Understanding and influencing consumer purchase decisions

  • Understanding consumer purchase decisions.
  • Influencing consumer purchase decisions.
  • Marketing funnel.
  • Pirate metrics explained.
  •  Mckinsey Consumer decision journey explained.
  • Google’s decoding decisions, making sense of the messy middle.

The most important aspect of any enterprise is monetization, also, the toughest at the same time.  A lot of factors contribute to success or failure of products and services and having a “good” product is never enough in modern times, all the pieces of the puzzle have to somehow fall in the right places for you to actually make a fortune out of your sweat. Now, the most unfortunate thing here is the fact that the process of monetization which majorly involves getting the right customers to value your product enough to pay for it, has a lot of levers and elements that are almost beyond your control. 

 And one of the most important elements is that moment of truth when the customer decides to buy a particular product. 

  • How do you influence customer decisions? 
  • This is what you must crack to cross the success line in your product launches.

 Traditionally, a few marketing models have been developed to track customer paths leading to this purchase moment, in a bid to influence the customers’ behavior and decisions and get them to buy your products. 

 The objective of this chapter is to provide guidance on modern methods for your product monetization.

 The marketing funnel

Commonly known today by the acronym: AIDA, this was conceived in 1898, by an ad agency executive Elias St. Elmo Lewis. 

He broke down the customer buying journey into distinct stages: Awareness, Interest, Desire, and Action. Depicted in a funnel form with the Awareness end having the largest base of potential customers and withering down as we progress down the funnel.

A lot of brands meet a lot of customers at the Awareness stage, Interest (Familiarity) sees a few customers and a few brands dropping out in the race, leading up to the Purchase and ultimately the retention (Loyalty) stage where the winning brands acquire actual paying customers.

This model looks clean and ideal in a society where there are few brands chasing after a large number of customers who are limited by information they get (typically only from the brands) and the options they have (usually limited to a few brands and products). However, it looks quite pale and unrealistic when exposed to modern reality where the internet has led to information overload and customers have a myriad of options at their beck and call.

The traditional funnel concept was quite effective in the past and has been modified over the years. One key focus of this model in modern times is the optimization of the consumer touch points at the different stages of the funnel. This, in a way, is still relevant till today. A good example of this adaptation of the funnel model is found in the Pirate Metrics as illustrated below.

Marketing funnel adaptation – The Pirate Metrics

Dave McClure categorized the customer-lifecycle into five stages, which he called the Pirate Metrics. AARRR! These metrics are simple, actionable and easy to measure. They are widely accepted for Startup performance measurement.

A for Acquisition – Track all the channels by which users access your product. When you have created awareness for your product and the value proposition is good to the users, the next step is user acquisition. 

Measure: User acquisition usually manifests in form of Email Subscribers to your product website, enquiry chat engagements on your website (e.g. via a bot), download of resources, users contacting via all the available contact us channels etc.

Optimize channels: Website landing page, Chat bots, Email newsletters, Resources download page, Contact forms, SEM, SEO, Blogs, Social Networks, Affiliates, Direct on TV, Telephone, PR etc.

A for Activation: At this point, the user gets to experience your product or service. Depending on the nature or your offering, it’s a good practice to offer a free trial period (e.g. 14days free trial), free consultations for certain services, freemium or pay per download (might require more convincing and demonstration of value). 

Measure: Free trial sign ups, freemium downloads (e.g. mobile apps and games), responses from sales contacts and engagements.

Optimize channels: Customer-Journey map of the products and services – optimize experiences in Buying, Payment, Usage and Support e.g. self-service features. 

R for Revenue: Users pay for your product or services. You’re a winner! However, your job is not done. You still need to measure, track and optimize to ensure these users are retained, and above all refer other users to your product. 

Measure: actual cost of acquisition of a paying customer, rate of Trial-to-paid conversion, customer profile and segmentation analysis (who buys what package of your product).

Optimize channels: customer journey map especially the Buying experience (Checkout flow and payment processes), user experience overall.

R for Retention: Users have enjoyed the product or service and return for more. This is definitely a good sign.

Measure

  • Customer lifetime value (CLTV), i.e. how much revenue the user generates for you in his/her lifetime of using your product. 
  • Incremental revenue. How have the users fared in generating revenue for you? Have they upgraded or downgraded on the services usage?
  • Churn – the number of users who stopped using your product over a period of time. They might have moved on to competition products or substitute products.
  • Net promoter score – NPS shows how happy your users are being with you versus being with competition.
  • Promoters (score 9-10) are loyal enthusiasts who will keep buying and referring others, fueling growth.
  • Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings.
  • Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth. 

Subtracting the percentage of Detractors from the percentage of Promoters yields the Net Promoter Score, which can range from a low of -100 (if every customer is a Detractor) to a high of 100 (if every customer is a Promoter).

Optimize channels: Customer lifecycle management (campaigns and other marketing initiatives such as gifts, discounts and freebies), retargeting and other product marketing initiatives.

R for Referral: Users refer other users to your product! Word of mouth marketing is very potent and leads to over 80% conversion rate. You need to offer very good experience at all points to ensure you create product/service ambassadors out of your users.

Measure: Net promoter score (NPS), Social shares of your communications and interactions.

Optimize channels: Referral marketing channels and initiatives, overall product/services experience

The modern consumer

  • The modern consumer is exposed to huge amounts of information – tends to be overloaded with information about products, services, ideas, events etc thanks to the internet. 
  • Well informed – the modern consumer has access to information about any subject at a click of the mouse. 
  • Bombarded by myriad options, hundreds of thousands of ads showcasing different products and services as he journeys through the day both at work, while commuting and while relaxing at home.
  • The world has become a global digital village – consumers are exposed to service providers from all across the world. Competition has gone global among service providers.
  • No doubt, consumer decision making is no longer linear.

 In view of this new psychographics definition of the modern consumer,  we are not surprised why the marketing funnel concept does not seem so effective anymore.

 Given the complex and convoluted nature of the modern consumer, the emphasis should not be so much on defining a funnel model or any model at all, but focused more on understanding what influences a consumer at the point of making that purchase decision. 

Dwelling on building a funnel or a model at this point in time seems like an exercise in futility given the complexity of brand vs consumer interactions and the products and services options available to consumers. 

It becomes especially hard to expect consumers to be loyal to certain brands when they can experiment and shop for better values from all the other similar brands and products available.

So, what are these elements that influence consumer decision making at the point of purchase? 

To be very honest, no one has the answer, don’t anyone mislead you into believing he has it figured out, because, even if he had tried a few concepts that worked out well for him in his business, there is no guarantee that same concepts would work out for your own business even in similar industry and geographic location. It’s that complicated, but nonetheless, manageable.

Below are a few recommended models for efficient and effective monetization.

Value Proposition

Customer Value

Customer value is the perceived value of your product or service to the customer. Products and services deliver fundamental elements of value that address four kinds of needs: functional, emotional, life changing and social impact.

Understanding this concept enables you to always craft value-adding and life enriching products and services for your customers and also achieve good commercial results.

A way to understand customer value could be to look at the basic attributes of a product or service that address four kinds of needs: function, emotion, life changes, and social impact.

Functional elements, for example, include saving time, reducing risk, and organizing. The pyramid below shows how value elements fit into the four categories.[1]

 

Products and services deliver fundamental elements of value that address four kinds of needs: functional, emotional, life changing and social impact. In general, the more elements provided, the greater customers’ loyalty and the higher the company’s sustained revenue growth. Companies that deliver well on multiple elements of value tend to have stronger customer loyalty and higher revenue growth rates, as Bain & Company’s analysis shows. The research documents 50 companies that deliberately added elements over time to improve their propositions, either to turn around a flagging business or to accelerate growth.[2]

The Value Proposition canvas

Simply put, a value proposition represents the brand promise to the consumers.

Elements to focus on:

I would recommend you start the journey from the Customer side of affairs with the following questions:

  • What are the customer’s actual Needs, Wants, Issues, Fears etc?
  • What drives purchase decisions – logical and emotional drivers?
  • Substitutes – what alternatives are they using to solve the current needs/wants/fears/issues?

Then your product must align with the above.

The value proposition must explain the following:

  • How your product solves customer problems, fulfils their needs.
  • The key benefits for the customer.
  • Value for money – The perceived value of your product should match the customer’s willingness to pay for the price you placed on the product vs competition.

Examples of Value Propositions

 

Remote Logistics (www.remotelogistics.co)

I used this in the context of the situation of the Nigeria/Lagos market at that time. According to PwC, Nigeria’s poor infrastructure has constrained growth in the logistics industry. Time delays, bottlenecks for shipments, poor tracking and tracing capabilities and poor logistics quality and

competence are all industry risks that weigh on growth prospects for logistics and transport industries.

These are some of the issues we hope to solve with our Remote Logistics platform – where we aggressively seek to improve efficiency and customer experience as our utmost priority.

Unique selling point

  • We leverage on technology to build platforms that will enhance good customer experience and service delivery in the logistics business operations, focusing on the following among others:
    • Ease of discovery
    • Ease of booking
    • Ability to view the dispatch riders and estimated time of pick up, drop-off and cost.
    • Transparency and regular notifications to all the parties involved to keep them well informed of the delivery status – Riders, Customer, Recipient and the Remote Logistics administrator.

 

SuperBi – www.superbi.co

Understanding customer value

Customer Value

Customer value is the perceived value of your product or service to the customer. Products and services deliver fundamental elements of value that address four kinds of needs: functional, emotional, life changing and social impact.

Understanding this concept enables you to always craft value-adding and life enriching products and services for your customers and also achieve good commercial results.

A way to understand customer value could be to look at the basic attributes of a product or service that address four kinds of needs: function, emotion, life changes, and social impact.

Functional elements, for example, include saving time, reducing risk, and organizing. The pyramid below shows how value elements fit into the four categories.[1]

 

Products and services deliver fundamental elements of value that address four kinds of needs: functional, emotional, life changing and social impact. In general, the more elements provided, the greater customers’ loyalty and the higher the company’s sustained revenue growth. Companies that deliver well on multiple elements of value tend to have stronger customer loyalty and higher revenue growth rates, as Bain & Company’s analysis shows. The research documents 50 companies that deliberately added elements over time to improve their propositions, either to turn around a flagging business or to accelerate growth.[2]

Market saturation and how to deal with it

What is market saturation?

Market saturation defines a point at which a market is no longer generating new demand for a firm’s products, due to competition, decreased need, obsolescence, or some other factor.

It is a measure of the extent of a product’s sales volume relative to the number of total potential customers, expressed as a percentage.

Formula: Sales volume of a product x 100 ÷ Number of total potential customers.

Signs that your market might be maturing

Every growth market must mature eventually, and entrepreneurs must be able to navigate the transition to maturity. Often the very basis for competition and value creation will change radically when a market matures.

  1. Customer needs do not appear to be evolving rapidly.
  2. Consolidation by leading competitors is reducing competitive intensity.
  3. New entrants are barely gaining market share.
  4. Products from all the competitors have similar features and offerings.
  5. Lack of new innovative products as old ones are constantly recycled.
  6. Market shares of leading competitors have solidified with minimal fluctuations
  7. Price, brand and channel strategy has supplanted product innovation as key value drivers.
  8. Cash flows are increasingly turning positive and being returned to investors rather than invested into the market.

Here are symptoms of a mature market

  1. High cost of operation.
  2. Price war leading to value erosion and low quality services
  3. Lean profit – very low profit margins.
  4. Non-investment/maintenance of infrastructure
  5. Poor Quality of services.
  6. Bad customer experience.

THE 3Es STRATEGY OF MANAGING SATURATED MARKETS

  1. Efficiency
  2. Optimize all operational activities to cut costs.
  3. Optimize product features, customer journey maps to ensure optimum performance and plug all revenue leakages.
  4. Optimization of all the customer touch points from activation on the network to product discovery, purchase, usage and support when issues arise.
  5. Embrace machine learning for customer management (self-service), product notifications and upsell as well as product recommendations. This cuts down the marketing campaign spend and effort.
  6. Personalization and automation is very key here to ensure good results.
  • Experience
  • Customer experience has to be re-invented to compete in a saturated market.
  • Positive Net Promoter Score (NPS) is required to turn customers to brand ambassadors.
  • This involves optimized communications, product & services experience as well as network experience.
  • Ecosystem
  • Watch and follow trends.

Let’s take the case of Telco market. Voice and SMS services have long been commoditized and out of vogue, now data is the new innovation fueling the emergence of so many innovative digital services and solutions.

Take the case of video and gaming services. Video and gaming have emerged as the hottest contents in this era.

To illustrate with the Telco S-curve below…

And take a look at Video service potential

And possible business models..

  • Market penetration and New product development

There is need to create new products and networks on these services in order to capture the right customers.

A good tool to guide in this scenario is the Ansoff Matrix tool. With this too you can evaluate different options such as developing new products or opening up new markets.

The Ansoff Matrix

For an existing saturated market, Market Penetration is the safest option. Here, you focus on expanding sales of your existing product in your existing market. There is this assurance that the product works, you only need to find better ways to sell.

New Product development is also a very good option if you have innovative product ideas. It is however slightly more risky, because you’re introducing a new product into your existing market.

  • Niche

Capture a profitable niche. 

Notwithstanding the dominance of brands like Coke and Pepsi, there are several very successful regional brands. Dr. Pepper and Big Red are both popular in the South and Southwest and have successfully made the transition to the national stage. In your market, there are likely profitable niches you can successfully capture and defend.

Innovate within emerging sub-markets or adjacencies. 

Mature markets often have niches that are evolving and/or underserved (e.g., the energy drink and bottled coffee beverage markets mentioned above). Your best target for “better mousetrap” innovation will often be those sub-markets or niches that are evolving rapidly within your mature market.

  • Solve problems

Find solutions to key problems in your space. Businesses that solve problems by creative value-adding products that enrich customers’ lives are always immensely successful.

Don’t focus only on transactional services, look for solutions to daily issues and needs of customers.

The 4Ps and 7Ps of Marketing Mix explained with comments

4Ps of Product marketing

“Marketing mix” is an expression used to describe the various types of decisions organizations need to make in the entire procedure of bringing a product or service to the market. The 4Ps is a way of characterizing the marketing mix, and was initially communicated in 1960 by E J McCarthy.

Here are a few comments about each of the four components:

  • Product

Products are mainly characterized by the value proposition, i.e. the benefits or value add to customers either in a way of solving customer problems or enhancing their daily activities. It is important to have clear objectives and target market for the product.

Providing answers to the following questions clarifies the concept of Product:

  • What needs does it fulfill?
  • What features does it have to address these issues?
  • How and where will the client use it?
  • What does it look like?
  •  By what method will clients experience it?
  • What size(s), color(s), etc. should it be?
  • What is it to be called?
  • How is it branded?
  • How is it differentiated versus your rivals?
  • What is the most it can cost to provide, and still be sold adequately beneficially?

  • Place

How the product will be provided to the customer is what determines the place or its placement. Thus, a product’s distribution is a major element in determining a products placement. The placement strategy can be helpful when it comes to assessing the most suitable channel of distribution to be used.

Questions:

  • Where do customers search for your products online, offline, what kind of channels?
  • How would you be able to get to the right distribution channels?
  • Do you have to utilize a sales force? Alternately go to trade fairs? On the other hand make online entries?
  • What do your rivals do, and in what capacity would you be able to gain from that and/or differentiate?
  • Price

Price refers to the real amount the end user is expected to pay for the product. The price of a product is a key factor on how it performs in the market. This is related to the product’s perceived value to the customer as against the actual product costing. A product with a higher or a lower price tag than its perceived value will not perform well in the market – either perceived as too expensive or cheap and low quality respectively. As such, understanding how a customer perceives what you are selling is extremely important. Factors such as distribution, value chain costs, markups and the way competitors price a rival product may also affect the price.

Pricing questions:

  • What is the value of the item or service to the buyer?
  • Are there established price points for items or services here?
  • Is the client price sensitive?
  • Will a little decline in value gain you additional market share?
  • On the other hand will a little increment be indiscernible, and thus gain you extra profit?
  • How will your price contrast with your rivals?

  • Promotion

The promotion plan comprises of the marketing communication strategies and techniques. These may entail advertising, sales promotions, special offers, as well as public relations. Regardless of the channel used, the promotion should be appropriate for the product, the price as well as the targeted end user.

Questions:

  • What channels would be used for promotions?
  • Will you reach your audience by advertising online, in the Press, on TV, Radio, or on Billboards?
  • When is the best time to showcase?
  • Are there any wider ecological issues that affect the timing of your market launch, or the timing of ensuing promotions?
  • How do your rivals do their promotions?

Using a marketing mix offers an excellent way to ensure that the right product is put in the right place. The marketing mix is a very important tool that helps businesses understand what value the product or service can provide and how to successfully market the product. This mix is generally implemented through the 4Ps of marketing, namely Price, Product, Promotion and Place.

The 7 Ps of services marketing

Services are very different from products. So the marketing concepts need to be revisited while marketing a service. Services can range from financial services provided by the banks, technology services provided by the IT Company, food and ambiance as a service provided by restaurants or even a blog where an author provides a service (information presentation, interesting reading etc) to his audience. Services marketing are dominated by the 7 Ps of marketing namely Product, Price, Place, Promotion, People, Process and Physical evidence. The 7P framework is one of the most popular framework for deciding a marketing strategy, right from strategy formulation to actual implementation.

We have already dealt with the 4Ps, hence we just run through the remaining 3Ps, thus:

  • People

The best food may not seem equally palatable if the waitress is in a sour mood. A smile always helps. Intensive training for your human resources on how to handle customers and how to deal with contingencies, is crucial for your success.

  • Processes

 Services being intangible, processes become all the more crucial to ensure standards are met. Process mapping ensures that your service is suitable for your target segment.

  • Physical evidence

Often, customers depend on other cues to judge the service offering. This is where physical evidence plays a part. Would you like eating at a joint where the table is greasy or the waitresses and cooks look untidy and wear dirty aprons? Surely you would evaluate the quality of your experience through proxies such as these.

Social media demographics 2019

Picking the right social media platform to promote your product or brand is very important. This saves you time and funds, ensures your hit bulls-eye in terms of right audience to promote your services.

One of the key actions to perform in selecting the best-fit platform, is to constantly review the demographics distribution of the users on each platform. This enables you to determine where your kind of audience are most domiciled.

Facebook demographics

It’s pretty obvious that one cannot ignore the Facebook platform when it comes to online engagements



Source: http://www.pewinternet.org/2018/03/01/social-media-use-in-2018/

Instagram demographics

Instagram age & gender demographics

Instagram leans towards a much younger audience than that of Facebook, appealing to teens and young adults with its straightforward, photo-centric design and ease of use.

The platform also is more popular among women than men, with 39% of online women using Instagram vs. 30% of online men.

Twitter demographics

Twitter is incredibly popular amongst its user base, and also has become an exceptional platform for brands to use for social customer service.

Twitter age & gender demographics

As one of the last remaining social networks with a chronological feed (for the most part), Twitter has stayed a favorite for many of its users. Most popular with people in their 20s, the breakdown of Twitter user demographics shows that the platform is preferred by those in younger age ranges.

Perhaps surprisingly, Twitter demographics for gender reveal that the spread of women vs. men on the platform is nearly even.

  • 24% of online women use Twitter
  • 23% of online men use Twitter

LinkedIn demographics

LinkedIn is the number one platform when it comes to B2B social media marketing. Known for connecting professionals, LinkedIn has over 590 million registered users.

LinkedIn age & gender demographics

  • 29% of 18-29 year olds use LinkedIn
  • 33% of 30-49 year olds use LinkedIn
  • 24% of 50-64 year olds use LinkedIn
  • 9% of 65+ year olds use LinkedIn

The percentage of online women and men on the social media platform is equal.

  • 25% of online women use LinkedIn
  • 25% of online men use LinkedIn

Pinterest demographics

Pinterest is a visual search engine that has revolutionized online shopping on their platform. With 250 million monthly active users and over 175 billion items pinned, it’s created an entirely new way to shop for products. In fact, 61% of pinners have made a purchase after seeing a product on Pinterest.

Pinterest age & gender demographics

Although more popular with younger users, an overview of Pinterest demographics shows it still has a steady user base across all age ranges.

  • 34% of 18-29 year olds use Pinterest
  • 34% of 30-49 year olds use Pinterest
  • 26% of 50-64 year olds use Pinterest
  • 16% of 65+ year olds use Pinterest

Although a higher percentage of online women use the platform, 50% of all new signups are men.

Snapchat demographics

Snapchat came along as a disappearing messaging app and has quickly turned into a common way for teens and young adults to chat with each other on their smartphones. Although it’s been recently outshined by Instagram Stories, another version of disappearing updates and messages, Snapchat still has 186 million daily active users.

Snapchat age & gender demographics

Snapchat’s strength is in its appeal to younger audiences, and many of its users visit the platform multiple times a day.

More women than men use the messaging platform.

  • 31% of online women use Snapchat
  • 23% of online men use Snapchat

Tags: social media demographics 2019, facebook demographics, twitter demographics, pinterest demographics, linkedin demographics, instagram demographics, digital marketing

Source: Source: http://www.pewinternet.org/2018/03/01/social-media-use-in-2018/

https://sproutsocial.com/insights/new-social-media-demographics/