Social Media's Impact on Consumer Behaviour in Market Segment

HOW SOCIAL MEDIA IS IMPACTING CONSUMER BEHAVIOUR FOR A PARTICULAR MARKET SEGMENT [pic] Presented By: Rohan Bhardwaj Anupam Nagar Sumit Kumar Prateek TABLE OF CONTENTS 1. Abstract 2. Introduction 3. Literature Review. 4. Objectives. 5. Research methodology. 6. Results. 7. Findings 8. Appendix 9. Conclusions and Recommendations. 10. Limitations. 11. References ABSTRACT The global proliferation of the internet over the last decade has substantively changed the traditional buyer-seller exchange dynamics through ts high volume-high speed information flow capabilities. Businesses can now directly communicate in real time with one another throughout their value chains to create value for their consumers.

Likewise, the consumers can communicate with businesses, third party independent information providers, actual users and/or potential users of a product across the globe for obtaining better value for their money spent on purchasing products and services.

On the consumer side, the internet has provided tremendous access of consumption-related information to consumers worldwide and the global flow of information has therefore given a fresh impetus to allow consumers to participate in obtaining value through several new types of marketing exchanges such as auctions (e.

g. Ebay) or reverse auctions (e. g. Priceline). The academic literature is increasingly recognizing the new role of the consumer as the co-creator of value in the buyer-seller relationship (Payne et al. 2008). Vargo and Lusch (2004) argue that the customer is always a co-creator of value: There is no value until an offering is used—experience and perception are essential to value determination. The focus of consumer flocking in the internet buying context is the tendency for individual consumers to take charge of the online shopping channel and integrate it with their other online communications, especially social communications at sites like Facebook.

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While still in its rudimentary stage, consumer flocking has promise in creating a win-win economic scenario for consumers and marketers. For instance, by quickly bringing together large groups (“flocks”) of consumers through their communications within existing social networks, marketers can achieve a quick turnover of unsold inventories and thereby lower their production and transaction costs. Likewise, by using consumer “flocks”, the service providers can fill up their unsold services during lean periods, thereby smoothening the peaks and valleys of service utilization.

Apart from these strong economic benefits, consumer flocking, in principle, can enable the marketers to accelerate the arrival of late-adopters into market. On the consumer side, they perceive victory because they obtain more value for their money than what they could have obtained if acting individually. In effect, consumers would create greater value for themselves—globally. The focus of this paper is the individual consumers’ propensity to flock for creating value for themselves and the process and formation of consumer flocks.

Next, we define and characterize consumer flocking and propose factors that influence the consumer’s propensity to flock on the internet. We then discuss the role of social media in supporting this behavior and examine the role of certain consumers we call catalyzers in the flocking process. Organizations are increasingly using online communities to interact with customers, but marketers identify a number of key obstacles standing in the way of community effectiveness.

A survey of more than 500 companies that are using online communities and other research to identify characteristics of successful communities. Marketers should understand key human characteristics as thoroughly as the Web 2. 0 and social media tools they employ when interacting with customers through online communities and that by keeping these human attributes in mind, marketers may foster more successful community deployments. Therefore, social media not only is impacting the consumer behavior but also helping us understand it.

Internet has not only given marketers an opportunity to better understand the consumer need but it has also given consumer , myriad options of a specific product to choose from. This study by us, tries to identify the impact of social media on specific market segment and also the possible marketing strategies. INTRODUCTION Successful companies are adopting social media tools to meet an array of goals including communicating more effectively, monitoring their brands and researching perspective employees.

More of them are blogging, tweeting and networking than ever before, and the trend looks like it will continue. Longitudinal data on the Inc. 500 and the Fortune 500 shows social media is fast becoming an integral part of a company’s marketing strategy and that the social media tools of choice are shifting. The internet has upended how consumers engage with brands. It is transforming the economics of marketing and making obsolete many of the function’s traditional strategies and structures. For marketers, the old way of doing business is unsustainable.

Consider this: Not long ago, a car buyer would methodically pare down the available choices until he arrived at the one that best met his criteria. A dealer would reel him in and make the sale. The buyer’s relationship with both the dealer and the manufacturer would typically dissipate after the purchase. But today, consumers are promiscuous in their brand relationships: They connect with myriad brands–through new media channels beyond the manufacturer’s and the retailer’s control or even knowledge–and evaluate a shifting array of them, often expanding the pool before narrowing it.

After a purchase these consumers may remain aggressively engaged, publicly promoting or assailing the products they’ve bought, collaborating in the brands’ development, and challenging and shaping their meaning. Consumers still want a clear brand promise and offerings they value. What has changed is when–at what touch points–they are most open to influence, and how you can interact with them at those points. In the past, marketing strategies that put the lion’s share of resources into building brand awareness and then opening wallets at the point of purchase worked pretty well.

But touch points have changed in both number and nature, requiring a major adjustment to realign marketers’ strategy and budgets with where consumers are actually spending their time. The use of social media by consumer is increasing with 83% of the internet population using social media . Companies have followed suite, embracing social media as a way to market to their consumers. With more consumers and organizations using social media, the question that has yet to really be addressed is – are these companies receiving a return on their investment?

With 81% of surveyed executives expecting to increase the money spent on social media projects and reduce traditional marketing, there is still little research on the effect of social media on purchasing decisions . Previous research is conflicting with some consumers leaning towards the idea that social media does influence a purchase decision and some lean away, saying that social media has little influence. Additionally, it’s important to understand if there is a difference between gender and different age groups and how social media influences these different groups when it comes to purchasing decisions.

The results of this study will start addressing these questions and concerns surrounding the larger picture of social media and purchasing decisions. LITERATURE REVIEW THE ROLE OF SOCIAL MEDIA IN ONLINE CONSUMER FLOCKING Wikipedia describes social media as the online technologies and practices that people use to share opinions, insights, experiences, and perspectives with each other. Social media began with personal email communications of the early 1990’s to the current social networking communications at Twitter. com, Facebook. com, MySpace. com and Ning. om. Media itself has evolved from broadcast where audiences are assumed to be passive recipients of information and interactive which is less passive and allows for some feedback from the recipients to social where audience involvement is active and are very often co-creators of content, context, and connections. Nedelka (2008) categorizes all social media into three groups: content syndication (blogs, podcasts, videocasts), content sharing (user-generated content, wikis, widgets, reviews) and community building (social networks, online communities).

However, the context of this paper is more specific: how are group buying communities formed and what are the characteristics of the participants? These group buying communities—here on called consumer flocks—are consumer-initiated, private, user-created sites set up specifically for aggregating buyers, users, and other influencers for an e-commerce exchange. These participants of the consumer flock derive greater economic value (lower prices) than purchasing as individuals. In the past, sites such as mercata. com, accompany. com, letsbuyit. om and mobshop. com have attempted to aggregate buyers though with a professional or business profit motive. A new site, eSwarm. com, intends to provide a similar platform but was not launched as of date. While all social media provide a channel for consumer flocking, social network sites provide a powerful vehicle for consumer aggregation on the internet. The purpose of many-to-many communications is succinctly described thus: a social trend in which “…people using technologies to get the things they need from one another …”

Social network sites are defined as “web-based services that allow individuals to (1) construct a public or semi-public profile within a bounded system, (2) articulate a list of other users with whom they share a connection, and (3) view and traverse their list of connections and those made by others within the system (Boyd and Ellison, 2008). Charron et al. (2006) propose that social computing will lead to the new product innovation process to shift from top-down to bottom-up, the value to the consumer will shift from ownership to experience and power will shift from institutions to communities (consumers).

Based on Li and Bernoff (2008), Forrester Research Inc. is recognizing the impact social technologies have on the performance of companies and satisfying their customer by instituting awards for best practices in these categories: listening, talking, energizing, supporting, embracing, managing, and social impact. As we can see, social media impacts all stages of the consumption process, from product innovation and creation to the consumption and use experience of the consumer. FACTORS INFLUENCING THE PROPENSITY FOR CONSUMER FLOCKING

There are several reasons which motivate an individual buyer to self-organize on the internet. Such factors as willingness to flock, the need for socialization, online trust and online commitment influence the individual’s propensity to flock. Further, social, structural and financial bonds drive the process of flock formation as does newly found consumer power. The higher the individually perceived economic, social or psychological value, the higher will be the consumer’s propensity for flocking on the internet.

Willingness to flock is one of the most important factors that determine whether there will be a deal or not. This willingness to flock will depend on the specific product offered by the marketer to the flock and the accompanying price and may be limited to a particular size, color or technical configuration. There are several concepts from existing research streams that impact the propensity to flock. According to Klein, 2005 traditional group buying draws on the economic value created in the process for the buyer (and seller). This remains the key motivation for individual consumers to self-organize.

Learning and conditioning theories (Bandura, 1977; Rescorla and Solomon, 1967) suggest that expectation of positive reinforcements and the resulting feelings of self-efficacy may induce consumers to group or flock. While the key value that individuals in an online community site derive would not be only economic in nature, the purpose of consumer flocking is to obtain enhanced economic value in the purchase transaction. Theories related to cognitive consistency (Festinger, 1957) posit that consumer flocking reduces psychological tension by providing consistency and continuity with the online group.

Proposition 1: Higher level of the willingness to flock will lead to a greater propensity to flock. Literature in the areas of social groups, social exchange theory and group influence processes provide several factors influencing consumer flocking. Group socialization literature posits the need for socialization, assuming a presence of norms (Moreland and Levine, 1982), to be a driving force for an individual. Further, trust that develops between and within existing and new members in a consumer flock will encourage group socialization.

Literature in the formation and continuation of reference groups address the concepts of group conformity, avoidance of conflict and affiliation through membership. The current members of a consumer flock may influence the new or potential members if these new members feel a degree of similarity with the group characteristics, values and beliefs (Merton, 1968), there is sustained interaction with others and they consider the flock’s leaders as “significant others” (Bock et al. , 1983). Network theory forwards the concepts of cohesion and homophily as drivers of network and dyad formation.

Proposition 2: Higher level of group socialization will lead to a greater propensity to flock. One of the central concept in the relationship marketing literature that may be applied to the online context are online trust. In a large-scale empirical study of online trust, Bart et al. (2005) examine several types of websites and indicate the key drivers of online trust. The authors define online trust based on consumer perceptions against expectations, believability of the information and confidence in the site.

For the “society and community” category—the category that comes close to our context of social media—the key drivers identified by the authors were “privacy, absence of errors and community features”. While they identify “information risk” to be a factor for such sites, we would expect social risk and psychological risk as relevant factors for social media and would impact the member’s online trust. Other research considers competence and dependability of site sponsor, security of site, and reliability as drivers of trust online.

Proposition 3: Higher level of the perceived online trust will lead to a greater propensity to flock. Hsieh et al. (2005) studied the impact of social, structural and financial bonds on search, experience andcredence goods/services bought online. They found that for search goods—typically, most tangible products—financial bonds may have the greatest impact on online commitment. However, considering the context of the channel, it is expected that social bonds would play a role in the continued commitment of the participants.

Literature in social psychology suggests that self-efficacy and (product) expertise would impact an individual’s motivation to join a consumer flock online. Proposition 4: Higher level of social bonds as perceived by the consumer will lead to a greater propensity to flock. The phenomenon of the shifting of consumer power on the internet has been of interest to scholars (Li and Bernoff, 2008; McConnell and Huba, 2007; Pitt et al. , 2002; Rezabakhsh et al. , 2006). Pitt et al. 2002) discuss the following trends that have increased consumer power in the internet domain: access to accurate, unbiased information; ability to talk to lots of other consumers; ability to band together with lots of other customers; heightening awareness of a firm’s shortcomings; quickly finding legal information; and talking to firms in the public domain. Rezabakhsh et al. (2006) have studied the well-accepted bases of power proposed by French and Raven (1959) to the internet context and concluded that the expert,sanction and legitimate bases of power are the most relevant for study.

When consumers perceive the organizer or lead initiator of the target website to have the qualities of expert, sanction and legitimate power they are more likely to be attracted to the site. Proposition 5: A greater perception of (i) expert, (ii) sanction and (iii) legitimate bases of power of the lead initiator of the website will lead to a greater propensity to flock. One important determinant of action by the consumer to flock is the perceived value of the transaction.

Several benefits and costs that may be considered in determining the value to the consumer (and discussed earlier in the paper) include: potential for lower purchase price; price dynamics, aggregate bidding behavior and individual’s economic benefit (Kauffman and Wang, 2001); expectation of positive reinforcement (psychic benefit) or reduction of psychological tension due to cohesion and homophily (safety-in-numbers); need for socialization, group conformity and affiliation, and avoidance of conflict (social or group benefits); and search, information, communication, and coordination costs (Klein, 2005).

Proposition 6: A higher perceived value of the transaction at the website will lead to a greater propensity to flock. Consumers and Social Media Social media has become a household name among organizations and society. Knowledge Networks reports that 83% of the internet population uses social media, with 47% of those using it on a weekly basis. According to the Nielsen Company, globally, consumers spent more than 5. 5 hours on social networking sites in December 2009 which is an 82% increase year-over-year, when users were spending three-plus hours on social networking sites.

Facebook was the top social networking site in December, with 67% of global users visiting the site that month. In the U. S, people have continued to spend more time on social networking sites, with total minutes increasing 210% year-over-year in December 2009. Additionally, the time per person increased 143% year-over-year. Facebook and Twitter continue to lead the pack with year-over-year growth spent by U. S increasing 200% and 368%. According to a study by the Pew Research Center and contrary to how social media statistics appear, adults make up the bulk of these users on social networks in comparison to teens.

Adults make up a larger portion of the population than teens, because the 35% of adults represents a higher number of users than 65% of teens. That said, younger adults in the 18-24 age group are much more likely to use social networks with 75% compared to 7% of adults 65-plus. Facebook, which recently surpassed yahoo as the second most visited website, saw its user base grow from 42 million to 103 million in 2009 which is a 144. 8% growth rate. The 35-plus age group represents more than 30% of the entire user base and the 55-plus age group grew 922. % in 2009. Social Media in Organizations Given these types of numbers, it’s no surprise that organizations have also begun to embrace social media for business. According to the 2010 Digital Marketing Outlook, 81% of executives surveyed are expecting an increase in social media projects and will be investing more money into digital projects and reducing the money spent on traditional marketing. The survey also showed that social networks were high on the to-do list with 45% reporting that they were a top priority in 2010.

When looking at Fortune 100 companies, 54% are on Twitter, 32% have a blog and 29% have an active Facebook page. Only 17% of companies are using all three of the above social networks, with the average Fortune 100 Twitter account having 5,234 followers. The median is 674 followers. It’s not only large businesses increasing in social media use. According to a BIA/Kelsey Local Commerce Monitor study, there’s increasing interest from small and mid-size businesses putting social media to work for them. The report showed that 9% of mid-size companies use Twitter and 32% plan to use social media in the next 12 months.

According to the study by Coleman-Parks Research of the importance of business social media marketing, 84% of North American companies feel they require new methods to interact with customers, including social media. The study states that companies who do not use social media do so “at their own peril,” meaning they are missing opportunities to grow and are likely to find themselves behind companies who embrace media tools. Companies who do use social media reported the following:
• Improved Feedback 78%
• Improved Customer Satisfaction 66%
• Improved Customer support 71%
• Increased Sales 40% Improved public perception of company 75% Engagement with Consumers On the other end of the spectrum, consumers are engaging with brands on social networks more. According to a 2008 Cone Business Social Media Study , 60 percent of Americans use social media and of those, 50 percent interact with companies on social media web sites. Additionally, 93 percent of social media users believe a company should have a presence in social media, and to top that off, 85 percent believe that a company should also interact with its consumers – resulting in a stronger connection and being better served.

A study of media use of college students confirmed that four out of every 10 college students have reported friending a brand on a social network, compare to 19 percent of adults A new study conducted by ForeSee Results of nearly 10,000 visitors to the 40 largest U. S. retail sites found that 56% of shoppers are friends, following or subscribing to a retailer on social networking sites, particularly Facebook, Twitter and YouTube. It also found that more than half of all online shoppers use Facebook, but only a quarter of the top 100 retailers by sales volume have their own presence on Facebook .

Influence on Purchasing Decisions The question to be asked is- are users visiting social media sites to help make purchasing decisions? Even though 83% of the internet population participates in social media, one study reports that less than 5% of those users go to the social sites for guidance on purchasing decisions. Along with that, only 16% of the users say that they would be more likely to buy from companies that advertise on the sites.

According to a Pew Internet study on adults and social network sites, social media sites are mostly used for personal networking with 89% using their online profiles to keep up with friends, 57% using their profile to make plans with friends and 49% using them to make new friends. Additionally, according to the eMarketer “Women’s Survey,” even though more than one-half of women are active in social media, 74. 8% reported not being influenced by it when it came to purchase decisions and just over one-fifth said they were somewhat influenced and only 3. 3% reported greater influence.

Additionally, female internet users said they were much more likely to say online purchase decision were affected by coupons and discounts, product ratings, and online advertisements, than by online communities (Are Women Really Ignoring Social Networking, 2009). That said, an iProspect research study showed that social networking sites are influencing the purchasing decisions of a meaningful percentage of the internet users who visit them. For example, according to new data from comScore, nearly $16 billion was spent during the first 36 days of the 2009 holiday shopping season (Nov. ) which was a 3% increase versus 2008. What also was found was that 28% of shoppers said that social media influenced their purchases in 2009. A study by DEI and OTX on the impact of social media on purchasing decision showed that consumers rely on different social networking sites, as much as company websites for brand/product information. Companies that use social media in an engaging way with their customers increase their likelihood of them making a purchase.

Sixty percent of people reported that they pass along information they receive online in social media websites and two-thirds agreed that recommendations from other people could influence their purchase decisions. Additionally, talking with a brand representative online was shown to strong influence the purchasing decision . Companies using social media are reporting returns on investments (ROI) from using social media. Dell, who established their Twitter account over two years ago, claimed to have brought in more than $3 million from Twitter followers who clicked through their posts, to the web site, and followed through with a purchase.

An Atlanta aquarium had their staff spend a minimal amount of time and resources to send out information through Facebook, MySpace and Twitter, with their efforts bringing in $42,000 – equating to 2,500 admission tickets. Yet, the aquarium admits that it’s hard to say how many people would have come without the promotion and how many came because they received a discount . Naked Pizza, an all-natural New Orleans pizza place has also generated a positive ROI due to their social media efforts. Co-founder Jeff Leach says he was able to drive 15% of his daily revenues with Twitter and of those, 90% were new customers .

OBJECTIVES 1. To determine whether or not consumers are influenced to make a purchase by brands/organizations using social media 2. To determine whether gender is a factor 3. To determine whether age is a factor 4. To determine whether time spent on social networks is a factor 5. To understand the concept of “consumer flocking”. METHODOLOGY Social media use is increasing and it’s followed by a rise in the number of brands/organizations investing more time and money into marketing, advertising, and interacting with consumers via social networks.

Little research has taken place on whether the time and money spent, contributes to a consumer’s decision to make a purchase. This study was undertaken to: 1. Address whether or not consumers are influenced to make a purchase by brands/organizations using social media 2. Determine whether gender is a factor 3. Determine whether age is a factor 4. Determine whether time spent on social networks is a factor Subject Selection and Description The subjects in this study were randomly asked via social networks if they would like to take an online, anonymous survey.

There were no limitations as to who could take the survey. The survey addressed: -> Whether the participants use social media. What social networks they use? ->How much time they spend on social networks? ->Whether they connect with brands on social networks? ->Whether they make purchases online and how many. ->Whether they interact with brands on social networks. ->Whether they’ve made a purchase because of a brand on a social network. ->Whether they think the brands on social networks influence purchasing decisions. ->Their age group ->Their gender

Data Collection Procedures During the time period of 10TH OCTOBER TO 25TH OCTOBER 2011, an 11-question survey was sent electronically to 30 people via email, asking them to take the survey. Additionally, the survey was open to voluntary participants using Facebook and Twitter. The participants in the email were selected specifically target those people who may or may not use social media. The use of Facebook and Twitter was used to target those participants who do use social media. Data Analysis Data analysis included calculating percentages of responses for each question addressed.

The percentages of the data will then be analyzed to determine if it’s probable that people make purchasing decision based on their interaction with a brand on social media and any significant correlations. Limitations Limitations of the study are that: 1. It was not determined whether or those answer yes to being influenced to make a purchase online because of a brand/organization being on a social network, wouldn’t have made the purchase otherwise. 2. The study does not address whether or not organizations report an increase in sales that come directly via social media. . This is partially a convenience sample and maybe not be representative of the population RESULTS During the time period of 10TH OCTOBER TO 25TH OCTOBER 2011, an 11-question survey was given to 30 participants to assess their social media usage and whether or not interacting with a brand on social media influenced a purchasing decision. The participants in the email were selected specifically target those people who may or may not use social media. The use of Facebook and Twitter was used to target those participants who do use social media. RESULTS USE

The data showed that 28% of participants used social media for personal use only, 25% used social media for business use only and 22% used social media for personal and business use. TYPES Facebook was on top with 88% of participants, followed by 48% on You Tube, 37% on LinkedIn and Twitter and 28% on Flickr. TIME Most participants spend five hours or less using social media (51%), with 28% spending six to 10 hours, 8% spending 11-20 hours and 2% spending more than 25 hours a week. CONNECTIONS Fifty-four percent of participants are connected to brands via social media.

Of those, 25% interact with brands on social media. Of those 25% that interact with brands, 20% have 14 purchased a product online or in store because of an interaction. Of that 20%, online coupons and reviews contributed to the purchases sometimes (8%), always (5%), rarely (2%), and never (8%). Also of that 20%, all of had made purchases online at least once to more than 30 purchases. Of those connected and not connected to brands, 20% of participants said that definitely yes, purchase decisions are influenced by brand interaction, 60% think probably yes, and 14% probably no. FINDINGS

Given these statistics, we step back to answer some of the questions addressed in the literature review. Give the small sample size, we cannot consider these results to be representative of the population but they do lead to the following conclusions: We can consider it to be true that consumers’ purchasing decisions can be influenced by their interaction with brands via social media, given that 20% of the 54% of participants that interacted with brands have made a purchase because of that interaction. We can consider it to be true that purchasing decisions influenced by brands may or may not be also influenced by online coupons or reviews.

When it came to think about whether others’ purchasing decision are influenced by brands, 60% said it’s probable, while 20% said it’s likely. There was no distinct correlation between those who said it was probable and those that actually made a purchase because of the interaction. Age and gender may or may not be a contributing factor. The correlations were not significant. It’s probable that the more time spent on social networks, the more likely a consumer is to be influenced by a purchasing decision given that of the 20% that made a purchase, 8% spent 6 to 10 hours and 8% spent 11 to 20 hours on social networks.

Additionally, all of those that were influenced to make a purchasing decision used Facebook. Further research from a representative sample will need to be completed to more deeply understand what exactly in the interaction with the brand is affecting a consumer’s purchasing decision including the types of interactions, larger demographic samples, and focus groups to discuss the nature of purchasing decisions and whether these purchases would have taken place 16 regardless of the participation.

Future research will also have to be done from the analytics side of a company, for example, how many people came in from a social media site and made a purchase. APPENDIX Social Media Survey 1. Do you currently use social media tools? Yes for personal use only Yes for business use only Yes for personal and business use No (skip to question 9) 2. If yes, which social media tools do you use? (check all that apply) Facebook Twitter MySpace Linkedin Flickr You Tube Technorati Digg Delicious Other, please specify 3. On average, how much time do you spend per week using social media tools? 0 – 5 hours – 10 hours 11 – 20 hours 25+ hours 4. Are you connected to any brands/organizations on social networks? (e. g. Being a Facebook fan of Pepsi or following airlines on Twitter) Yes No (skip to question 6) 5. Do you interact with brands/organizations on social networks? Yes No 6. On average, how many online purchases do you make per year? I don’t buy online 1 – 5 6 – 10 11 – 20 21 – 3025 31+ 7. Have you purchased a product online or in-store because of your interaction with a brand/organization on a social network? Yes No (skip to question 9) I don’t interact with brands/organizations (skip to question 9) . As part of that interaction that led to a purchase, did coupons or online reviews from others contribute to your purchasing decision(s)? Yes, always Yes, sometimes Yes, rarely No, never 9. Do you think that a brand/organization being on a social network influences the purchasing decisions of others? Definitely Yes Probably Yes Definitely No Probably No 10. Gender Male Female 11. Age Under 18 18 – 25 26 – 31 32 – 40 41 – 50 51+ CONCLUSION In conclusion, from the research we can consider the following items to be true: From the research, we can consider that the following items might or might not be true:

Although it’s possible that feedback, customer satisfaction, and public perception are results of social media use by organizations, does the fact that they are using it via social media translate to a sale that might have not happened otherwise. Are organizations clearly investigating their social media ROI versus traditional ROI? This research study seeks to answer some of the above questions including: Are consumers influenced by a purchase solely because the brand is using social media, not necessarily if they are engaging with the chosen tool? Is age or gender a factor in the influence of social media and purchase decisions?

Are consumers more likely to buy if influenced with a coupon via a social site, in comparison to a coupon offered elsewhere (direct mail)? Are consumers more likely to purchase a product if a brand is providing product information via a social network? RECOMMENDATIONS For years, marketers assumed that consumers started with a large number of potential brands in mind and methodically winnowed their choices until they’d decided which one to buy. After purchase, their relationship with the brand typically focused on the use of the product or service itself. [pic].

NOW THE CONSUMER DECISION JOURNEY New research shows that rather than systematically narrowing their choices, consumers add and subtract brands from a group under consideration during an extended evaluation phase. After purchase, they often enter into an open-ended relationship with the brand, sharing their experience with it online. [pic]. Consider & Buy Marketers often overemphasize the “consider” and “buy” stages of the journey, allocating more resources than they should to building awareness through advertising and encouraging purchase with retail promotions.

Evaluate & Advocate New media make the “evaluate” and “advocate” stages increasingly relevant. Marketing investments that help consumers navigate the evaluation process and then spread positive word of mouth about the brands they choose can be as important as building awareness and driving purchase. Bond If consumers’ bond with a brand is strong enough, they repurchase it without cycling through the earlier decision-journey stages. By David C. Edelman David C. Edelman (david_edelman@mckinsey. com) is a coleader of McKinsey & Company’s Global Digital Marketing Strategy practice.

Idea in Brief Consumers today connect with brands in fundamentally new ways, often through media channels that are beyond manufacturers’ and retailers’ control. That means traditional marketing strategies must be redesigned to accord with how brand relationships have changed. Once, a shopper would systematically winnow his brand choices to arrive at a final selection and complete his engagement by making a purchase. Now, relying heavily on digital interactions, he evaluates a shifting array of options and remains engaged with the brand through social media after a purchase.

Smart marketers will study this “consumer decision journey” for their products and use the insights they gain to revise strategy, media spend, and organizational roles. Block That Metaphor Marketers have long used the famous funnel metaphor to think about touch points: Consumers would start at the wide end of the funnel with many brands in mind and narrow them down to a final choice. Companies have traditionally used paid-media push marketing at a few well-defined points along the funnel to build awareness, drive consideration, and ultimately inspire purchase. But the metaphor fails to capture the shifting nature of consumer engagement.

In the June 2009 issue of McKinsey Quarterly, my colleague David Court and three coauthors introduced a more nuanced view of how consumers engage with brands: the “consumer decision journey” (CDJ). They developed their model from a study of the purchase decisions of nearly 20,000 consumers across five industries–automobiles, skin care, insurance, consumer electronics, and mobile telecom–and three continents. Their research revealed that far from systematically narrowing their choices, today’s consumers take a much more iterative and less reductive journey of four stages: consider, evaluate, buy, and enjoy, advocate, bond.

CONSIDER. The journey begins with the consumer’s top-of-mind consideration set: products or brands assembled from exposure to ads or store displays, an encounter at a friend’s house, or other stimuli. In the funnel model, the consider stage contains the largest number of brands; but today’s consumers, assaulted by media and awash in choices, often reduce the number of products they consider at the outset. EVALUATE. The initial consideration set frequently expands as consumers seek input from peers, reviewers, retailers, and the brand and its competitors.

Typically, they’ll add new brands to the set and discard some of the originals as they learn more and their selection criteria shift. Their outreach to marketers and other sources of information is much more likely to shape their ensuing choices than marketers’ push to persuade them. BUY. Increasingly, consumers put off a purchase decision until they’re actually in a store–and, as we’ll see, they may be easily dissuaded at that point. Thus point of purchase–which exploits placement, packaging, availability, pricing, and sales interactions–is an ever more powerful touch point.

ENJOY, ADVOCATE, BOND. After purchase, a deeper connection begins as the consumer interacts with the product and with new online touch points. More than 60% of consumers of facial skin care products, my McKinsey colleagues found, conduct online research about the products after purchase–a touch point entirely missing from the funnel. When consumers are pleased with a purchase, they’ll advocate for it by word of mouth, creating fodder for the evaluations of others and invigorating a brand’s potential.

Of course, if a consumer is disappointed by the brand, she may sever ties with it–or worse. But if the bond becomes strong enough, she’ll enter an enjoy-advocate-buy loop that skips the consider and evaluate stages entirely. LIMITATIONS OF THE STUDY The limitations of this study are: 1. There is a short time-frame allowing for only one survey, test period and a small number of those surveyed. 2. There is not enough long-term research on behalf of organizations to track the possible purchase influence. 3.

This study will not track actual purchases. Results will be based upon survey results. 4. This study will not take into account how organizations are using social media, and if they are using it as effectively as possible. Methodology Data will be obtained through the use of an online survey. REFERENCES 1. JOURNAL OF ACADEMY OF BUSINESS AND ECONOMICS, Volume 9, Number 3, 2009 2. September 2010 Journal OF Advertising Research. 3. May 2009 Harvard Business Review and Harvard Business Publishing Newsletter content on EBSCOhost 4. Wikipedia