the sale of clothing, travel, tickets, household appliances and financial services. Traditionally, goods that people want to see and experience (eg. shoes or glasses) were less frequently purchased or reserved online. Recently however, order processing on ecommerce sites has improved and conditions for product returns have been greatly relaxed. Moreover, the increased use of Augmented Reality (AR) by ecommerce sites allows people to judge whether or not a new pair of glasses would suit them or how a piece of furniture would look in their living room, for example. The principal potential for growth can now be found in the online purchase of foods, cosmetics, cleaning products, pharmaceuticals and resources for digital education and learning. For supermarkets and drugstore chains, the professionalisation of their ecommerce sites as well as the emergence of innovative new players eg. Ocado have played an important role in this. The turnover that is generated online is increasing steadily (see Figure 3.4). 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 71 26/11/20 4:55 PM  72 © Noordhoff Uitgevers bv FIGURE 3.3 Ecommerce adoption per country JAN ECOMMERCE ADOPTION 2020 PERCENTAGE OF INTERNET USERS AGED 16 TO 64 WHO SAY THEY BOUGHT SOMETHING ONLINE VIA ANY DEVICE IN THE PAST MONTH 88% 82% 82% 82% 82% 81% 80% 80% 78% 78% 78% 77% 76% 76% 76% 75% 74% 74% 74% 74% 74% 73% 73% 73% 72% 71% 70% 70% 70% 70% 69% 69% 68% 68% 67% 66% 65% 64% 63% 60% 60% 56% 51% 3 INDONESIA THAILAND POLAND GERMANY MALAYSIA SOUTH KOREA IRELAND AUSTRIA CHINA ITALY PHILIPPINES U.S.A. SWITZERLAND VIETNAM WORLDWIDE INDIA SPAIN SWEDEN SINGAPORE FRANCE SAUDI ARABIA NETHERLANDS NEW ZEALAND DENMARK BRAZIL HONG KONG AUSTRALIA ROMANIA BELGIUM JAPAN CANADA ISRAEL MEXICO U.A.E. PORTUGAL ARGENTINA TURKEY COLOMBIA RUSSIA SOUTH AFRICA EGYPT U.K. TAIWAN Source: wearesocial.com FIGURE 3.4 Projected ecommerce revenue worldwide 4,000,000 2,956,018 3,102,791 3,000,000 2,772,539 In millions US$ 2,541,992 2,275,953 2,000,000 1,935,212 1,662,751 1,387,847 1,000,000 0 2017 2018 2019 2020 2021 2022 2023 2024 Fashion Electronics & Toys, Hobby & DIY Furniture & Food & Media Appliances Personal Care Source: Statista, 2020 Despite almost every business having a website, far from all organisations are using Digital Marketing. Eg. just one in three organisations currently provides options for purchasing, booking or reserving products or services on their website. The most important reasons that impede companies from selling via a website are: unsuitability of product logistical problems costs payment issues security issues legal difficulties. 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 72 26/11/20 4:55 PM  © Noordhoff Uitgevers bv MARKET SENSING 73 In addition, many companies favour the ease of distributing via marketplaces (eg. Amazon) over having to set up and maintain their own digital sales channel. About 40% of all online purchases are currently made using a desktop computer or laptop (see Figure 3.5) and the number of purchases made using a mobile device is growing rapidly. FIGURE 3.5 Worldwide online order share per device 50% 40% 3 Share 30% 20% 10% 0% 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2020 Q1 Computer Mobile Tablet Source: Salesforce Shopping Index, 2020 § 3.2 Online shopping behaviour Successful Digital Marketing professionals are not only aware of how their potential customers shop online, but also why they do so. Firstly, we will discuss what determines whether someone is shopping online, next we will examine why many people switch from online to offline or vice versa during the buying process and finally we will discuss the five different shopping segments. 3.2.1 What determines whether someone shops online? It is important for marketers to know how their customers feel about using the internet and online shopping. It makes no sense to invest time and money in promoting online sales to audiences who anticipate too many risks or who are simply predisposed to physical shopping. It is wiser to invest in groups (segments) where the chances of success are higher. Lim (2015) suggested the factors which determine whether an individual shops online or not. He claims that this is dependent upon their attitude towards online shopping, determined by the following factors: The value they expect from online shopping: do they expect to save money, have access to a wider range of products and experience less ‘hassle’ when compared to offline shopping? The expected ease of use: do they expect ecommerce websites to be easy to use so that they are able to find what they are looking for? Experience: is it faster than offline shopping, does it lead to better purchasing decisions, is it easier? Social factors: do they worry about what others say about online shopping, do they tend to buy online products and go to ecommerce sites that have been recommended by friends on social media? Entertainment gratification: do they have fun shopping online or do they Entertainment find it difficult and unpleasant? gratification Internet irritation: do they find the web disorganised and annoying, eg. because of too many ads? 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 73 26/11/20 4:55 PM  74 © Noordhoff Uitgevers bv Emotional state: does online shopping lead to satisfaction and happiness? is it stimulating? Someone may be positively inclined to online shopping, but their expectations still need to be met: the actual experience must be a good one, so a foundation of trust is created. Only then will someone become a habitual online shopper. It is useful to investigate customer attitudes regarding online shopping. If there are many people in your target audience (eg. a particular age group or geographical region) who are not comfortable using the internet, it is wise to adjust the policy accordingly. Even if it’s only a small group, it would be wise to find out how to educate and motivate these people to help them engage 3 with your online offering. An example of entertainment gratification. Many people enjoy designing custom shoes at Adidas 3.2.2 Channel switch Doing research online does not always lead to a purchase. While the web is the most widely used research channel for people who want to buy a product, the physical store is still a key place for product investigation for many people. Moreover, there are big differences depending on product type. Convenience and efficiency are very important to buyers. In addition, people want to make the best possible choice, especially if the purchase is important to them (high involvement). Price plays an important role in this. Many people use the internet to do research online before visiting a physical store to Webrooming purchase a product. This has been called ‘webrooming’. This is a smart move: online research allows you to compare product details and prices before visiting the physical store where you can see and try out the products in real life. This process leads to a sense of confidence, making one feel like a ‘smart shopper’ who has made a well-considered choice (Flavián, C., Gurrea, R. & Orús, C., 2019). It is always a good idea to make an online buyer feel like they are also a smart buyer; placing an emphasis on value for money, 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 74 26/11/20 4:55 PM  © Noordhoff Uitgevers bv MARKET SENSING 75 or giving them a feeling of being in control by providing insight into the progression of the ordering process (part of the online User Experience UX), also serves to reinforce this feeling once they have completed the purchase. ‘Webrooming’ is an established phenomenon, so it is wise to provide as much product information as possible online, including product reviews. In addition, a visit to a physical store can be made attractive with promotions or by the provision of an interesting shopping experience. Moreover, interconnectivity between different sales channels in order to assure the cross-channel availability of customer data is essential to the creation of a ‘seamless’ shopping experience. 3 The inverse of webrooming is showrooming. This is where customers visit the Showrooming physical store for orientation purposes before ordering the chosen product online. Many people choose to first visit a physical store, because they want to see and hold the product and receive personalised advice from a store attendant. On ecommerce sites however, they may encounter lower prices, discounts and other deals, high quality service, convenience of buying and returns and a wider range of products, leading them to make their purchase there (Arora, S. and Sahney, S., 2018). For a significant portion of the people who use a smartphone during their visit to a store, the information that is available online affects their experience, their purchases and their loyalty to the store (Shopping Tomorrow, 2020). This information can also be displayed in the store itself, eg. using a digital information screen. Showrooming is problematic for retailers who do not have their own online store. They have to convince customers that their products are good value for money and that this outweighs the advantages of buying online. Furthermore, retailers who do have an online store can encourage customers to place their order online while they are in the physical store, eg. by offering them assistance or a discount. People not only switch between online and offline stores and vice versa, they also switch between different devices during the orientation and buying process. Research by De Haan et al (2018) has shown that conversion increases when customers switch from a mobile device to a desktop computer or laptop. This is most often the case when the purchase includes a product that, from a consumer point of view, is risky to buy because the price is higher and the customer lacks experience with the type of product or with the online retailer. For this reason, it is especially important for customers to be able to switch smoothly between devices. 3.2.3 Five types of shoppers A study by Herhausen et al (2019) established that there are five types of shoppers: 1 Store-focused shoppers 2 Pragmatic online shoppers 3 Thorough online shoppers 4 Multiple touchpoint shoppers 5 Online-to-offline shoppers Each of these segments finds different things important. In Table 3.1 you will find an overview of the ‘touchpoints’ that are most relevant to each when searching for and buying products and what will turn them into loyal customers. 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 75 26/11/20 4:55 PM  76 © Noordhoff Uitgevers bv TABLE 3.1 The most relevant touchpoints per segment Segment Description Main touchpoints What to do to make this group loyal to a store Store-focused Use only two touchpoints in Physical store Digital Marketing is pointless. shoppers the search phase, consult few Competitor’s physical Better to provide an inspiring online sources and almost stores physical store with an attractive always buy from a physical Word-of-mouth selection of products that are store. Hardly ever use mobile appropriately priced in terms of devices. value for money. Pragmatic Use only two touchpoints in Online store Provide service online. Ensure an online shoppers the search phase, consult Other online attractive presentation of the range many online sources and touchpoints of products available online and 3 almost always buy from an Catalogues appropriate pricing in terms of online store. Average use of value for money. mobile devices. Providing an efficient purchasing process so that products can be bought quickly. Thorough online Use four touchpoints in the Online store A segment for whom services shoppers search phase, mostly online. Competitor’s online should only be provided online. Always buy from an online store Provide extensive online search store. Use mobile devices Search engines options and product information. more than average. Try to keep them within your own online store. Multiple Use more than six touchpoints Online store Segment for whom the provision of touchpoint during the search phase, Physical store Search services must alternate seamlessly shoppers more than half of which are engine between online (mobile) and online. Usually buy online. offline touchpoints, during the Mobile use is high. search phase as well as the purchasing phase. Provide inspiration and invest in search engine marketing. Online-to-offline Use four touchpoints in the Physical store Servicing this segment must occur shoppers search phase, more than half Search engines online during the search phase of which are online. Purchases Competitor’s online and offline in the purchasing are always made in the store phase. Ensuring an attractive range physical store of a local of products with appropriate retailer. Mobile usage is pricing in terms of value for money, average. throughout the various channels. Provide a seamless experience within the relevant touchpoints. Inspire the customer. Source: Herhausen et al 2019, edited. Digital Marketing professionals should identify which segments they want to focus on and take the specific preferences of those segments into account when making their plans. § 3.3 Online buying process and the Digital Marketing funnel Anyone who purchases a product or service goes through the following stages of the purchasing process: acknowledgement of needs, seeking information, evaluation of alternatives, purchase and result (Engel, Blackwell & Miniard, 1990). In online shopping there are two decisions: the choice of the product to be purchased and the choice of the online store. 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 76 26/11/20 4:55 PM  © Noordhoff Uitgevers bv MARKET SENSING 77 Therefore, an additional step in the model shown below (Figure 3.6) is included: the channel selection. After some online orientation, consumers can purchase the product in an online store or from an online marketplace, physical store, or through another sales channel (eg. by phone). FIGURE 3.6 The six phases of the online buying process 3 evaluation searching sales need alternatives for channel purchase result recognition and product information decision selection We will now discuss the six phases of the online buying process: Online buying 1 acknowledgement of needs process 2 seeking information 3 evaluation of alternatives and product selection 4 choice of sales channel 5 purchase 6 result 3.3.1 Acknowledgement of needs The consumer becomes aware that their current situation can be improved before deciding to buy a product or service. They might feel hungry, thirsty or suddenly feel like going away for a weekend. This awareness can be caused by actually missing something in the current situation (eg. the toothpaste has run out) or because the consumer has aspirations for the future (a fitter body or romantic dinner with his or her partner). This moment of dissatisfaction could arise whilst using the internet but could happen at any time. Online, consumers are free to choose their own path. When they are in a physical store, high street or mall, they are more or less constrained by the layout. As a result, they experience limitations in distance and time. Online, the user is exposed to a variety of products within a short space of time. However, this does not always lead to more impulse buys. Once people are used to online shopping, they respond to ‘temptations’ online in the same way as they do offline (Amos, Holmes & Keneson, 2014). Eg. marketers use audience-targeted ads, newsletters, promotional offers, and rankings of the most viewed or purchased products. 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 77 26/11/20 4:55 PM  78 © Noordhoff Uitgevers bv 3.3.2 Seeking Information The consumer seeks out which products or services meet their wishes as best as possible. They collect and process information. In the previous chapter we learned that seeking information is one of the most important activities on the internet. Worldwide, 90% of store visitors do prior research online (thinkwithgoogle.com, 2020). The search process can be split into two different classifications: ‘internal search’ and ‘external search’. Before a consumer seeks information, they will first try and recall what they already know about the product category or product. The extent to which an internet user will then actively go looking for this information online, depends on what they assume the benefits will 3 be. If they have experience in buying a particular product, are satisfied and do not feel like they are at risk, they will seek out little information. They Routine are displaying what is called routine purchasing behaviour and they will purchasing base their decision on one or a few simple features of the product or the behaviour provider. If the web user wants to buy something that they have experience with, but still consider to be a risk, they will consider alternative brands or providers. They already have a reasonable idea of the evaluation criteria to apply, know about relevant websites and are therefore performing a very limited search. An example of this is an experienced driver who is looking for a new car insurance policy. When the consumer wants to purchase a product they have little experience of, especially if it is ‘high ticket’, they will search extensively. Products such as long-haul holidays, mortgages, cars and pensions fall in this category for many people. Search When consumers search extensively, the process consists of two phases extensively (Payne et al., 1993): 1 screening of possible alternatives by looking for products that match their preferences in different ways 2 searching for more detailed information about the alternatives that were found Asda enables routine (repeat) buying behaviour online 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 78 26/11/20 4:55 PM  © Noordhoff Uitgevers bv MARKET SENSING 79 The extent to which people are motivated to actually search for detailed information and the depth of their search depends on the extent of their involvement in the purchase decision. Mittal and Lee (1989) define this as Involvement ‘the extent of interest and the importance that a customer attaches to a careful purchase decision’. When people decide to search online, the next question is: where do they do it? using a search engine via a website, eg. a content website or an online retailer via other online channels, eg. social media 3 Consumers select an information source based on (Vroomen, 2006): the information provided convenience the range of products that are presented perceived risks the enjoyment of using the channel In theory, the search process online is faster than when people physically go shopping. In practice, this is not always the case. The internet contains a huge amount of information and alternatives. The more alternatives the consumer is considering, the better (in theory) the quality of their decision. But on the other hand, scrutinising all possibilities takes a lot of time. Decision-making Tamaki (2005) calls this the ‘decision-making paradox’. paradox As a website better enables consumers to combine a high-quality evaluation of many alternatives with speed, it gives consumers more value. This may mean that the tendency of the consumer to look elsewhere decreases. Appreciation of a website leads to lower price sensitivity and increasingly higher-ticket purchases (Teo & Yeong, 2003). An interesting development is the fact that consumers are using visual searching (searching by image) with increasing frequency. More than half of smartphone users say images serve as inspiration and help them to decide on which product to choose. The use of voice search is also increasing dramatically (thinkwithgoogle.com, 2020). 3.3.3 Evaluating alternatives and product selection In order to be able to decide which product or service best satisfies their wishes and needs, the consumer must determine evaluation criteria. Only Evaluation once the consumer has determined what matters to them, are they able to criteria weigh up the possibilities and determine what is, in their opinion, the ‘best’ product. By evaluating the different alternatives, the consumer aims to achieve the choice of product that offers them the greatest value. This perceived value is a combination of all the benefits that the consumer will Perceived value receive when purchasing the product, offset by the size of their investment. In setting evaluation criteria, consumers will be inspired by both online and offline sources of information: eg. product descriptions, tests, blogs and posts on social networks. For marketers it is important to find out what the relevant evaluation criteria are for their target groups. Some market segments are particularly inclined 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 79 26/11/20 4:55 PM  80 © Noordhoff Uitgevers bv to decide based on pricing, others are more focused on eg., quality or brand personality. In order to assist the consumer in setting evaluation criteria and evaluating alternatives, there are several options, eg. the inclusion of decision support systems on the website, product reviews, user reviews, and independent testing. This will be discussed in greater detail in Chapters 4 and 8. While providers’ websites play an important role in the information seeking process, consumers tend to attach value to the opinion of independent third parties. Websites containing reviews, reviews by Google, blogs and other social media play an important role in this phase. Individual customer ratings greatly influence a person’s attitude towards a product, more so 3 than general satisfaction scores. The presence of positive online reviews and the absence of negative ones has a positive influence on the purchase intention, especially if it concerns a large number of reviews with useful content. Reviews also influence people’s attitudes towards a brand, especially when emotions play a major role, as is the case for lifestyle brands (Zablocki et al., 2019). 3.3.4 Choice of sales channel When the consumer has found the product that best suits their needs, they either buy the product through the channel where they found it, or elsewhere. That may be in the physical counterpart to the website where they found the product or from another online or offline provider. During the purchase phase, the range of products, perceived risk and after-sales service of the (online or offline) store are the most important criteria for the consumer. There are also indications that the decision to purchase via the internet or in a physical store is related to the complexity of the purchasing problem for the consumer as well as their experience with that type of product. The choice of channel is highly personal and situational. Consumers choose between online and offline stores based on their perceived value. Consumers evaluate the possible time savings, a wider range/more choice (content and User Experience UX), delivery and other factors against money, time and risk. If the consumer feels that they get the ‘best’ value on a website, they are less likely to look for alternatives (Anderson & Srinavasan, 2003). The quality of the website is a crucial determinant of sales volume. Consumers exhibit complex behaviours when choosing a channel. Eg. sometimes they visit a large number of channels for product information and to evaluate products. Even if the customer ends up buying somewhere else, an attractive website leads to a positive attitude towards the brand and to a stronger bond. Omnichannel An omnichannel strategy, where customer experience moves seamlessly strategy between online and offline channels, offers some ‘stickiness’ to retain customers, but preventing customers from researching other suppliers is of course impossible. 3.3.5 Purchase The intent to purchase is not always converted into an actual purchase. Payment issues, or an item not being in stock, are some of the many 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 80 26/11/20 4:55 PM  © Noordhoff Uitgevers bv MARKET SENSING 81 reasons why a purchase might not be completed at a given time. Research has shown that even the addition of items to the online shopping cart does not automatically result in a purchase. This is due to the following reasons: Consumers do not use the shopping cart as it was intended, but as a way of temporarily storing alternative options or as a wish list. Consumers use the shopping cart to find out what the total price will be, including administrative costs, shipping, etc. Or to respond to a promotional offer and keep the products ‘on hold’ in their shopping cart while looking for even cheaper alternatives. Consumers have the intention of making a purchase but encounter obstacles eg. payment difficulties (Kukar-Kinney & Close, 2010). 3 This underlines the importance of an efficient order and payment procedure, the option of a separate ‘wishlist’ and the ability to hold products in the shopping cart for a longer period of time or to be able to otherwise retrieve the cart after having left the website (eg. to drive ‘abandoned carts’ emails). If the consumer encounters too many obstacles, they will find a different sales channel or abandon the purchase completely. 3.3.6 Result In the evaluation phase, the customer will again weigh the pros and cons of buying from the supplier’s website. The result of this consideration will leave them more satisfied or less so. Very satisfied customers are usually loyal customers who return to the online store. Srinivasan, Anderson and Ponnavolu (2002) investigated the many factors that promote ‘e-loyalty’. E-loyalty They identified the following eight Cs (8C model): 8C model 1 customisation 2 contact interactivity 3 cultivation 4 care 5 community 6 choice 7 convenience 8 character 1 Customisation Customisation is the extent to which an online retailer tailors the products, Customisation services and the environment (within which the transactions take place) to the individual customer. By customising, the likelihood that people will find something they want to buy is increased and the impression is given that there is a broad range of choice. It leads to a better match between customer and product and transactions are more efficient. This is done by eg. automatically reading customer data, but also because people are not forced to compare dozens or hundreds of alternatives. 2 Contact Interactivity Contact interactivity is the ‘dynamic character of the online retailer’s Contact engagement with their customers on the website’. This can be done by the interactivity presence of customer support tools on the website and by facilitating mutual communication between company and customers. Interactivity 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 81 26/11/20 4:55 PM  82 © Noordhoff Uitgevers bv makes the search process easier: customers have less to remember. This leads to an increase in the perceived value of the website. In addition, interactivity allows a lot more information to be presented to the customer. This increases the customer’s sense of control and freedom of choice. Srinivasan et al. (2002), for example, use the example of looking for a book. In a physical bookstore, you can only read the flap texts, whilst online you can also read reviews by others or get recommendations for similar books. The online retailer is able to build up knowledge about the tastes and preferences of their customers through interactive communication, thereby increasing the quality of their recommendations. This allows them to offer more value to the customer. 3 3 Cultivation Cultivation Cultivation is the extent to which an online retailer offers relevant information and encourages customers to expand the breadth and depth of their purchases over time. Eg. by using newsletters to proactively provide information to customers, the customer can be encouraged to buy more products and allows for cross-selling. Online furniture retailer MADE.com regularly sends its customers an enewsletter about newly arrived designs. On eBay, advertisers can distribute ‘package inserts’ included in the parcel delivered to the customer, sent by various sellers. As an advertiser, you can specify which target audience your inserts will reach (eg. female buyers in the ‘Baby & Kids’ section). MADE.com builds customer relationships by showcasing new designs in their enewsletters 4 Care Care Care is the attention an online retailer gives to all interactive activities before and after the purchase, which are intended to facilitate the transaction and strengthen the long-term relationship with the customer (Srinivasan, Anderson & Ponnavolu, 2002). Eg. the care that the provider takes to try to prevent anything from going wrong and their response if that accidentally happens anyway. Are complaints resolved quickly and prudently? Another component of care is informing customers about the availability of products adequately and in a timely manner. 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 82 26/11/20 4:55 PM  © Noordhoff Uitgevers bv MARKET SENSING 83 5 Community A branded community is an online social group that consists of existing and Community potential customers and is coordinated and maintained by the online retailer. Within this online community, customers can exchange opinions and information. This can be done on a forum or by posting reviews. You can read more about this in Section 10.6. 6 Choice Online retailers are able to offer their customers a broad and deep range of products, increasing their options (choice). There is no definite restriction Choice on product availability and floor space because the online retailer is not required to physically exhibit their goods. Additionally, in some cases, the 3 original manufacturer or a partner retailer can even take care of shipping. A wide range of products allows the website visitor greater convenience and time saving. The online retailer with the most extensive range will often be the dominant player in an industry and can accumulate many loyal customers. 7 Convenience Convenience is the extent to which the customer feels that the website is Convenience simple, intuitive and user-friendly. This includes the accessibility of information and the simplicity of the transaction process. In many cases, the customer uses the quality of the website to gauge the extent to which they are dealing with a good, reliable supplier. Moreover, according to Srinivasan et al. (2002), customers don’t make as many mistakes on an easy-to-use website, which automatically leads to greater customer satisfaction. 8 Character Character, or the individuality of a website, is the brand image that the Character online retailer conveys to the site visitor by using, eg. text, style, images, colours, logos and slogans or themes on the website. The character of the website underlines the brand personality of the online retailer. If this brand personality appeals to the visitor and they experience a bond with the brand, this will lead to greater loyalty and more visits. Research (from Wang, Pallister & Foxall, 2006) shows that the degree of involvement that the site visitor feels with the product they are looking for is of great importance to their sense of loyalty. The more important the decision is to the consumer, the greater the probability that satisfaction will lead to loyalty to the website and the more connected they will feel to the online retailer’s brand. This means that the probability that they will buy a product again on that website is increased. Website visitors with a strong sense of involvement have a lower risk perception than people for whom the decision is less important. People who feel less involvement with the product they want to buy usually search on a limited number of websites of well-known brands and estimate the risks to be higher. Another important point for evaluating the value of the website is the extent to which the visitor experiences what is called flow. Flow is the extent to Flow 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 83 26/11/20 4:55 PM  84 © Noordhoff Uitgevers bv which a person is fully absorbed in what they are doing. Flow gives the site visitor a sense of control over their experience on the website and that leads to an enjoyable feeling and taking pleasure in the visit. This results in a positive attitude towards the online provider and a greater likelihood of a repeat visit (Sicilia & Ruiz, 2007). According to research by Lee, Ha and Johnson (2019), satisfaction about a digital sales channel is a positive reflection of three elements of flow: to what extent the visitor has a clear goal, to what extent it is confirmed that achieving that goal is within reach and the pleasure that is experienced as a result of shopping. Too much flow can also be detrimental: if a visitor becomes too immersed in the website, starts to feel detached from reality, 3 this may lead to a feeling of dissatisfaction. This may be related to the feeling of being pushed into making impulse buys or that shopping is taking up too much of their time. Flow is the extent to which site visitors are fully absorbed in what they are doing In recent decades, research has shown that the impact websites have on brand awareness is influenced by: factors related to the individual: involvement, interactivity they experience and the feelings of being ‘in the flow’ factors related to the website: the actual interactivity of the website, the usability of the website, the features on the site and the extent to which the website is aligned with the brand image The factors related to the website both affect the extent to which visitors Likeability appreciate the website (likeability) as well as brand attitude. Although marketers cannot directly influence the factors that relate to the individual, they can take them into account when constructing their websites. This means that they must know the characteristics, wishes and needs of the website’s users. Marketers can control the factors that relate to the website: they can maximise interaction and user- 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 84 26/11/20 4:55 PM  © Noordhoff Uitgevers bv MARKET SENSING 85 friendliness, provide lots of features and encourage their use, and ensure a good match between the brand’s desired image and the website’s personality. As described in Chapter 2, the enterprise strategy, including branding policy, should be an important starting point when putting together a Digital Marketing plan and the resulting communication tools. 3.3.7 The Digital Marketing funnel The steps of the online buying process – needs acknowledgement, information seeking, evaluation of alternatives, choice of sales channel, actual purchase and satisfaction with the result – can be translated into the objectives of the digital marketer. A useful tool to help you with this is 3 the Digital Marketing funnel, which already has been discussed briefly in Digital Marketing Chapter 1: funnel 1 Visit 2 Captivate 3 Decide 4 Order 5 Pay 6 Bind The Digital Marketing funnel is a funnel made up of objectives for a digital sales channel (see Figure 3.7). The idea is that the digital marketer generates as many visits as possible from people within the target audience, guiding the visitors step by step through the ‘Digital Marketing funnel’, ultimately achieving the desired number of sales and satisfied repeat customers via the digital sales channel. Example 3.1 illustrates what the objectives for each of the steps of a Digital Marketing funnel for an online store might be. EXAMPLE 3.1 The Digital Marketing funnel for an online store Out of the 100,000 visitors to a website, 75% (say) will look beyond the homepage, 25% will immediately leave. Out of the 75,000 visitors who view more than one page, 60% use the site search tool to find products. These are people who are in the process of deciding whether to buy a product. Of these 45,000 who are still deciding, 33.3% (15,000 visitors) will order a product on the website by clicking on the order button. 90% of these orders ultimately pass the payment process, resulting in 13,500 sales. Of these customers, 50% are returning customers, with whom a bond has been established. These customers have their own account and, should they so choose, receive a newsletter. The other half are new customers. 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 85 26/11/20 4:55 PM  86 © Noordhoff Uitgevers bv FIGURE 3.7 Digital Marketing funnel completed Visit: 100,000 (100%) Captivate: 75,000 (100% × 75%) = 75% Decide: 45,000 (100% × 75% × 60%) = 45% Order: 15,000 3 (100% × 75% × 60% × 33.3%) = 15% Pay: 13,500 (100% × 75% × 60% × 33.3% × 90%) = 13.5% Bind: 6,750 (100% × 75% × 60% × 33.3% × 90% × 50%) = 6.75% Visit: number of visitors. Order: click order button Captivate: more than 1 page viewed Pay: paid Decide: search tool used Bind: returning customer Source: Visser & Sikkenga, 2018 Digital Marketing We further elaborate on the Digital Marketing funnel below: funnel 1 Visit The online marketer’s first objective is to ensure that people with the Visit (possible) intention to buy, visit their online presence or sales channel. This could be a website, an app, a marketplace, but also a social media channel Critical success that is aimed at sales. The critical success factors (CSFs) in this phase are factors brand awareness, brand image, discoverability of the sales channel and the promise (proposition). The most important instruments for encouraging a visit are the Marketing Communications Programme (see Chapters 5 to 7). At this stage, it is important to measure how many visitors have found their way to the website, whether or not they belong to the intended target audience, through which communication channels they found the website, and, for each communication channel, how much each visitor has cost. This kind of data enables communication efforts to be optimised. In Chapter 12 you will find more information about ‘digital analytics’, the analysis of the results of Digital Marketing. 2 Captivate The second objective is to ensure that visitors are so captivated (= engaged = interested = motivated) by what they find on the website, in the app or on the social sales channel, that they want to find out more about what is on 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 86 26/11/20 4:55 PM  © Noordhoff Uitgevers bv MARKET SENSING 87 offer. On a marketplace, the product page must be sufficiently interesting, because this is not the place where you want customers to begin looking into the other products on offer. As you can read in Section 3.5, the critical success factors in this ‘Captivate’ phase are the information (in-depth, Captivate current) that the sales channel offers, the range of products on offer, how easy it is to search and navigate, the feeling of security and, not least, the Navigate enjoyment and the feelings that visitors experience. At this stage it is important to take note of the amount of time spent by each visitor on the individual online channel, eg. how many pages they view, which pages are most popular, how the visitor moves from one page to another (navigation) and at which point they finally leave the channel (exit page). Also, the so- called ‘bounce rate’ is important: the percentage of visitors that click away Bounce rate 3 from the site, having visited only one page. With the help of this type of data, the digital sales channel can be optimised, and the marketing communications mix can be adjusted, eg. to create a better match between the expectations of the visitors and what they actually encounter. The most important tool for engaging visitors is the digital sales channel (eg. the website) itself. For more information on building effective websites and apps, see Chapter 11. 3 Decide The third objective is to ensure that the visitors compare and evaluate products in order to come to the decision to buy. Critical success factors are: adequate product information (in line with consumer search criteria), a variety of products that are readily available, advice that supports the visitor in their decision, product reviews, and clear prices. The most important tools here are the search and advice module and the catalogue, Search and the list of available products and the associated information. Examples of advice module relevant measurements are: use of the search tool, applied search Catalogue criteria, use of product information and price information. Using these measurements, the content of the website can be modified, and modules can be optimised. More information on online sales and prices can be found in Chapter 8. 4 Order The fourth objective is to ensure that the visitor actually buys the chosen product via the digital sales channel and does not go to a different provider. Critical success factors at this stage are: trusting the provider, the convenience of the order process, the pricing in relation to the competition Order and responsiveness (responding actively and adequately to potential convenience questions). The checkout page and the on- and offline answers to questions Checkout page are decisive tools. In this phase, actual orders are measured: ie. requests and reservations, purchased products, realised (achieved) prices and turnover. 5 Pay The fifth objective is to persuade the visitor to complete the payment process so that actual sales are achieved. Ease of payment and trust are the critical success factors here. The payment module is the relevant tool. Payment module What can be measured are the number and value of transactions. The User Experience (UX) of the checkout page is crucial here. More information about payment can be found in Chapter 9. 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 87 26/11/20 4:55 PM  88 © Noordhoff Uitgevers bv 6 Bind Bind The sixth objective is to ‘bind’ or ‘stick’ the buyer to the organisation to encourage repeat purchases. Critical success factors in this phase are: the experiences the buyer has relating to the purchased product, the quality perception of the online sales channel and the extent to which the buyer feels a bond with the brand. Relevant processes at this stage are order processing and customer service (Chapter 9) and customer relationship management or CRM (Chapter 10). Customer Service provision and delivery are also key. Important measuring points are the number of returning visitors, repeat purchases and customer satisfaction. The information regarding The Digital Marketing funnel as described above, 3 is shown in Table 3.2. TABLE 3.2 The Digital Marketing funnel Visit 100% Captivate Decide % Order % Pay % Bind % % Critical Brand Information Product Trust Ease of Experiences success awareness Range of information Order payment with the factors Brand image products Range of convenience Trust purchased Discoverability Ease of use products Pricing product Proposition Safety Advice Responsiveness Quality Enjoyment/ Evaluations experience flow Price regarding information the sales channel Brand binding Core Marketing Website Catalogue Checkout Payment Order processes Communication App Search and Answering module processing and Social media advice questions Customer instruments module service CRM Examples of Number of Time on Use of the Number of Quantity and Return measurements visitors site search ordered value of the visitor Characteristics Page views module products realised Repeat of visitors Most Search Realised prices transactions purchases Source of visited criteria Turnover Customer visitors pages Use of the Requests/ satisfaction Cost per Paths product reservations visitor followed information Bounce Use of the rate price information Using The Digital Marketing funnel allows an online marketer to make calculations, eg. of how many ecommerce site visitors are needed to generate a particular amount of sales. Let’s say the conversion rate (number of buyers/number of visitors) is 13.5%. If the aim is to achieve 27,000 buyers in the coming period instead of 13,500, you will have to attract 200,000 visitors to the website. The main purpose of using the funnel is to find out which processes can be optimised and what effect it will have on sales. Eg. for a shopping site the ecommerce manager can test whether a change in the search process will 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 88 26/11/20 4:55 PM  © Noordhoff Uitgevers bv MARKET SENSING 89 lead to more orders. Suppose that by selecting criteria that better match the visitor’s wishes, the percentage orders increase from 33% to 40%. The other percentages remain the same, as no other changes are made. This would lead to a conversion rate of (100% × 75% × 60% × 40% × 90%) = 16.2%. That means 20% more sales (16,200 orders). A shopping site ecommerce manager can then compare the result of investing in paid search with optimising the payment process and other options for improvement. Finally, you should of course choose the improvement that yields the best return on the investment (ROI). Of course, every business is unique and organisations must determine the steps for their own Digital Marketing funnel based on the main objectives of their own Digital Marketing programme. The funnel must be custom- 3 made. § 3.4 Use of social media Social media are web applications where users can create and share Social media information and communicate with each other without the intervention of third parties. There are different types of social media. 1 A blog (a combination of ‘web’ and ‘log’) is a chronological list of messages that visitors can read and respond to. 2 Business networks are used to seek and maintain professional contacts. LinkedIn is the most well-known. 3 Collaborative projects bring together internet users with common interests with the aim of planning, developing, improving, analysing and/or testing technological, academic, scientific or simply fun projects. Wikipedia is the best known example. 4 Corporate social networks are only open to employees of a specific organisation. Eg. the international consultancy firm Capgemini uses a social business network on which short, ‘twitter-like’ messages can be shared between employees. 5 A forum is a virtual discussion platform where users can ask and answer questions as well as exchange thoughts, opinions and experiences. On such a platform, communication does not take place in real time, as in a chat, but it is delayed and usually open to the public. The subject of such forums can be anywhere between general to highly specialised. Tweakers (www.gathering.tweakers.net), is aimed at people with a specific interest in technology. 6 Microblogs limit the length of posts to around two hundred characters. Images or hyperlinks can sometimes be added. Users can subscribe to updates from other users, companies, brands or celebrities. Twitter is the best known example of this type of platform. 7 Image-sharing websites allow users to make use of services eg. uploading, hosting, management and sharing of images and photos. These can often be edited online and stored in albums. Users are also able to leave comments. Instagram and Flickr are two examples. 8 Review websites sell and provide information about products or services. Customers are able to assess products or product features and read or write reviews. Examples are Tripadvisor and Trusted Reviews. 9 Social bookmarking is the concept of storing and organising bookmarks on the internet (bookmarks) on a central platform for the purpose of Bookmarks 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 89 26/11/20 4:55 PM  90 © Noordhoff Uitgevers bv sharing them with friends and other users. Reddit is the best known example. 10 Social games are online games that allow or require social interaction between players. Candy Crush Saga is an example of this. 11 Social networks connect people who already know each other, share common interests or wish to pursue similar activities. Users have an individual profile where they can upload photos and videos and they can be found by other users when they search for their full name. Facebook is the biggest social network. 12 Video sharing platforms allow users to upload and share personal, professional or royalty-free videos and provide the opportunity to view them legally. It is also often possible to react to these videos by leaving 3 comments. YouTube is the biggest video platform. The Chinese alternative is youku.com. 13 Virtual worlds are populated by many users who create their own personal avatar and simultaneously, independently of one another, discover this virtual world, participate in activities or communicate with others. Unlike computer games, time continues even when the user is not logged in. Virtual worlds often use a virtual currency that has actual value and allows companies to sell virtual or real life products. World of Warcraft was one of the most popular games of this kind (Sikkenga and Visser, 2017). Another is Second Life. The role of social media in communicating with the market has continued to increase. For this reason, it is important for organisations to continue Social business to work towards becoming a social business: where communication through social media is fully integrated into planning and practice of a business. As a digital marketer, it is important to know what drives the consumer to use social media in order to be able to respond to their needs. We will first define three types of social media users. Following on from there, we will discuss six motivations that lead to the use of social media for brand- related activities. We will then examine what the motivations are for each type of user. Finally, we will illustrate how consumers’ brand-related activities are influenced by the attitudes that they have towards a brand. 3.4.1 Three types of users Muntinga, Moorman and Smit (2011) argue that the activities of social media users can be classified into three types of brand-related activities based on increasing activity: consuming, contributing and creating. Consuming ‘Consuming’ requires the least amount of activity from the user and includes, eg. viewing brand-related photos or videos or reading about product experiences, without contributing or creating any content. Contributing Users of the ‘contributing’ type respond to, eg. articles, photos or videos, or contribute to discussions or wikis. Creating Users of the ‘creating’ type are active producers (creators) of brand-related content, eg. photos, videos, reviews, or articles. 3.4.2 Six types of motivations As mentioned in the introduction to this section, use of social media should Uses and be active and goal-driven and based on user needs (Dainton & Zelley, Gratifications 2005). This statement stems from the Uses and Gratifications Theory, a Theory theory that focuses on why individuals use certain media. The Uses and 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 90 26/11/20 4:55 PM  © Noordhoff Uitgevers bv MARKET SENSING 91 Gratifications Theory states that you as an individual have a free will and therefore make choices about which media you use and when you use them. The choices and decisions you make as an individual are based on personal needs and values that you wish to fulfil. McQuail (1987) has defined four general motivations for why individuals access media and content and thus perform brand-related activities: for Entertainment, for Information, Personal Identity and lastly for Integration and Social interaction. Based on a literature study, Muntinga et al. (2011) added two motivations to the original four that are relevant to social media, namely Reward and Self-fulfilment. In the diagram in Table 3.3, these six motivations are briefly described. 3 TABLE 3.3 Motivations that are relevant to social media Motivation Description and examples Entertainment For relaxation, enjoyment, escaping reality or ‘killing time’, watching videos on YouTube or participating in a social game on Facebook/Instagram Information Seeing what’s happening in your immediate vicinity by reading status updates on Facebook/Instagram, seeking out opinions and stories, increasing your knowledge by viewing pages on Wikipedia or videos on YouTube or reading reviews on a product before purchasing it to decrease risk Personal Identity For self-expression, gaining recognition and self-confidence, presenting yourself to the world by posting home-made videos or photos online to YouTube or Instagram or by updating your LinkedIn profile with your most recent experiences Integration and For social interaction on a social network like Facebook, seeking and giving Social support and advice on, eg. a forum, identifying with others by joining a Interaction LinkedIn Group and participating in social media because others do – to ‘hang out with people like me’ Reward Consuming, contributing to or creating brand-related information because you expect to get something in return in the future Self-fulfilment Using social media to exercise influence or power on others, ie. by writing their own blog 3.4.3 Users have different motivations Research from Muntinga et al. (2011) shows that the defined user types – people who consume, who contribute and who create – all have different motivations for performing these brand-related activities. Next, we will discuss the relationship between brand-related activities and brand attitude. Motivations for consuming brand-related information Users who consume are driven mainly by information-related motivations. Within information-related motivations there are four sub-motivations, Information- namely observing, acquiring knowledge, acquiring information in order to related motivations make a purchase and gaining inspiration. Within the information-related motivations, observing is by far the biggest motivation for consumers to engage in brand-related activities. Eg. social media users observe other people’s opinions about a brand or note which news articles are currently relevant to their brand. In addition to the information-related motivations, entertainment also appears to be an important motivation for consuming brand-related information. Users of social media consume brand-related Brand-related information to relax, kill time or for entertainment (and to stop being bored, information to be amused/distracted, to relax). Finally, motivational reward also plays a 03_275468_DIGITAL_MARKETING_FUNDAMENTALS_CH03.indd 91 26/11/20 4:55 PM  92 © Noordhoff Uitgevers bv role in why users consume brand-related information, although this motivation is only slightly present (Muntinga et al., 2011). In B2B marketing, target customers may consume content in order to deepen their knowledge, to do their jobs better or to advance their career. 3 Reading reviews from other consumers before going on a city trip is an example of consuming brand-related information to reduce the risk of making a bad purchase decision The information-related motivations for consuming brand-related information are consistent with the online consumer behaviour model discussed in Section 3.3. In that model, seeking information is referred to as one of the six stages of the purchase process. Motivations for contributing to brand-related information Users who contribute, primarily engage in brand-related activities as a result Social of integration and social interaction motives, with social