- 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.
- 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.