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TechTalk: The Retail Edition

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The first 2012 edition of our quarterly magazine, TechTalk, exploring current trends, issues and market developments affecting technology organisations today. In this edition we take a closer look at …

The first 2012 edition of our quarterly magazine, TechTalk, exploring current trends, issues and market developments affecting technology organisations today. In this edition we take a closer look at the customer purchase journey for technology products, with a particular focus on retail.


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  • 1. TechTalk the retail edition 2Technology trends, opinion and insight | Edition One - 2012 the retail edition Welcome to our first 2012 edition of TechTalk which takes a closer look at the customer purchase journey for technology products, with a particular focus on retail. Retail, both online and offline, represents the part of the customer journey where value is ultimately generated and money changes hands. Understanding how this part of the journey works, and what challenges and chances arise, is the key to success for technology brands and retailers alike. It is hardly surprising that, given the current tough trading environment technology brands are facing across markets worldwide, there is so much interest in how retail is evolving. In particular, retailers are feeling the effects of disruption, as technology itself changes the way in which consumers shop for technology products. It is this which sets the topic for the lead article where we explore the nature of these changes and set out a vision for ‘bricks and mortar’ through an omnichannel approach. In a number of articles we then dissect different aspects of bricks and mortar including the importance of the sales person in the purchase process and the way in which smartphones are rapidly becoming indispensable shopping companions for many. Beyond this, we explore the entire customer purchase journey beyond the context of the traditional yet restrictive linear process, and review the significance of initial online brand relationships within this process in forming consumers’ purchasing preferences: the potential of the so-called Zero Moment of Truth. To put the customer journey in a broader context, we present five emerging consumer-led trends for 2012, a shortened version of our annual consumer trends analysis, ‘Tech Trends: The Harmonisation of Digital Life’. Enjoy the read…and the shopping! Anette Bendzko Global Lead Digital Technology, GfK Consumer Experiences anette.bendzko@gfk.com Sign up for future editions of TechTalk Copyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 2. the retail edition 4 contents p.05 bricks clicks: the start of a budding relationship? p.11 What’s in store for the future of retail staff? p.15 how smartphones are changing the way we shop p.19 how customer purchase journeys stopped being linear p.23 becoming a hero at the zero moment p.27 Digital Psychology: what smart data says about you p.31 So what is Behavioural Economics? p.37 Tech Trends 2012 –Harmonisation of Digital Life p.41 RETAIL DISRUPTION THROUGH MOBILE PAYMENTS p.45 Disruption, and what consumer research can learn from Henry Ford p.49 contactCopyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 3. 5 the retail edition the retail edition 6 By Friedrich Fleischmann bricks clicks: the start of and Colin Strong a budding relationship? The pressure on offline retail is growing with online retail’s move onto mobile platforms creating instant price transparency. The GfK finding that customer journey patterns are mixing online and offline in the purchase process means that retailers now need to invest in a truly omnichannel approach where both online and offline retail complement each other. By taking this creative route, bricks and mortar will continue to have a successful role in the market for tech products. There seems to be gloomy news on often free. Indeed, online retail has been an almost daily basis concerning the getting progressively better at creating future of offline retail, which can often positive experiences for consumers lead to the impression that it struggles through innovations such as one-click to compete with its online retailing shopping, personalised recommendations counterpart. The accelerating success of and linkages to social networks to not only online retail is largely attributed to some see what your friends have bought but to undeniable advantages of the channel: show off your own purchases. it is straightforward to find what you are looking for from a vast selection of Yet we are now entering a new phase which goods, prices are very competitive, and it has the potential to impact physical retail is easy to shop around for bargains. Not spaces more than ever, thanks to the having to drag yourself out in the rain, no introduction of new mobile-based apps spending money on high petrol prices, and that enable instant price comparisons. no wasting time circling for a parking space Flow, for example, is an iPhone app when online delivery, and even returns, are launched by Amazon subsidiary A9.comCopyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 4. 7 the retail edition the retail edition 8 which allows users to scan barcodes of items in store to display the Amazon.com technology products from bricks and mortar stores when there are so many “Whilst purchase 2. Increased complexity = need for guidance: shoppers often still want to see the fresh products before they buy, and clothing, product information. So rather than buying good reasons to shop online. We have journeys have The nature of the products which are where consumers continue to try them on the product from the store, shoppers can identified three key reasons why the offline dominating tech sales perhaps provides before they purchase. purchase immediately from Amazon. E-Bay retail environment is proving to be resilient clearly changed some clues about how traditional sales is among a number of other brands that for tech products: in response to channels may continue to have an In the technology sector this trend is have launched similar apps, and more will important role. GfK data shows strong also evident, with consumers increasingly inevitably be released in due course. 1. Convenience: cutting-edge growth in smartphone and tablet sales wanting to experience the products The spiralling costs of offline retail (rents, employee costs etc.) means that the Whilst online is certainly useful in terms of search and purchase, it can be hard to online retail whilst observing declines in sales volumes of other, more traditional, technology of interest. The Apple Store is the prime example of this with a theatre for increased price pressure this creates could beat offline for the convenience of other initiatives, the products such as satnav and plasma TVs. A presentations, a studio for training with make it even more challenging to compete effectively with online channels. aspects of the customer journey. Offline is, for example, the only way you will get overwhelming key feature of these growth product areas is that they clearly rely on ecosystems that Apple products, a Genius Bar for technical support as well as free workshops available your hands on the highly desired piece of majority of tech will typically interconnect devices in order to the public. Another example is the way So what is the role for offline retail? kit straight away without having to wait to operate optimally. Previous research in which shops selling gaming products Whilst purchase journeys have clearly for at least a day. And despite the ever- products are, from GfK has shown that consumers want frequently have zones that allow shoppers changed in response to cutting-edge online improving delivery speeds of online stores, still purchased to evolve the mobile experience and benefit to play with the latest consoles and games. retail initiatives, it is important to note this is clearly a tough one to beat. from accessing content across different The limited data available on the success of that the overwhelming majority of tech through offline devices. such approaches are compelling. A recent products are, in the end, still purchased through offline retail (see Figure one). Related to this, if there are problems with the purchased product there is an retail And it is surely here that there is a study (1) estimated that Apple makes $5,626 per square foot of floor space from Whilst online will clearly continue to undoubted ease when returning the device very clear role for technology retail as its US stores, thus making it more sales per encroach, GfK forecasts are not indicating a to a shop for refund and repairs compared consumers look for good quality advice square foot than any other U.S. retailer. sudden decline in the offline channel. to having to package up the item and in the face of the growing complexity of This evidently raises the question of organise return delivery. the products they buy. More confident Rethinking the customer journey why consumers continue to purchase consumers who will typically figure it out So if we are right and these factors do themselves often want to go in store to indicate a clear role for tech products ‘road-test’ the technology and quiz the via offline retail, then how does this sales staff to make sure that it delivers interact with online retail? Discussion on the points that are important to them. of the consumer purchase journey often Less confident consumers will frequently appears to infer a fairly linear process, withFigure one*: Percentage sales of technical consumer goods by online vs offline in European markets** want to go in store to get reassurance consumers researching online, perhaps about their purchase. going in store to check the look and feel of the product, and then probably closing the 3. Touch and feel: transaction online. There is a long standing tradition among consumers of wanting to ‘touch and feel’ goods before they buy them. This is true in many categories such as food, where * 1) GfK Retail Panel and the figures are based on full year 2011 B2C sales for technical consumer goods. **European markets covered AT, BE, CH, CZ, DE, GB, ES, FR, IT, NLCopyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 5. 9 the retail edition the retail edition 10 “Tech Companies making their purchase – why would they not expect this to be available in store as “Today’s shopping channel performs a complementary role for generating sales and that the success need to ensure well as online? experience means is measured in terms of total sales and not as a function of the source of the consistency of When it comes to making a purchase, that awareness sales. message across although there was no clear preference of products for purchase channel amongst the tablet Perhaps the biggest vote of confidence multiple channels purchasers, it is clear consumers need and increased in an omnichannel retail environment is which complement to be reassured they are getting the best deal regardless of which channel footfall can be the apparent move of previous Internet- only brands into retail. Microsoft has each other moving they purchase through. No matter how raised through been steadily rolling out a successful forward” useful and enjoyable the bricks and motar experience, there is still a significant risk online marketing experiential store format across the US, eBay is growing business drop-off stores that consumers will simply use the offline using tools such which support prospective sellers in the channel to try out the products and then physical world, and there has been plenty purchase online. as coupon codes, of speculation that Google or Amazon are However, recent research from GfK, which location-based about to launch a physical store. If brands tracked PC tablet purchase journeys of Adopting an omnichannel approach that are predominantly digital are seizing a representative sample of the online In this light, the challenge for retailers is to promotions and the opportunity then surely we can take population, challenges the assumption that understand how to ensure their online and offline channels are complementing each optimised search this as a strong signal that when combined effectively, both online and offline can this process is as undeviating as has been suggested. First, the study found extensive other, thereby leveraging their respective terms” continue to have a crucial role in boosting movement between channels with people benefits to generate sales. Today’s sales. switching from store to online and back shopping experience means that awareness again, and not necessarily in a consistent of products and increased footfall can be Sources and linear fashion. Indeed, the myth that raised through online marketing using There are, however, significant challenges 1) US firm RetailSails: http://retailsails. different channels deliver discrete functions tools such as coupon codes, location-based for brands adopting an omnichannel com/2011/08/23/retailsails-exclusive- was completely dispelled by the research promotions and optimized search terms. approach: ranking-u-s-chains-by-retail-sales-per- findings as consumers were found to be Products can increasingly be reserved square-foot/ moving across both online and offline online before going in store to check the • Developing an effective role for offline channels at each stage of their purchase product out and make the purchase. In is an expensive business: purchasing 2) GfK Retail Panel and the figures are journey. store online tools are becoming more the right space on the street, fitting out based on full year 2011 B2C sales for common providing more information to the shops, buying the necessary kit, and technical consumer goods. The implication of this is that tech allow customers to purchase items quickly training sales people to the appropriate companies need to ensure consistency of and efficiently without having to queue. standard all comes at a high price. message across multiple channels which This mix of channels enables retailers to Want more information on retail and tech? complement each other moving forward. • Breaking down the barriers between take a more targeted approach to different - Colin Strong For example, whilst both online and offline online and offline: brands will typically parts of the market, some of which will colin.strong@gfk.com channels are used extensively for all types use sales as the marker of success of a of research, we found offline-only tablet continue to be served in the traditional channel, with sales per square foot being buyers were much less satisfied with the manner, whilst others may need a focused a well known measure of the effectiveness level of detailed information available. effort to encourage consumers to visit of a particular store for example. The The online environment has geared stores more regularly. Brands are now in adoption of a successful omnichannel up expectations that large amounts of a much stronger position to craft multi- approach involves ensuring that each information will be available to assist in channel strategies to meet the needs of specific consumer segments.Copyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 6. 11 the retail edition the retail edition 12 By Rachel White What’s in store for the and Matt Fisher future of retail staff? In an age when consumers research their purchases thoroughly online, talk to their friends for recommendations, and test out their potential purchases in store, exactly what role do store staff have to play beyond facilitating the experience? Recent research by GfK shows that the suitable mix of in-store recommendations and demonstrations, achieved by store staff training, can be highly effective at increasing sales. A new GfK research programme has So what are some of the key findings provided some unique insights into the ROI of this programme that are useful for of store initiatives by combining mystery marketes? shopping results with individual store-level sales data. The programme reveals how Recommendation drives market share, but the in-store experience translates into not all recommendations are equal sales and shows the average uplift in sales As expected, there is a significant resulting from different types of in-store correlation between in-store activity. This is highly useful for brands recommendation and share. However, this that want to understand how to prioritise is not consistent for all brands.; brands in-store marketing budgets, benchmark with a relatively high price point are more against competitors, negotiate better rates resistant to recommendation turning for display space, and calculate the ROI on into sales and brands with a very high in-store marketing spend. appeal will achieve a high share with low recommendation.Copyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 7. 13 the retail edition the retail edition 14 The programme reveals that it is not Don’t bother to demonstrate the camera having a freestanding display unit which advocacy into market share. This data is enough simply to be recommended; what Even the most enthusiastic brand may well be cheaper to implement than a hugely useful to support brands in making is said is just as important. Consumers advocates can sell more if they are dedicated area. informed choices about how to spend in- are more likely to buy in store if they are trained to demonstrate the features that store budgets that would not otherwise be given a number of reasons to buy. On customers most want to see and use. Pile ‘em high? possible. The study is currently conducted average, advisors gave 14 reasons for Demonstrations can increase sales by 6.8 The research splits stores by high, medium in the UK but we believe it has direct recommending a handset, with the most per cent on average, although showing and low sales volume outlets . Whilst relevance for other markets. Future frequent reason being that the phone only the camera gains a feeble 3.9 per there are fewer high sales stores (they are research programmes will be exploring had good Internet access. However, when cent increase., consumers typically now likely to be flagship stores) the research other geographies. advisors recommended the brand itself, the know how a camera works. Where advisors perhaps surprisingly finds that advisors greatest uplift in sales was achieved. demonstrated how to use social networking in these stores are not always the most Sources sites, this led to a sales uplift of 8.3 per knowledgeable or enthusiastic. This may GfK study tracker piloted in 2011 and Additionally, knowledgeable and cent. Stores can use these sorts of findings be because they host a wider product range involved conducting mystery shopping at enthusiastic advisors sell more. The Holy to develop advisor training programmes to resulting in diluted advisor knowledge. 150 stores, for the top five handsets and Grail for a brand is to turn advisors into focus on the features of most interest to Nevertheless, these stores do sell more, comparing with sales data from the same brand advocates, and to get them to customers, thereby driving up sales. partly because they are in high footfall 150 stores. actually use and love their handsets. For areas, but also because they create an customers it is very powerful to hear an Pay and display exciting environment for brands. advisor say “this is a great phone, I have The area where most of the in-store one of these”. Such findings are crucial marketing budget goes is in visual Conclusion Want more information about the research in this article? to helping brands calculate the impact of presence. Any sort of visual presence at This programme clearly shows that - Rachel White getting their devices into the hands and point of sales results in an uplift in sales. recommendation is important and that rachel.white@gfk.com hearts of store advisors. As well as giving The biggest uplift of 10.9 per cent comes there are opportunities to maximise out phones, brands can work with stores to from having a dedicated in-store display return on investment in store, turning customise phones for advisors, and include area. However, it is interesting to note that free apps that will convince them to actually an uplift of 8.2 per cent can be gained from use the handsets.Copyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 8. 15 the retail edition the retail edition 16 By Ryan Garner and Alex Kozloff how smartphones are changing the way we shop The irrepressible tide of smart, connected, mobile devices is changing the way we shop at every stage of the purchase process. This poses new opportunities and challenges for product marketers and retailers in both the online and offline world. The ‘always on’ nature of smartphones - be in conjunction with the PC or an aid to not just in your pocket but also connected the consumer while in store. Indeed, the to the Internet - makes them the perfect research showed that the most common companion for shoppers throughout the behaviour was for the smartphone and entire purchase journey, both online and PC to be used together in the purchase offline. Recent research by the IAB and process rather than independently. GfK shows that while PCs (laptops and/or desktop computers) are still the most used Shopping in a multi-screen world devices throughout the online purchase The smartphone and PC offer consumers process, smartphones are an increasingly very different but complementary benefits. important complement to existing With its larger screen, the PC is better methods of shopping. The number of suited to high value, high consideration shoppers using smartphones will inevitably research and purchase activity. In increase, but this usage will in many cases comparison, the smartphone is perfect forCopyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 9. 17 the retail edition the retail edition 18 Figure one: Device usage throughout the purchase journey UK Smartphone owners who have purchased something in the last month (n=800) looking up information quickly and while on transaction through an online retailer (scan conduct an Internet search about products purchasing habits become. In particular, the the move. A great example of this is when the QR code below to watch the video). or services. Faster networks, more tactile way consumers are turning to their mobile consumers are watching TV. 44 per cent screens and localised information will phone in store should be a strong call to of respondents in this study stated that The most striking thing only accelerate this trend in the future. In action for retailers to get prepared to this they reach for their mobile when wanting to about this particular addition to Internet search, location-based growing trend. follow up a TV advert. In general, they are purchase journey is that services and price comparison apps will often looking for more price and product from trigger (seeing the provide consumers with almost complete For more information information to supplement what they have advert on the XBOX) price transparency while shopping. In terms about the IAB’s just been told by the TV advert. through to purchasing the of service provision we’re not quite there Mobile Online Journey game, there was not a physical retail store yet, however nearly half (49 per cent) of Observation (MOJO) study The introduction of the smartphone in or a PC involved. From a retail perspective, those who used their phone in store did so please visit their website the purchase process means that from Amazon won this sale through combining to conduct price comparisons with other by scanning to QR code to trigger through to transaction, the journey an easy-to-use optimised interface for retailers. the left or get in touch. becomes more complicated for product smartphones, convenient payment options marketers and retailers. When considering (one click) and pre-order promotions. The use of smartphones in the purchase - Want to contact the author? all the channels, devices, and information process is a very present reality which Ryan Garner sources the variety of routes through Smartphone: the perfect in-store shopping is affecting all brands and retailers to ryan.garner@gfk.com the purchase journey seem infinite. Take, companion a greater or lesser degree, and clearly for example, a young gaming enthusiast Today’s shoppers hit the high streets demonstrates the importance of a cross- who sees an advert for a new game on his armed with a wealth of knowledge in their device digital and retail marketing strategy. XBOX. He discusses what he has seen with pockets. The research shows that 38 per The greater number of connected devices his friends and decides to purchase the cent of respondents use their smartphone consumers own, the more their behaviours game, using his smartphone to make the in store and of this group, 55 per cent change and the increasingly complex theirCopyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 10. 19 the retail edition the retail edition 20 By Iain Stanfield how customer purchase journeys stopped being linear There are some things that have to happen in the right order. You can’t build a house starting with the roof. Dinner is soup to nuts, life is cradle to grave. We tend to assume that a consumer’s decision making process is a similarly linear process. Classic market strategy therefore uses a funnel or pyramid model to assess brand and communication performance (see Figure one) but does this need to be updated? Logic dictates that consumers cannot An example would be as follows: consider a brand unless they are aware John goes online to look for a laptop. He is of it; they are unable to use a brand they interested in Brand A and Brand B, but he have never considered. However, we feel puts ‘laptop’ into Amazon’s search engine. that this model needs to be updated to As he scans the results, he sees that Brand reflect the way that today’s consumers C, which he hasn’t heard of, is getting 5 shop for technology products, entering stars in all the reviews. the brand funnel at any stage, and walking through it at any speed. This means that John has just gone straight to if your brand has a better consideration consideration of a shiny new Brand C score than a competitor at a certain point 2012XyZ laptop. He checks YouTube and in time, it no longer follows that you will finds a review video shot by a techie from sell more products. Disruptive elements Brand C development labs, which helps him are lingering all along the decision-making feel confident about the brand. process, leading consumers to deviate from the linear process, jumping stages, and He checks Pricerunner for some more going back and forth. reviews, and the best deal, and then he buys Brand C. Brand C was not even in the consideration set initially.Copyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 11. 21 the retail edition the retail edition 22 Figure one: A traditional Sue is looking for a new smartphone it is worth switching. The new network brand funnel online. She knows exactly what make operator has just gone from passive and model she wants and she plans to consideration (I would not reject this stay with her current network operator. brand) to being actively considered and As she searches she sees that a rival purchased. network operator has a great deal on her chosen phone. She has signed up for 24 months on a high-end tariff. Sue has entered the She hadn’t considered changing but it brand funnel at ‘attachment’. is too good a deal and the rewards are appealing. Whilst she doesn’t know much about the new operator, she thinks Disrupting the linear decision-making are more likely to look for advice and How can brands control this non-linear 2. Use the brand funnel as a measure of process: reviews and recommendations reassurance when researching a purchase, decision making process? brand strength, rather than for driving Consumers have always trusted particularly as the number of available So does this mean that it is not important purchase and purely for focusing on sales recommendations from a friend, but products proliferates. And finally, retailers to develop a strong brand? Should all (Our suggested funnel does not include a now they have access to the aggregated play a huge role in this disruptive process. brand and comms activity be focused on purchase stage). opinions of millions of ‘friends’ via social driving recommendation and on search networks, price comparison sites and Disrupting further: the ‘Zero Moment of engine optimisation? And is the brand 3. Decide what you want to achieve at each specialist review sites, forums and blogs. Truth’ funnel dead? stage. For example, you may wish to In technology markets, recommendations It is not only recommendations and reviews redefine consideration as ‘My brand is the and reviews are becoming even more that can divert your potential customers Whilst understanding the purchase journey ONLY brand you will consider. important and can be a greater influence from their orderly procession down the in the category is important, we argue that on consumers at point of purchase than a brand funnel to become lifelong customers a strong brand is the only way to fight back. 4. Compare your performance at each stage carefully-crafted campaign. and advocates of your brand. Any purchase Technology is personal; your smartphone against your main competitors – this will journey that includes online research says something about who you are (or highlight any disconnects and show you The pace of technology development exposes your customer to a wealth of who you would like to be). In technology where to focus your effort. increasingly leads consumers to look for offers, promotions, search term results and markets where there is so much change guidance. Five years ago smartphones Google ads. (See next article, ‘Becoming a and choice, the goal for any brand must Rethinking the brand funnel in this way were mostly bought by early adopters who hero at the zero moment’) Each of these be to build a strong relationship, and not will help you to lay down the foundations understood the technology and compared is a touchpoint with a competitor. The merely to drive sales. The brand funnel is of a robust and strategic brand and brands according to features and functions. following is a good example. alive and kicking but what it consists of and comms strategy. Underpin the strategy Today, as high-end technology has gone how it is analysed must be considered in a with actionable research and you are on mainstream, a much higher proportion different light. your way to building profitable brand of smartphone buyers may well instead relationships with your customers. be attracted by the look of the handset. 1. The brand funnel should be a flexible These less knowledgeable consumers tool that should be tailored to meet the needs of your product category. Want more information on branding and retail? - Iain Stanfield iain.stanfield@gfk.comCopyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 12. 23 the retail edition the retail edition 24 By Wendy Jones becoming a hero at the zero moment 70 per cent of buying decisions are made at the shelf…or so we are told. This information has been at the forefront of retailing strategies ever since PG expounded the idea of the First Moment of Truth (FMOT) in the Wall St Journal back in 2005, but a new theory is now challenging this accepted mantra as a result of the rise of the, largely unforgiving, online brand relationship. The FMOT concept is that whilst brand mouth on purchase decisions, traditionally communications serve the dual purpose consumers would only talk to a small circle of raising awareness and increasing of friends and family. Other sources of propensity towards the product, it is information such as PR, reviews and expert ultimately in the three to seven seconds recommendations, whilst also influential, after a shopper encounters the product were usually controlled to some extent by on a store shelf that the brand has the the brand. best chance of converting a considerer into a buyer. It is then down to the product However, in the last few years, the digital performance to convince the consumer revolution has changed the balance of that they made the right choice, and power between brands and consumers. to repurchase the brand at a later date This has led Google to assert that the Zero (otherwise known as the Second Moment Moment of Truth (ZMOT) is now the killer Of Truth). moment in the purchase decision making process. ZMOT refers to when a consumer Underpinning this idea is the notion encounters a brand online, often in the that the brand itself controls the vast form of others’ opinions, which influences majority of messages a consumer their perception of the brand, thereby receives. Whilst marketers have always affecting the decision they go on to make been aware of the influence of word-of- at the point of sale. This is not to say thatCopyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 13. 25 the retail edition the retail edition 26 subsequent interaction with the brand half of those who sought information did from a friend or family member early in Other companies take it further and is unimportant but that initial contact so online. Despite this high level of activity, the journey were less likely to conduct use the digital arena as a platform for is potentially much more pivotal than 51 per cent claimed they did not find all of extensive research in the first place, co-creation, which increasingly involves previously thought. the information they required . suggesting that ultimately, a personal ‘gamification’. This can be as simple as The majority of product comparisons in recommendation from someone you trust the game on a leading ice-cream brand’s Exploring the role of digital tablet purchase journeys were conducted is still the most powerful form of word-of- website that invites visitors to create their Consumers have growing access to a using retailer websites: a great one-stop- mouth. own flavours, or as complex as the energy proliferation of brand touch-points, shop for finding and comparing the range company that gives visitors the opportunity both official and unofficial, which are of products and price points available in the Nonetheless, it is important to recognise to play a SIM-style game creating their own reforming the way brands are perceived marketplace, for reading user reviews and that online word-of-mouth (or what is now eco-world with the objective of saving as and considered. These changes manifest ratings, and for the ability to purchase if all often referred to as earned media) is an much energy as possible. themselves in three key forms: buyer conditions are met. It seems retailers increasingly influential tool, in particular The Internet offers brands the opportunity offer a certain level of objectivity that for those whose category experience, or to conduct a two-way dialogue with their 1. the ability for consumers to find and manufacturers cannot always lay claim to, that of their friends, is limited. Indeed, our consumers that can deepen the brand compare detailed product descriptions but it is still the opinions and experiences study showed that most tablet buyers only relationship beyond product experience and other information they require to of those deemed to be ‘in the know’ that received advice from one source or the and conventional marketing stimulus. support their decision making. are perceived to be the most trustworthy. other. Customers benefitting from this type of brand relationship are significantly more 2. the broadening of word-of-mouth Importance of online word of mouth Becoming a Hero at the Zero Moment of likely to become advocates, elevating the circles through peer-to-peer exchange The issue that leads brand owners to Truth brand to ‘hero’ status. By taking the time of brand experiences in the form of lose sleep is the simple truth that, Where the digital arena really excels is as to comment on the experiences they’ve recommendations and reviews. largely thanks to the Internet, they have a platform on which brands can deliver had, and including the emotional impact decreasing levels of control over what a ‘experiential marketing’. Just like the of these in their reviews, customers create 3. the new ways in which the digital space consumer sees or hears about their brand. offline version, this type of marketing is powerful ZMOT experiences that influence allows brands to interact with customers We found that amongst tablet buyers who designed to drive greater engagement with other users. and engage them in two-way dialogues . claimed reviews and recommendations the brand by supporting brand stories in were influential in their decision making, interesting and often unexpected ways. Like any tool in the marketing mix, ZMOT At GfK we decided to look at these issues in as many read online reviews and Where digital differs is in its ability to offer alone isn’t sufficient to drive substantial the context of a real-life purchase journey. recommendations as received them from a truly interactive experience to consumers. growth for any brand, but it is becoming Conducting research with consumers who offline friends and family. Additionally, a It goes beyond the opportunity to merely increasingly influential. In order to maximise purchased a tablet PC, we looked at how similar proportion cited an online review as participate, instead encouraging consumers ZMOT opportunities brands need to create they used the wealth of digital information being most influential in their decision as to play an active role in the creation, not only positive product experiences available to help formulate their product the proportion citing friends and family as development and distribution of these that live up to the brand promise, but also choice. The research combined online having the greatest impact. branded events. engaging brand experiences and a platform surveys with over 300 recent tablet buyers, for the distribution of the advocacy they and tracked the online browsing behaviour This suggests that online can be just The gaming company that provides generate. of a sub-set of these using our LeoTrace* as important as offline when it comes back-stories to characters, the airline software for a four week period prior to to recommendations. The Internet that asks its frequent fliers to upload Sources their purchase. has provided access to a multitude of photos for its advertising campaign, and GfK study conducted with 300 adults via other users, whose humble opinions and the tech company that provides video UK ConsumerScope Panel with LeoTrace, Information underload descriptions of brand experiences often tutorials and a forum for users to share between Dec 2011-Jan 2012. The results revealed that shoppers do make count for far more than the ‘official’ experience are all examples of how digital widespread use of the Internet to gather communications coming from the brand is facilitating improved brand perceptions information, helping them make up their itself. and deeper consumer loyalty through Want more information on ZMOT? minds about their potential purchases. online experiences in a way that cannot be - Wendy Jones Overall, 84 per cent of tablet buyers However, the value of online research achieved through other, more traditional wendy.jones@gfk.com claimed to have actively sought information may be greater amongst those who media. relating to the category in the four weeks require extensive research to validate prior to their purchase: 25 per cent said their purchase decision. For example, they ‘researched extensively’. More than those receiving a strong recommendationCopyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 14. 27 the retail edition the retail edition 28 Digital Psychology: By Colin Strong What smart Data says about you and how brands can use it to build exciting online relationships As I started planning my summer holiday, I Much of what has historically been was struck by the sheer scale of the digital a human-to-human activity is now footprint that I alone was creating. Using increasingly digitised, not only by people, Google to search for potential destinations, such as me, trawling the Internet, but I skimmed through holiday reviews and also through the digitisation of back- local destination websites, tried to see office systems. This means, for example, the facades of various apartments using that I now receive my airline booking Google Earth, shopped around travel sites automatically via email, that the plane to book flights, used comparison sites for capacity is instantly updated and that the my car hire and insurance, let everyone prices are accordingly re-estimated (or know about it on Facebook…and this all should I just say hiked up!), all without the before I had even set foot outside of the involvement of any human being. front door. When I finally do go on holiday, I will of course leave digital traces all the way As life becomes more digital, what we to and from my destination, from attending know about people is progressively going to my messages and updates on social to come from the digital form, thereby networks, to showing up on all manner of creating valuable opportunities for travel systems. On my return I will upload consumer researchers. Indeed, with the photos, share my thoughts online, update numerous traces I have (evidently) left Facebook again...and the list goes on! scattered across the digital landscape fromCopyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 15. 29 the retail edition the retail edition 30 “Much of what understanding of consumers themselves, thereby reaping even bigger benefits for on the inevitable myriad of data in order to create any meaningful metrics. Smart Data involves the creation of new methodologies across the consumer has historically brands wishing to create the best possible digital experience for consumers. Currently, there are few industry- standard digital metrics that accurately researcher spectrum but in areas which are familiar to those working in this industry been a human- So, for example, we can deduce the way reveal consumer mindsets in the way, for example, that ‘customer satisfaction’ has – identifying and creating data collection methods, designing data capture tools, to-human in which consumers research and buy in more mainstream consumer research. analysis and modelling etc. It also involves products or how they are influenced by the creation of a whole new set of metrics activity is now digital marketing or social media content 3. Integrate: By retaining the more which not only accurately summarise the concerning brands. If analysis is limited to traditional tools in the consumer digital behaviours being exhibited but increasingly the brand’s digital assets then, at best, very researcher’s kit bag (e.g. surveys, also start to tell us something much more digitised” limited information can be gleaned about the wider digital lives and behaviours of qualitative interviews) we can not only help to fill in some of the inevitable insightful about the people behind these behaviours. consumers. gaps in our understanding, but also get more insight into what different digital The real power of Smart Data lies in the this year’s summer-getaway research, it We believe there are five cornerstones for activities actually mean (e.g. what does it integration of the digital and ‘traditional’ wouldn’t be difficult to determine quite a brands to succeed in transforming Big Data mean if people sometimes spend a long market research approaches to create a bit about me and my holiday preferences. into Smart Data. time before they confirm actions?). coherent understanding of the consumer. In short, it is becoming easier to build Those that can best harness the power of a picture of consumer lives, mind-sets, 1. Capture: Although brands are able to 4. Model: A critical challenge is to integrated digital data will add tremendous attitudes and motivations from their digital capture the digital activity that passes understand the relationship between value to business strategy and decision footprints. through their own assets, they do not different forms of digital activity. For making, far beyond the industry’s current see the activity that sits outside of these. example, are there digital activities level. Of course, digital analytics has long been an This gap in knowledge is, nevertheless, that brands undertake which lead area of investment for brands to optimize critical for generating a holistic view to particular consumer outcomes Want more information on Digital Psychology? their web-sites, search terms and so on, of consumers’ digital lives beyond the (e.g. change in brand perception)? - Colin Strong enabling them to increase the flow of site mode of interaction with one brand. Frameworks are being developed here colin.strong@gfk.com traffic and to maximise sales, although the The challenges here are immense but that have their legacy deep in areas such full range of brands digital assets is often in making use of large global panels of as social psychology but can be applied under exploited. There has recently been consumers we can achieve this. GfK, for to the digital world. much discussion of the merits of ‘Big Data’, example, uses electronic means to track that is the use of large-scale data gathering consumer’s digital activity across devices, 5. Transform: The end point of Smart and analytics to shape strategy. as well as collecting a range of personal Data is to recognise how brands can and attitudinal data through more build more effective digital experiences. At GfK, we fully support this thinking but traditional survey methods. The crucial question is how can have a somewhat different emphasis. Our brands generate new, more facilitating ‘Smart Data’ approach is about putting 2. Measure: A key challenge is how we go relationships with consumers by using the consumer at the centre of the analysis about generating measures or ‘metrics’ digital profiling? If brands can better as opposed to the brand’s digital assets. from digital data. Contrary to traditional understand the ‘digital psychology’ of By doing this we can gain a greater consumer research approaches, we have consumers then we should expect an to create and impose our own structures enhanced digital experience.Copyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 16. 31 the retail edition the retail edition 32 So what is Behavioural Economics?... By Colin Strong and Prof Peter Ayton ...And what does it offer to technology brands to improve the influence Watch the video on in all stages of the customer journey. Youtube now, scan the QR code below Market research has long been about understanding the way consumers behave in order to develop successful market strategies for brands. An area that is getting increasing recognition for having a key supporting role to play at each stage of the customer journey is Behavioural Economics. Although a current hot topic, Behavioural Behavioural Economics is Nobel Laureate Economics has, in fact, been around Daneil Kahneman. A key contribution of for a long time, informing much of our his work has been to argue that the model understanding of consumer behaviour, of rationality held by many people is not particularly in the area of consumer choice always correct but that we are irrational in when researching and developing retail ways which, in most cases, meet our broad strategies. requirements. This is known as ‘bounded rationality’. So within the limits of our Behavioural Economics is highly useful brainpower and our ability to process all for market researchers as an approach the information that is relevant to the to understanding human behaviour problems that we have to solve, we are which accepts that economic theory is able to function effectively for the majority unable to deliver the whole story about of our needs. But because this is done by what influences consumers’ economic making shortcuts (simple rules of thumb) behaviour. The idea that people do not and not always using optimal strategies, we always make rational decisions is what the occasionally get things wrong. core of Behavioural Economics is about. Conversely, Economics is based on the So let’s explore how this is relevant to the premise that people do make rational customer journey in technology markets. decisions and that market forces will resolve everything in the most efficient way. An important figure in the field ofCopyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 17. 33 the retail edition the retail edition 34 “consumers’ photographer’s dream became the middle- implications for the way in which tech brands create their portfolio, with the the way in which pricing is presented to consumers: preferences are range option. However, in this new context, recommendation being to limit the offering this camera improved its market share to manageable numbers for consumers. 1. Fair pricing: Our perception of what clearly governed with more than 50 per cent of respondents might be a fair price for an item is often by the context of choosing that item. And the secret to its success? Despite having the same features Behavioural Economics also shows that determined by a mechanism called consumers struggle to juggle a large ‘anchoring’. This is a widely researched options that they and same price as in the previous context, number of pieces of information at a time. phenomenon which indicates that it won over more customers because it was do not choose, a presented as a good compromise option – a One study illustrated this effectively by looking at the way in which magistrates (a consumers’ perceptions of what is a reasonable price are often determined finding that has deal hard to pass by. court official in UK courts) make decisions by an earlier reference. For example, implications for the Therefore, consumers’ preferences are concerning whether to allow defendants to have bail (go free until their next court real estate agents were asked to value a house that was on the market. They way technology clearly governed by the context of options that they do not choose, a finding that has appearance) or whether to retain them on visited the house and were given a remand (keep them in jail until their next booklet of information about the brands seeks to implications for the way technology brands court appearance). Although magistrates property which included an asking price. position their seeks to position their products in the market both relative to competition and are instructed to make their decision based One half saw a high asking price, the on a wide range of different variables other half saw a low asking price. When products in the indeed within their own portfolio. (and indeed they consider that this what they were subsequently asked what their market ” Consumer choices they do), in the vast majority of cases the researchers found that it was ultimately estimate was of a fair asking price for the house, the results were clear – the We generally believe that we like choice only one or two pieces of information that listed price consistently influenced their – the more choice the better and the influenced the decision (in this case the assessment despite their repeated claims assumption is that our desire for a larger advice of the prosecution). to the contrary. range and our ability to navigate it is Forming preferences unlimited. The reality is that consumers can This ‘fast and frugal’ means of decision 2. Free: Offering goods for free has a Prior to making a purchase choice, often struggle with the extent of options making is a useful adaptive skill as we disproportionate impact in the market, consumers generally review the market available to them, as illustrated by the do not become over-loaded with the to the extent that consumers will and begin to identify their preferences. classic ‘jam sandwich’ study. This research complexity of the everyday decisions that often choose free goods as opposed to Behavioural Economics research involved setting up an ‘exotic jams’ tasting we might have to make. This is especially spending small sums for much higher increasingly demonstrates that preferences booth at a high-end grocery store in pertinent for tech companies which often quality goods. are actually very malleable and influenced California. On one occasion there were six provide consumers with a large amount by all manner of contextual effects. jams at the tasting booth, whilst on another of information concerning the variety of 3. Overvaluing discounts: This is classic A good example of this is a classic occasion there were 24 jams. Consumer features that their proposition may offer territory for retailers who have long experiment which offered people a choice reaction and subsequent purchase was The ‘fast and frugal’ rule means that it is been aware that strategies such doubling of two cameras; one was an upmarket tracked with compelling results; despite critical to understand which features are prices and then marking them down by camera boasting various special features, the initial appeal of the wider choice of consumers focus on in order to make their 50 per cent will result in many more sales the other was a much cheaper, basic model. 24 jams, in this case only three per cent purchase decision. At retail, for example for than otherwise would be the case. Broadly equal numbers of people were of consumers actually purchased a jar. By smartphones, we therefore often see only interested in each camera. contrast, of the consumers browsing the three or four main features on the display. tasting booth when it had six jams available, Another study was then undertaken a staggering 30 per cent went on to Price evaluation using the same two cameras but this purchase a jar. There are a wide range of issues in time with the addition of an even better, more feature-packed model. In this Behavioural Economics that underpin This ‘choice overload’ again has significant scenario, the camera that was previously aCopyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 18. 35 the retail edition the retail edition 36 An example of the impact of these by retail outlets to generate experiential students chose not to make the exchange. the duration of the examination, a real mechanisms for technology markets is involvement on the part of consumers to commitment to the cause of research! the way in which the Internet influences engage them further with the brand. This neatly illustrates how consumers, once When the patients were asked to relay their consumer willingness to pay for online in possession of an item, endow it with a retrospective evaluation of the experience, services. Very often, content is available Post-purchase evaluation greater value than they otherwise would researchers found that the average or total free of charge which makes it difficult to Once consumers have made their purchase, have done. amount of pain was much less important persuade consumers to start paying for taken it home and started setting it up, than peak pain experience or the level of alternative content, even if it is of a high what does Behavioural Economics have to The implications for the tech market are pain that was experienced at the end of the quality. Conversely, a tech brand may say about the way they think about their to give consumers a sense of ownership procedure. benefit from a competitor offering goods purchase? of their purchase. It is clear this happens at a higher price, because assuming that when a device is purchased but perhaps This finding is key for technology brands the goods are considered to be in the A phenomenon that is relevant here is less so when it comes to services, such as which need to make sure that the in- same category, consumers will have their the ‘endowment effect’. This indicates mobile apps, where there is often a much life management of their customers has perceptions of pricing ‘anchored’ and will that once consumers own an item and it less obvious sense of possession. some key positive experience, particularly therefore be willing to pay more. is theirs (rather than something that they towards the end of their contract (where might covet in a shop) they revalue it, Satisfaction with the experience applicable) and that this is reflected at a The point of purchase often becoming reluctant to give it up or Finally, Behavioural Economics has micro-level within the brand touch-points The psychology of the individual at the exchange it for any other item. interesting things to say about the way in such as call centre calls. point at which they actually make the which people subsequently report their purchase is increasingly under scrutiny An example is a study where participants perceptions of an event. Behavioural Economics has a lot to offer within Behavioural Economics. An in three different groups were offered a technology brands at each stage of the interesting issue here is related to people’s choice between the same two goods, a Studies have shown there to be a customer journey. Some of the findings emotional states at the point of purchase. coffee mug and a bar of Swiss chocolate. In distinction between what consumers above are already implicitly recognised by When a new product is launched people are the first group, upon completing a short have actually experienced and what they tech brands and we can see examples of frequently found queuing outside stores, questionnaire, students were asked to remember experiencing. This is a subtle the way in which these are playing out. By often in what is called a ‘hot emotional choose between the mug and a bar of Swiss but critical distinction which has significant making these mechanisms explicit, it is state’ which is when they are particularly chocolate. There was a roughly equal split implications for how brands manage clearly possible to develop ways brands can craving something. In these circumstances in preference. customer experiences. engage with consumers in a more positive consumers may appear to act irrationally. way. Indeed, there is evidence that when people Meanwhile, all students in group two were An important, if rather wince-inducing, are bidding for products in auctions, they given the coffee mug at the beginning study from the early 1990’s looked at Want more information on Behavioural will sometimes pay higher than retail of a session as a reward for completing the experience of patients undergoing a Economics? prices for some goods because they are so the same task. At the completion of the painful medical procedure At the time, - Colin Strong desperate to acquire them in the auction task, the students were shown the bar this was a treatment which was carried colin.strong@gfk.com context, even though they initially thought of chocolate that they could immediately out without the benefit of an anaesthetic they were going to get a really good deal. receive in exchange for the mug. The and was considered to have been very students in the final group were offered painful. Patients were asked to report their Whilst, of course, brands will not wish to an opportunity to make the opposite pain levels every 60 seconds throughout encourage consumers to act irrationally, exchange after first being given the there is evidently more that can be done chocolate bar. In each case the majority ofCopyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 19. 37 the retail edition the retail edition 38 By Hannah Tierney Tech Trends 2012 – Harmonisation of Digital Life At a time when innovation in devices, mobility and connectivity continue to drive the way we use everyday services, socialise and communicate, what can we expect to emerge in the forthcoming months? Using GfK data to explore how technology is likely to evolve throughout this year, we’ve identified five consumer-led trends to watch out for. 1. Reaching the Cloud 2. Excellence as standard This is the year that cloud-based Well-managed, easily-accessible content solutions will creep into the mainstream; is no longer enough; consumers want Internet-based computing where shared consistent high quality and a seamless user information, software, and resources are experience. With more consumers accessing accessible on demand is largely driven by content from a greater range of devices, the ever-increasing use of smartphones, HTML5 looks to be the computer language tablets and other connected devices, as of the future. Worth its weight in gold for well as advanced mobile applications. As the consumer experience, it is simple for such, it is an essential development to developers and therefore easily-accessible complement the ecosystem as it facilitates for all. consistent service usage and storage across any device. The use of this code alongside cloud technology to create app-like functionality However, these solutions must go hand- for browsers is significant as apps continue in-hand with educating consumers on to be popular and integral for driving how they can organise their increasingly loyalty to operating systems, thereby complex digital lives, with simplicity and dictating device choice. In this light, the value being key. As such, we may see the high expectations of consumers should rise of a new business opportunity around not be taken lightly. The use of blogs, the management of digital life for a fee, forums and review sites provides products as tech companies translate technology and services with a whole new world of solutions into consumer benefits. influence that brands need to beware of and manage.Copyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 20. 39 the retail edition the retail edition 40 3. Seamless existence 4. Right here, right now 5. Gate keepers The Internet has emerged as the key Demand for instant gratification is not a There is increasingly awareness of the scale In light of these five Tech Trends, do you enabler in a wireless ecosystem to facilitate new trend, but advances in technology of personal information that is now stored affiliate with these emerging into the real-time communication. The importance enabling tailored, instant and relevant online. While consumers expect tailored mainstream, or are there other trends you of being connected socially and having a information means that expectations are on content and recommendations, security will identify as rising to prominence throughout constant connection has implications for the rise for instant everywhere. be a key driver of loyalty in the future. 2012? providers. Operators now have the chance Location-based service (LBS) is likely to Trusted brands will be in a strong position to take advantage of their relationship with change the way we behave and shop, as to balance ease of access and usability with You can read and download a full copy of the consumer by offering enhanced data technology provides relevant content growing security concerns. A completely ‘Tech Trends: Harmonisation of Digital connectivity by subscription rather than to consumers based on their latest new revenue stream may also be available Life’ by scanning the QR code below or by device. Of course, device refers not only geo-marketing coordinates. Near Field to these ‘trusted’ brands, with operators in contacting the author. to mobiles – the desire for fully integrated Communication (NFC) will additionally a strong position to affiliate with partners in-home experience is set to rise in the enhance the consumer experience, who will help to streamline consumer Want more information on Tech Trends? coming months, with laptops and tablets empowering devices to immediately and experience whilst additionally providing - Hannah Tierney becoming increasingly housebound, used securely pass information over a short customers with a safe and secure solution hannah.tierney@gfk.com as localised mobile devices as part of the distance, authorising payment by simply to their digital lives. home ecosystem. ‘tapping’ a reader. Finally, the EU is currently revising its privacy policy which is likely to have significant implications for consumers and businesses alike.Copyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 21. 41 the retail edition the retail edition 42 Nicholas Peppiatt interviews Stanford University’s RETAIL DISRUPTION THROUGH Francisco Guzman MOBILE PAYMENTS Despite its potential to disrupt the retail sector, adoption of mobile payments systems has been slow in the US and Europe in contrast to the popularity of such methods in parts of Asia, particularly Japan. To help us explore the elements which contribute to this disparity, TechTalk spoke to Francisco Guzman, a researcher at Stanford University studying the sociocultural factors that influence payment behaviour. Below we have selected some extracts from the interview. Defining the payments landscape Influence of culture Japan is frequently cited as the early As Guzman explains, some aspects of mover on contactless payments, beginning Japanese society actively contribute to with e-cards pre-loaded with cash before the popularity of such payment systems. expanding to include mobile phones (known “There’s definitely a heightened sensitivity as osaifu-keitai, which literally translates towards not causing commotion for others as “wallet phone”). “First of all Japan in and what other people are thinking of you general is very, very open to new kinds of as you do things”, he says. “Transportation technology”, Guzman says. “Right now there is something where time is very important. are several [contactless payment] systems If you’re taking time to refill your card and in Japan; Edy, Suica and PASMO. Those are making other people wait, that’s frowned the primary digital e-cash cards with digital upon.” counterparts on the mobile phones.” It is this area, he adds, where a phone that And this early adoption was driven automatically charges your bank account primarily by the transportation system, he has an advantage over e-cash cards, which elaborates, “Most of the people in Tokyo, require physical recharging. However, around 90 per cent, commute to work the popularity of mobile payments also every day. Mobile payments are an integral mirrors an aversion towards credit cards, part of that process. The way people pay and by extension, the concept of debt. “It’s for their tickets, the different surrounding because of the forward-looking nature of vending machines, and the different the culture - there’s definitely much more convenience stores within the train station of a concern for the future and your future all accept mobile payment methods.” state in Japan than there seems to be here in the United States, where it’s much more about the short term.”Copyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 22. 43 the retail edition the retail edition 44 “Instead of having “One of the frustrations is the fact that so many stores have their own Despite this threat, Guzman points out that the speed of smartphone technology The future Musing on the future, Guzman senses a loyalty cards mobile payment system and they don’t development means mobile payments need for re-evaluation in Japan. “How do work together.” Guzman elaborates, should prosper in the long term. “You’ll we take all this fragmentation and make it from 20 stores, “Transportation companies are working eventually have [a smartphone] that’s NFC more unified? How do we change people’s you manage together to make this process frictionless. For retail, it’s not so much the case.” capable and able to make payments. That’s when carriers and merchants are going to mindset, from using mobile payments to make small purchases, to increasingly them digitally. It try and make the push to get people to [getting them] to make bigger purchases?” The full picture actually use the technology as opposed to becomes more of a Another aspect Guzman is keen to point simply having it dormant on their phone.” While he predicts continued development free marketplace out, is the reality of mobile payments adoption in Japan. “It’s very easy to get The next step in the US and Europe, it is clear that trust will need to be a cornerstone of the whole where everyone swayed by all the different publications, While existing payment methods in western process. “I think within the next five years making it seem that mobile payments are markets are well established, it is clear that different kinds of partnerships will develop can use the same much, much more popular in Japan than the increasing ubiquity of smartphones and we’ll see which one gets the most system” they actually are”, he explains. “About 20 per cent of the people that have the mobile is changing the nature of people’s daily lives. “When you’re in the store you’ll see traction. Something that’s come across frequently, [in regard to] money specifically, payment functionality on their phones are people checking the price of things online, is trust. When consumers think about their actually using it. On a global level that’s seeing if there’s somewhere they could find money, who do they trust and how can we Retail tactics high, but [for the] other 80 per cent of [products] cheaper or find complementary get those players more involved?” So in that context, how are consumers people, why aren’t they using it?” ones.” in Japan incentivised to spend their “Mobile payment can allow for a closer money? Importantly, incentives are not Guzman expands that balancing This interaction goes beyond the individual, relationship between customer and limited to purely financial rewards – the convenience against the security risks enabling consumers and retailers alike to merchant. With all of the information we design of the interaction is also key, with around data has played a key role in draw on a potentially staggering amount share, and smartphones that are able to payments triggering an array of lights and this. “That became the more interesting of information. “A phone is able to tap into bridge our digital and physical worlds, it sounds which all provide added sensory question. As opposed to saying ‘Let’s talk your social networks and see what kinds is easier to make the payment experience confirmation of purchase. “Even little about why you use this’, I’d say ‘Let’s talk of things you like, what kind of things your feel more personalized, which is exciting things like that contribute to the greater about why you don’t’. That’s probably more friends are buying”, Guzman explains, “but because of all the possibility!” experience of getting something for doing helpful when we think about how we’re it’s going to be hard to balance because something that you would have to do going to design future mobile payment of privacy concerns. [This sensitivity has] About anyway”, Guzman adds. systems.” been heightened, with companies like Francisco Guzman is a senior and Google and Facebook increasingly pushing researcher at Stanford University in the Alongside this, there is an abundance The smartphone threat the boundaries of what people share online Department of Management Science and of loyalty points systems. However, as In the short term at least, Guzman believes and how people’s information is being Engineering and the Program for Science, highlighted by Guzman, these have their the current system of mobile payments in used.” Technology and Society. His final year own intriguing dimension. “The points Japan is under threat from the increasing Honor’s thesis is on the topic of mobile systems are extremely popular in Japan. global popularity of smartphones. “These The danger of fragmentation must also payment and behaviour, under the guidance But most people actually don’t redeem osaifu-keitai phones are also called be addressed, and there is a clear need of his advisor Professor Robert McGinn. them, which is something else that’s Galapagos phones because Japan is known for a unified system. “Instead of having interesting. It’s just the feeling of knowing [to release] advanced new technologies loyalty cards from 20 stores, you manage For more information on his research, that you’ve got something for nothing, that haven’t really been able to make their them digitally. It becomes more of a free please contact: fguzman1@stanford.edu knowing that you have these loyalty points way outside the country.” marketplace where everyone can use the to use whenever you like, that is appealing.” same system.” “[These phones] have advanced functions Want more information on mobile payments? like high-def cameras and Internet “However”, Guzman continues, “Are these - Nicholas Peppiatt Challenges access”, he continues, “but they’re not the even loyalty benefits anymore, because it’s nicholas.peppiatt@gfk.com Despite all these advancements, retail brands are still experimenting with touchscreen smartphones we’ve come so easy to just download a loyalty card? implementation, and fragmentation is a to know today - the iPhone, the Android If [acquiring a loyalty card] becomes too big challenge facing all parties. “Mobile phones - which are becoming much more easy there really is no benefit for retailers payments are restricted to smaller types of popular in Japan. People are giving up the because you’re not really being loyal purchases, mostly for buying train tickets, a option to pay with their phone to switch to anymore.” bottle of water, or things of that nature. We a smartphone.” haven’t really seen big retail adopt that yet”Copyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 23. 45 the retail edition the retail edition 46 By Oliver Robinson Disruption, and what consumer research can learn from Henry Ford I’m a relative newcomer to the ideas behind However, identification is only halfway to disruptive innovation (when Clayton application. With my market researcher Christensen first published The Innovator’s hat on, I was left with more questions Dilemma, which provides an evidence- than answers; in particular, when reading based framework for how new entrants around the topic I kept coming across the to a market can displace the incumbents quotation above. The truth behind Ford’s by introducing products and services sentiment, so the argument went, was that that compete asymmetrically, I was still at consumer research has little role to play in school). When I did, eventually, come across innovation. Christensen’s work, I could probably have skipped over the majority of the evidence So how, if at all, should disruptive part; as a market researcher in the tech innovation harness consumer insight? sector, I only had to look around at the changes taking place in the computing and Ask a silly question, get a silly answer telecoms markets. Regardless of whether their input is directly sought, consumers sit at the heart “If I’d asked my customers what they of the product development process. wanted, they’d have said a faster horse” Ultimately, their needs can only be met in Henry Ford the finished product if they are correctly As a framework for understanding how identified and understood from the outset. markets evolve, disruption is a seductive But what’s the best way of understanding idea. Just looking at the theme for this those needs? issue of TechTalk (retail), it is possible to quickly reel off a list of innovations that Taking a step back from disruptive either are, or could potentially, disrupt innovation, the majority of products and the retail space in the coming years. As services are developed as small variations a starting point, how about contactless or enhancements to existing products. In payments, 3D printing, or the continuing the best part of these cases, consumers growth of mobile and e-commerce, and understand the original product, appreciate resultant changes in the nature of bricks how it fits into their lives, and are therefore and mortar retail stores? able to provide often specific input intoCopyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
  • 24. 47 the retail edition the retail edition 48 Figure one: TechNeeds model as used in GfK Much of this observation can take place The speed of the horse doesn’t matter if it’s ‘live’, gathering anecdotal evidence from heading in the wrong direction the people around us as we go through Ultimately, disruptive innovation, as daily life. What are they trying to achieve? with sustaining innovation, is reliant What problems are they encountering on consumers. Their experiences and while doing so? The results can provide perceptions underpin what the product a more accurate picture of how people or service is setting out to achieve, and a interact with products and services than development process that does not involve recalled behaviour. While the speed of them from the outset risks misinterpreting the horse may be what springs to mind those same needs and frustrations that it for a consumer who is asked what would aims to meet and solve. improve their experience, observation might suggest reliability and maintenance By the same token, in the realm of (not to mention smell…) are more pertinent disruptive technologies, consumer input what would improve it. Typically, this to key dimensions that remain consistent problems in day-to-day usage. needs to be carefully managed. They is in the form of additional features or across different contexts and tech cannot guide innovations they are unable functionality, and market research has a categories. Good market research (which can, of to conceive, and as a result, their feedback widely acknowledged role to play here. course, include a range of observational will often be framed in the context of the Beneath the cornerstones of the model sit techniques) adds depth and clarity to the same marketplace that brands are trying However, input isn’t available for disruptive a sub-set of dimensions, so in security, for more subjective, anecdotal evidence we to disrupt. Understanding what consumers innovations. By definition, products and example, we will have a range of dimensions observe as part of daily life, but the nature want to do is more important than how services with disruptive potential exist including safety, privacy, reassurance etc. of disruptive innovation can make it hard they envision doing it. outside established markets, meaning Our work has shown these to be consistent to know what to look for. It is here where consumers can neither visualise their drivers of successful product innovation. the dominant market players hold the While the importance of observation has experience with the product nor how it strongest, but most rarely-played, cards. traditionally enabled new entrants with would fit into their lives. They might want This allows us to: limited resources, the businesses most a car, but until they know what one is they Typically, established businesses have vulnerable to disruption – established can only describe a faster horse. • Work with brands to ensure that their access to numerous consumer insights, brands – typically already have a wealth of product road map is meeting genuine collected from countless research projects. consumer data that can be mined for these Should we therefore exclude consumers needs in the market. Many of these projects were most likely insights. Leveraging them effectively can from the disruptive product development • Build an international framework for driven by specific business questions ensure that businesses are strategically process altogether? Not necessarily, but innovation, critical in the technology relating to sustaining innovations (those aligned with potential disruptions, it does necessitate a more considered sector. minor improvements to existing products preventing the asymmetric competition approach to framing their input. Rather • Visually map the opportunity for and services), but taken together, and that empowers new entrants. than focusing on features and functionality, development – what needs are being mined for further insight into unmet conversations with consumers should be catered, where is the white space – so consumer needs, they constitute a richer Henry Ford’s quotation should not be taken orientated towards the underlying needs we can rapidly start identifying new web of consumer experiences than anyone as a dismissal of consumer perspectives, they want to fulfil, and, in particular, the opportunities. outside the market has access to. When but as a reminder not to take them at face problems they encounter with existing placed in the context of a needs-based value. If he had asked one of his customers solutions. The disruptive solution may Actions speak louder than words framework, such as TechNeeds, these what they wanted, they might have said a be inconceivable to them, but a nuanced Of course, asking consumers about their experiences become building blocks for faster horse, but if he had asked enough of understanding of their current experiences needs and problems isn’t the only research disruptive innovation. them the right questions, he would have and frustrations offers the first signpost for approach. Indeed, disruptive innovations ended up with the list of problems that his getting there. have often emerged from new entrants Model T went on to solve, (and maybe even to the market. Typically limited by much the smell!). A needs model such as TechNeeds, smaller research budgets, their innovations which we use at GfK, is especially useful tend to be derived from observation rather for brands to help navigate this space. than direct consumer interaction. Based on significant research input, the Want more information on disruptive TechNeeds model maps consumer needs innovation? - Oliver Robinson oliver.robinson@gfk.comCopyright GfK | TechTalk Edition One 2012 Copyright GfK | TechTalk Edition One 2012
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