Rethinking the Consumer Buying Process

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The cornerstone of every marketing plan is understanding the consumer, both why and how they buy your product/service. The purpose of this presentation is to explore how consumer buying has changed and how that impacts your marketing strategy.

It’s not a big revelation that the Internet and social media have changed the way consumers learn, work, relax and of course buy! In fact, many of the leading consultants and universities like McKinsey and Harvard have written dozens of research papers about this fact. http://hbr.org/2010/12/branding-in-the-digital-age/ar/pr http://www.brandingstrategyinsider.com/2010/02/the-fall-of-the-purchase-funnel.html https://www.mckinseyquarterly.com/Marketing/Strategy/The_consumer_decision_journey_2373# http://www.mckinseyquarterly.com/spContent/charts/code09/CDJ-Base.swf http://www.mckinsey.com/Client_Service/Marketing_and_sales/Latest_thinking/CDJ/Winning_the_consumer_decision_journey.aspx We’re not trying to reinvent the wheel with this presentation but rather explore the impacts to your business and how you reach digital consumers.

Consider the buying process from your own point of view as a consumer, not a business owner. Have you changed the way you research and buy local products and services? Do you? Use your mobile phone (Google, Yelp, etc.) to find a restaurant? Try a business because of a friend’s post on Facebook? Not consider a business because of their negative online reviews? “ Like” favorite businesses on Facebook? Buy daily deal vouchers for yourself or a friend? “ Check-in” at a business on Facebook/Foursquare to get a special offer? Research several businesses online before picking one? See banner ads that remind you about something to buy? Write an online review when you have a bad experience? Now think about your target consumers for your business. How have things like search engines, banner ads, daily deals, social media and review sites changed how they buy your products/services?

In 2005 Procter & Gamble defined the 7 seconds when a consumer first encounters a shelf of detergent, toothpaste or anything else as “The First Moment of Truth.” It was so important to them that they restructured their marketing team around it. According to their CEO A.G. Lafley, “ The best brands consistently win two moments of truth. The first moment occurs at the store shelf, when a consumer decides whether to buy one brand or another. The second occurs at home, when she uses the brand — and is delighted, or isn’t.” Today, consumers are driven by a stimulus: advertising, mailers, newspaper/magazine article, email and word-of-mouth (both offline and social media) BUT there’s a new critical decision-making moment that happens BEFORE consumers pick up the phone or visit the store. Google calls this the “Zero Moment of Truth” and defines it as: “ That little moment that’s changing the marketing rulebook. It’s a new decision-making moment that takes place a hundred million times a day on mobile phones, laptops and wired devices of all kinds. It’s a moment where marketing happens, where information happens, and where consumers make choices that affect the success and failure of nearly every brand in the world.” Then they drive the point home: “ When consumers hear about a product today, their first reaction is ‘Let me search online for it.’ And so they go on a journey of discovery: about a product, a service, an issue, an opportunity. Today you are not behind your competition. You are not behind the technology. You are behind your consumer. ” “ Pre-shopping before buying has become a huge, huge part of consumer behavior. In the past it was confined to big-ticket items like cars, or expensive electronics or homes. Now people engage in online discovery before shopping for very small things. It’ s crossed all categories of shopping. It ’ s just the way people buy today. ” Today a customer walks into an auto dealer and says, “I want to drive the Lexus 250h with the touring package, the 2.4-liter four-cylinder engine, dual-zone climate control and tan leather with seat warmers. I’ve seen the specs and read the reviews online. And I know that the MSRP is $37,125, but your real invoice price is $33,686.”

To understand consumer behavior at the ZMOT Google surveyed 5,000 consumers in 12 categories to see exactly which things influence their decisions. They found that the average consumer uses 10+ sources of info to make a decision BEFORE going to the store (FMOT) What makes a ZMOT? According to Google… It happens online — typically starting with a search on Google, Bing, Yahoo, YouTube or any other search tool or engine. It happens in real time, at any time of the day. More and more, it happens on the go: mobile searches on Google doubled last year. The consumer is in charge, pulling the information he/she wants rather than having it pushed on her by others. It’s emotional. The consumer has a need he/she wants to satisfy, and an emotional investment in finding the best solution. The conversation is multi-way: marketers, friends, strangers, websites and experts all have their say and compete for attention. In summary Google concluded that: The buying decision journey has changed. ZMOT is a vital new addition to the classic three-step process of stimulus, shelf, experience. What was once a message is now a conversation. Shoppers today find and share their own information about products, in their own way, on their own time. Word of mouth is stronger than ever. For the first time in human history, word of mouth is a digitally archived medium. No MOT is too small. If consumers will do research online for houses and health care, they’ll also do it for Band-Aids and ballpoint pens. The MOTs are meeting. Our mobile devices are MOT machines. As mobile usage grows, the zero, first and second moments of truth are converging.

Traditionally, marketers have used an image of a funnel to explain the buying cycle where lots of consumers enter at the top and just a few wind up buying at the bottom. Awareness: Many consumers become aware of your company/product through your advertising, content on the web, and word-of-mouth (referrals). The goal is to create enough awareness and affinity with your business that they recall you when they have a need for your products and services. You can also use direct response advertising to drive more immediate action by promoting new products, special sales, limited time offers, etc. Consideration : Some of those consumers who are aware of your company/product will put you into their consideration set along with several others. The goal is to have a strong reputation and referrals when they research and compare you to competitors. Purchase : A few of those who consider your company/product will buy from you. The goal is to reinforce their decision at the moment they’re ready to buy. Review & Repeat : Fewer still become loyal repeat customers. The goal is to turn them into advocates who tell others about their experience (online reviews & social shares). This funnel model has evolved over many years but the questions it prompts are still very valid today. In order to craft the right marketing plan for your business you you need to answer each question. Let’s review the evolution of the buying funnel on the following slides.

In the old days (15 years ago) the consumer buying process was fairly straightforward. Local businesses built awareness by advertising in the relatively few places where they got their news and entertainment – e.g. newspapers/magazines, signs/billboards, and radio/TV if they had a large enough budget. Once consumers began to actively consider buying, they asked friends/family to recommend good local companies, and/or checked the Yellow Pages. When finally ready to buy, consumers looked in the Yellow Pages to find the phone number and then called (or drove over to the store). After the purchase a select few customers told their friends about their experience (physical word-of-mouth). And as the adage goes, when a consumer had a good experience they told one friend, when they didn’t they told ten friends. Summary Note: For the most part , businesses were in control. They advertised or “pushed” to consumers who predictably bought.

In the recent past (~10 years ago) the Internet emerged and consumers started getting their news, entertainment, sports, finance and even TV/radio over the Web. We call this the “digitization” of media and consumers. Consumers started spending more and more time online and less time on traditional media like newspapers and magazines. Moreover, digitization created an explosion of choice for consumers who have thousands upon thousands of sites at their fingertips. They also started searching/researching businesses online instead of the Yellow Pages. And they began seeing the usefulness of user reviews on sites like Amazon and used email to ask for recommendations and share referrals. We call that expansion of choice “fragmentation” and it made reaching local consumers so much harder than the old days. Business owners who wanted to “go digital” could no longer simply call one or two local media reps who would get them coverage across the city. Now they needed a dedicated employee or agency to help them identify, plan, manage and track all the places they needed to be online in order to reach consumers.

Today consumers spend over 60% of their media time searching, surfing, socializing and shopping online. [online time now exceeds TV time!] They rely on the web in every aspect of their lives – both at home and while on-the-go from their mobile phones. Again, think about all the things you use your phone for…finding maps to local stores, looking up restaurant reviews, checking Facebook, watching videos, etc. Consumers still become aware of companies/products via advertising on TV/radio/billboards but as shown in the Google Zero Moment of Truth research, the Web has now become integral part of the purchase process for all goods and services. The buying process is now a very complex journey where consumers are influenced at every stage by advertising (offline + online), directory listings (Google Places), business websites, user generated content on blogs, video sites, review/check-in sites and of course social media sites like Facebook and Google+. For example a consumer could become aware of a restaurant by any/all of the following: nearby billboard, banner ad on a city guide website, print ad in a local magazine, seeing a friend’s post on Facebook about their meal (with picture), receiving an email with a daily deal (Groupon, LivingSocial) or by using their cell phone to search Google/Yelp for nearby places to eat. Of course once they are aware of the restaurant the consumer is highly likely to check the online reviews. Then once they are at the restaurant, they may “check-in” on Facebook or Foursquare to alert their friends. And if they love their experience they might use their mobile phone to post a review along with some pictures of their meal. Here’s another example from my personal experience. Two months ago my friend posted on Facebook about a special offer for a 12-lap racing package at the Dallas Motor Speedway and asked if anyone wanted to join him. I wasn’t aware of the business prior to this but made a note to check the dates. Sure enough a few days later I had forgotten about it but saw a banner ad for the racing business. I clicked on the ad and visited their site, then I checked the reviews on their Google place page, and satisfied that it was a good company I went back to the site and bought the deal. The key takeaway is that you need to have a comprehensive Web Presence Strategy in order to engage consumers across all of these digital places or risk losing out to competitors who do. The issue of course, is having enough time to get yourself in all these places and then to stay on top of it all once you’re there. Summary Note: Consumers, not businesses, are in control! They choose their own buying journey and actively “pull” information helpful to them.

Buying today is a complex series of steps and information inputs, both ones the consumer seeks out and others that they happen upon. Instead of a simple straight path, it’s more like a spiral where they are influenced by over 10 different sources* as they start and stop the process repeatedly until making a final decision. Think about something you’ve bought recently and consider all the information sources you used in making the decision. For me, a good example is trying to find a landscaper for a project at my house. I remembered the name of one company whose truck I had seen in the neighborhood. But I also asked my friends on Facebook who they would recommend. And I did a Google search to identify a couple more potential vendors. That same week I got a postcard from a local landscaper and saw a few ads in our local city guide magazine. Once I had gathered a few names (from Facebook friends, truck signage, organic search results, paid search listings and post cards) I checked them all out online. I reviewed each of their websites, Google Places pages and Facebook pages. Which one had I heard of before (radio, magazine, friends, etc.) and had a positive impression? Which one had pictures and videos showing their work so I could evaluate the quality? Which one had more good reviews and fewer bad reviews? Which one provided some helpful tips and offers on Facebook? The ones with poor websites and no/poor reviews didn’t even make the first cut. And after a good bit of online research I narrowed it down to two landscapers that presented themselves the best across the all the places I checked and then called them to get bids. This whole process took roughly 3 weeks since I got busy at work and started/stopped the research a few times. I think I’m representative of a the typical consumer today. It’s clear that my buying journey was not simple -- it involved a blend of advertising (online and offline), website content, local directories/reviews, and my friends suggestions on Facebook. All of which influenced my decisions as I moved closer to purchase. This is just one example, and of course the consumer buying journey for your product/service will be influenced by the consumer mindset (need or want) and the consumer investment required (low cost or high cost).

The quotes speak for themselves. It’s imperative that businesses adjust their marketing plans and spending or lose out to competitors that do. David Court is the head of the sales and marketing practice at McKinsey, one of the top consulting firms in the world. He has authored numerous research papers on marketing and has deep experience in Branding, Customer Lifecycle Management, and Consumer & Shopper Insights. Jim Lecinski is a managing director at Google and previously held leadership positions at top global ad agencies [DDB, Young & Rubicam, EuroRSCG]. He led Google’s Zero Moment of Truth project [covered earlier] and works with some of the leading brand marketers in the world [Procter & Gamble, GE, General Mills, Best Buy] to develop and implement online marketing strategies.

All great marketing plans start with the foundation of a deep understanding of the end consumer. You need to not only understand why they buy your product (i.e. your value proposition & differentiation from competitors) but also how they buy your product. To aide in that process, we developed this grid to categorize the buying journey for different types of products/services based on consumer mindset (need vs. want) and level of investment (low vs. high cost). Of course this is an oversimplification of a complex buying journey but it provides a place to start. Again, it’s important to realize that you need to influence consumers at each stage of their journey or risk losing them to competitors who do. You need a comprehensive Web presence in all the places they are searching, surfing and socializing online. The following slides provide some sample buying journeys for consumer needs (plumber & new car) and consumer wants (spa & home remodeling)

This slide has two scenarios for how Mrs. Jones goes about finding a plumber to fix her water heater. Obviously this is an urgent need so the buying journey takes place in a very short amount of time (2 days). Scenario One: Searches on Google Clicks on ads and organic links and visits several plumbers’ Google Place Pages, looks at pictures, hours, business info, etc., and reviews Visits corresponding plumbers’ websites Picks one based on assessment of website, positive impression created by their advertising (radio & truck signage) and good reviews Calls for a quote and then books appointment Posts status update on Facebook about Plumber arriving late – prompting social discussion with friends Writes Yelp review about late arrival Scenario Two Posts Facebook status update from mobile phone to complain/vent “Ugh, hot water heater not working. How’s that for a Monday morning? Time to find a plumber…” Receives recommendations for two plumbers from friends on Facebook Searches those recommendations by name on Google to check each one out Visits their Google Place pages & Websites. One has negative reviews – she abandons that plumber. The other has good reviews so she calls. Thanks friend on her Facebook wall for the recommendation and mentions plumber by name

This slide has two scenarios for how Mrs. Jones decides to book a spa appointment. This is a lower cost want (vs. an urgent need) so the buying journey takes place over a few days. Scenario One Browses her favorite beauty lifestyle website to check seasonal trends Notices banner ad for local spa Is in the right frame of mind to want to treat herself Clicks on ad to visit website Searches Google for their business name to check reviews Satisfied, she calls and books an appointment Goes to spa and Tweets a picture of the lush spa interior: “Been a tough week – treating myself @ luxury spa!” Scenario Two Sees a great Daily Deal for XYZ spa on Facebook – it was shared by her good friend Mrs. Smith Has seen many print ads for XYZ spa in the past & trusts her friend’s taste Purchases the Deal certificate Books the spa appointment and visits Writes review on Yelp “ Likes” XYZ spa on Facebook to get specials/promotions from them year-round

Mrs. Jones’ old car keeps breaking down and needs costly repairs so she decides that it’s time to find a new one. This is a higher cost need so the buying journey takes place over a few weeks as she does a lot of research before making a decision. Day 1 -- Starts thinking about purchasing a new car There are already three clear frontrunners makes/models in her head This is due to the cumulative influence of advertising (TV, radio and print) – plus seeing them on the road and liking how they look. Begins researching 3 car favorites for safety, price and fuel economy Visits car review sites (Edmunds & Kelly BlueBook) Day 3-9: Gets busy at work so stops actively researching for a week Day 10-11: While surfing some entertainment sites she notices an ad for a local dealership with one of her favorite brands and is reminded of her car search [this is an example behaviorally targeted advertising by ad networks that have data on car shoppers] Clicks on the banner ad and visits the dealership website -- checks out pricing/inventory Does search on Google for the other 2 car favorites to locate dealerships near her house Visits dealership websites to view pricing/inventory on the other 2 cars (also checks their pics/video) but needs to wait until the weekend to visit dealerships in person Day 11- 14: Gets busy at work so stops actively researching for a few days Day 15-16 While surfing a news website at work she sees a banner ad from one of the dealerships she just visited [this is remarketing advertising to people who have already visited the business’s website] Searches Google to get map for dealerships Checks dealership reviews on their Google Place Pages Sees mainly positive reviews for each which means she will visit all 3 dealerships Day 17: Visits dealers After a long day at all dealerships she finally negotiates a deal and purchases After purchase she gets tour of service center & meets the service director who tells her to “Like” them on Facebook in order to get specials for oil changes & seasonal promotions Day 18: Writes reviews Writes review on Google Place Page for dealership she purchased from: “Spent a long day car shopping at 3 different dealerships, and these guys were the best – no pressure! Recommend!” Writes another review about dealership she didn’t buy from: “these guys were a little too pushy so I went with someone else.” Day 24 – Loves new car Tweets: “Kind of a bummer, love the new car but got my first door ding. Gonna be a pain to take it to @dealership to get it fixed” @dealership replies: “Sorry about that, stop by at lunch and I’ll touch it up for you in 5 minutes.”

Mrs. Jones has been wanting to remodel her kitchen for over a year, but hasn’t had the time or the money. She just got her annual bonus which has motivated her to make her dream come true! Given that this is a big, long-term investment the buying journey is over a year in the making. 1 Year of Casual Research She’s occasionally surfed lifestyle websites to get design ideas and has seen banner ads for local remodelers She’s seen ads for remodelers in local magazines and received mailers She’s seen her friend’s pictures of her kitchen remodeling on Facebook She’s developed a rough set of local vendors to consider but hasn’t done any research – she’s now ready to get some competitive bids 2 Months of Active Research Period Starts actively going to local home “style” websites and sees ads for local remodelers Asks friends/family on Facebook & Twitter for recommendations Accumulates a list of potential vendors Spends a lot of time searching the web (sites, YouTube, Facebook, etc.) to see videos/pictures of their work. As she travels between sites, she finds it interesting that she keeps seeing banner ads from one particular remodeler [this is remarketing advertising] Based on web content she narrows the list to 3 vendors and schedules appointments to get free estimates Receives quotes and is torn between two remodelers, so she does extra-deep reputation check (online reviews, BBB, customer references) Chooses remodeler 6 Weeks of Construction Work begins and she “Likes” company on Facebook and follows them on Twitter Chronicles progress on Facebook/Twitter with photos and video - mentions remodeler by name many times One Month After Job Finished Remodeler asks permission to link to/use photos/video in their social media/content strategy, cites her as reference Remodeler asks her to write review on key review site

Mrs. Jones called the business and purchased their product/service. But what tactic(s) drove her to buy? Was it: The billboard on the highway? The banner ads on lifestyle.com and news.com sites she surfed? The businesses posts on Facebook? The businesses reviews on Yelp? The product demo video on YouTube? The community service project (and the pictures of it on their blog)? The offer her friend shared on Facebook? The ad she saw on Google?

The bottom-line is that all of it working together influences the purchase. This is why big brands like Coke, Chevy, and Verizon use integrated marketing campaigns across print, TV, radio, billboards, banner ads, search engines, microsites, social media, mobile ads and in-store displays. They know that consumers are on buying journeys that twist and turn and spiral from awareness to consideration to purchase and repeat. And that they are influenced by all different types of advertising and content along the way. If they aren’t there to grab and keep mindshare then they will lose the consumer to a competitor. While this type of integrated marketing used to be beyond the reach and affordability of local business owners, it isn’t any longer. ReachLocal can help you create a total Web Presence with ads and fresh content in all the places that consumers are searching, surfing and socializing online. We track, optimize and report the results so that you know exactly what you’re getting from your investment. Essentially we’re your outsourced marketing team that handles everything so that you can focus on what you do best, running your business.

So what should you do about all of this? First, you need to research and understand the consumer buying journey for your types of products/services. Do they consider it a need or a want? Do they see it as expensive or low cost? How long do they typically consider the purchase? What types of media do they consume [e.g. moms visit healthy living websites, spend a lot of time on Facebook, search on mobile phones, etc.]? What keywords and phrases do they type into search engines to find your type of business? Where else do they research a local business? [e.g. review sites, city guides, industry sites, etc.] What questions do they typically want to answered [and search for online] prior to buying from you? How many other providers do they typically consider? Who are they in your area? Second, you need to assess your web presence . [Below are just a few of the many questions you need to answer] Search Discovery Search your business category online for the words/phrases consumers use. What do you find? Does your website, blog or social profiles appear on the first page? How about your Google Place page? Have you claimed and optimized all the local profiles for your business? [Google Places, Yelp, CitySearch, etc.] If someone searches for your slogan, or key phrases from your radio or TV ads what do they find? When a consumer searches “best [your business category]” do you appear on the results page? When someone searches on their mobile phone and finds you, is your site optimized for mobile viewing? [Google says ~20% of searches are mobile now] Reputation Check your online reputation by searching Google for: Your [business name] Your [business name] reviews Your [business name] complaints How many links do you occupy on the page? Do the links and information on those sites give an accurate picture of your reputation? Are competitors advertising on the search results page for your business name? [you should consider advertising on your business name to combat this] What is your reputation on the leading online review sites for your city or category? Are you monitoring competitors Web Presence and social media to see what they are doing? [products, offers, events, reviews, etc.] Social Discovery and Brand Engagement Do you have a nicely designed Facebook page rich with pictures, videos, service descriptions, etc. Are you actively posting on Facebook and Tweeting? [or do your profiles have cobwebs?] Are you listening to and engaging with your fans and followers? [people want a personal reply/connection] Are you creating compelling content that they share? [helpful tips, interesting videos, product demos, funny stories, etc.] Are you creating great offers that drive them to buy more from you? [special deals only for Fans, invite only events, customer appreciation coupons, etc.] Are you monitoring social media for potential customers in your area? [e.g. people tweeting to ask for recommendations on plumbers, house remodelers, etc.] Conversion Are you using advertising known as “remarketing” to stay in front of consumers who have left your site and remind them to come back? Does your site follow best practices for converting visitors into leads/customers? [large phone number, compelling offer, mobile optimized, etc.] Do you use video on your site to bring your business/products to life online and drive more calls/emails? [you can also use it on Facebook, YouTube, etc.] Have you considered using a live chat service on your site to pull in more leads from those who would have left without contacting you? Third, you need a strategy to make sure you are in all the places that consumers frequent on their buying journey. At ReachLocal we use a systematic approach to creating a total web presence for our customers. We do this through three strategies that all work together to drive the best results. Buying advertising on search, media and social sites to establish a top position where consumers spend their time and look for businesses [quickest way to get results] Building great content (search optimized) that helps you gain position in organic search results and that gets shared across social networks [takes time to build it into an asset] Converting more people who view your site/content into leads through better business tools and creative [you spend a lot to get them interested so why let them leave]

About Me: Todd Ebert As Senior Vice President of Marketing at ReachLocal (NASDAQ: RLOC), I lead a team responsible for all customer-facing marketing. I’m a seasoned B2B marketing veteran, with over 20 years of experience in brand strategy, product marketing, demand generation, PR and marketing communications at technology startups and Fortune 100 enterprises. Prior to ReachLocal, I was Vice President of Marketing at Entrust, a publicly-traded security software company. Before Entrust, I led marketing efforts for an Internet startup, managed Internet products at Sprint, and held global product marketing roles at Pfizer and 3M. I earned an MBA from The McCombs School at the University of Texas at Austin and a B.S. in Business & Economics from Lehigh University.

Referenced Articles: Winning the Zero Moment of Truth Jim Lecinski, Google http://www.zeromomentoftruth.com Branding in the Digital Age: You’re Spending your Money in All the Wrong Places David Edelman, Harvard Business Review http://hbr.org/2010/12/branding-in-the-digital-age-youre-spending-your-money-in-all-the-wrong-places/ar/1 The Fall of the Purchase Funnel Dr. Bob Deutsch, Brand Strategy Insider http://www.brandingstrategyinsider.com/2010/02/the-fall-of-the-purchase-funnel.html The Consumer Decision Journey David Court, McKinsey & Company https://www.mckinseyquarterly.com/Marketing/Strategy/The_consumer_decision_journey_2373# http://www.mckinseyquarterly.com/spContent/charts/code09/CDJ-Base.swf http://www.mckinsey.com/Client_Service/Marketing_and_sales/Latest_thinking/CDJ/Winning_the_consumer_decision_journey.aspx How Ready is Your Organization for the New Social Buyer Persona Tony Zambito, Social Media Today http://socialmediatoday.com/tonyzambito/285267/how-ready-your-organization-new-social-buyer-persona The Purchase Funnel is No More Robin Grant, We Are Social http://wearesocial.net/blog/2009/06/purchase-funnel/