MODELS OF CUSTOMER BEHAVIOUR

MODELS OF CUSTOMER BEHAVIOUR
JayaDigital

MODELS OF CUSTOMER BEHAVIOUR

How the buying decision process was reshaped during the age of free access to information. 


Relationships between customer and brand have changed drastically within the last decade. Nowadays customer wields dramatic influence on brand: they are able to obtain any information on the company, its goods or services – not only from the company itself, but from other customers, as well as to express an opinion or estimate them in front of wide audience.
 
As for a brand, it is supposed to not only speak, but listen to what customers say about it, and instantly respond to such information. Otherwise it is most likely going to lose both current and potential customers.
 
With the article below we will try to find reasons for such significant developments, and come to understand how they influence the process of choosing good/service and their purchase.
 
 

Purchase funnel


Back in 1898, American advertising advocate Elias St. Elmo Lewis created a model which mapped a theoretical customer journey from the moment a brand or product attracted consumer’s attention to the point of action or purchase. St. Elmo Lewis’ idea is often referred to as the AIDA-model – an acronym which stands for Awareness, Interest, Desire and Action.
 
Awareness – the customer is aware of the existence of a product or service
Interest – actively expressing an interest in a product group
Desire – aspiring to a particular brand or product
Action – taking the next step towards purchasing the chosen product

This early model has been evolved by marketing consultants and academics to cater for the modern customer and is now referred to in marketing as the purchase funnel. Marketing specialists use it to describe customer’s buying decision process, and to establish customer-brand relationship.
 
classic_purchase_funnel
 
That is how the model has been looking like during the last decade of the 20th century. Customer’s been going through more stages of decision taking: from brand awareness to interest, consideration, selection and purchase, as well as loyalty and repeat purchase, if it satisfied them.
 
At each of the stages the number of brands is decreasing, and in the end of the funnel there is only one brand chosen and bought by customer. If the product of chosen brand satisfies customer, they keep on enjoying it, not thinking of any other brands.
 
Marketing specialists only had to target their customers at every stage of decision-making with their advertising in so called touch points between brand and customer to influence their decision. 
 
The points could vary: customer saw advertisements on TV, next to shelves in a shop, on the walls of metro coaches etc. Quantity of media and their reach were limited, so the bigger was the media budget, the more people could see the advertisement. Naturally, only large brands could afford big budgets.
 
In the current model customer was limited in the access to information and selection of brands, limited source of information was one of the reasons. In such situation brand itself would be the source of information: the campaign covers the audience with advertisement, issues press releases, organizes events etc.
 
Customer only had to believe brand’s promises, and to purchase and check them out personally. There was no disposable instrument to compare prices or offers. Of course, one could ask their friends, but this wouldn’t always work e.g. with luxury goods, besides the number of acquaintances was limited.
 
The key task of marketing specialist within the model is to precisely target customer with appropriate advertisement at every stage of the funnel. Such linear model had been dominating up to the end of the 20th century.
 
 

Customer journey


The classical purchase funnel has been operating successfully during a very long period of time, but lately its application no longer has been providing such obvious benefits for marketing specialists.
 
Moreover, it doesn’t provide correct understanding of customer behavior during the purchase process, because it doesn’t cover all the points of customer’s contact with company, its goods and services.
 
All this negatively affects business indicators, resulting in cost escalation, ROI decrease and, most importantly, customer loyalty degradation.
 
Why is this all happening?
 
Information (technological) revolution is the key among numerous significant events that have happened during the last 15 to 20 years. It rendered customer’s free access to Internet, stimulated emergence and development of social networks.
 
Along with dramatic changes connected to the access to data sources and generation of these sources by customers themselves, other processes are taking place as well.
Indeed, we are living in the consumer society, where means of production and technologies have become identical and easy to copy. Consequently, in every product category a big number of manufacturers emerged.
 
Quantity of companies and volume of competition multiplied, and this tendency is only gathering pace. What is more, small companies also got access to media-resources that lets them communicate with customers the way large companies do.
 
In 2009 the McKinsey consulting company held a large scale study on buying behavior of over 20 thousand customers from 5 different industries on three continents. On the basis of the obtained data an updated model of customer behavior was offered: customer decision journey.
 
On one hand, it is cyclic compared to the linear model of purchase funnel. On the other, it consists of 4 stages and trigger.
 
mckinsey_customer_desicion_journey
 
Trigger is the very moment when demand for a good or a service arises. E.g. a natural situation (a housekeeper runs out of detergent, and she decides to buy a new one cheaper) or external influence (she saw a TV ad with an attractive offer from a competitive brand / a friend told her about the new product).
 
Stage 1 – initial consideration.
Customer studies the brands from one product category they have been aware of – heard, saw, tried etc. At this stage, similar to the one within the purchase funnel, brand awareness is of high importance.
 
Stage 2 – active evaluation.
With their access to various sources of information, customer carries out an active search for offers from other companies. It is not enough for them to only see or hear an advertisement, they want to know exactly what they are going to get with the purchase, and what other consumers know and think about the brand.
 
The process of search and evaluation has become much easier with Internet services such as search systems, manufacturers’ web-sites, social networks, forums, testimonials web-sites, ratings etc.
 
All these instruments offer not only information on the company and its goods/services, but about after-sales service as well. In contrast to the purchase funnel, at this stage number of offers and brands might increase significantly.
 
Stage 3 – closure. The stage similar to the stage of purchase within the purchase funnel model.
 
Stage 4 – impressions after application of goods/services.
At this stage customer makes use of goods/services he had acquired. But along with classical loyalty, i.e. repeat purchase, they represent a person who might evaluate goods/services in public. Their positive or negative testimonial will directly influence further sales of the brand.
Positive experience of goods/services application offers even greater opportunities for the brand. Customer not only repurchases it, but also influences other potential consumers of the brand expressing positive testimonials about it. And on the contrary, in case of negative experience the brand bears double risks.
 
As we can see, the model creates certain key trends marketing specialists and market players should pay attention to.
 
The stage of active evaluation bears benefits and hidden risks.
Benefits: make information about the brand available, and customers will find it themselves.
Risks: negative testimonials about goods/services in Internet might seriously affect sales.
 
The stage of impressions after application of goods/services. There are two types of loyalty: active – when customer not only purchases goods, but also talks about brand (brand advocacy), and passive – when they use goods, but don’t speak about them. Such customer tends to shift brands when they encounter a more attractive offer (i.e. they constantly remain within the stage of active evaluation).
 
 

Take-aways


Application of an appropriate customer behavior model has always been the basis for successful communication in business. It provides the possibilities to choose and cover the touch points most influential for customers’ behavior within a certain period of time.
 
In the age of development of information technologies and free access to data sources, customer decision journey represents the optimal model. This is the period of transfer from push marketing to customer driven marketing, from product centric marketing to client and experience centric marketing.
 
The time when brands could entirely rely on their advertising budget and advertisements is over. At the moment brands ought to follow customers’ opinions and desires, and respond on short notice hoping to turn them into brand advocates.
 
In our next article we are going to explore the connection of the current customer behavior model with raising questions directed onto development of business.
 
prepared by Andriy Krutko, CEO at JayaDigital