Sometimes you don’t realise that markets are telling you much more than the current state of Europe, the US and China. Underneath the financial turmoil is a dramatic change in customer behaviour which goes much deeper than simply buying on the net – consumers have become more "productive” and businesses providing goods and services which do not understand this are going to fall by the wayside.
Grandparent duties bring you in touch with young families and I can see that the way they shop is totally different to the way we operated at a similar age. Unfortunately, relatively few suppliers of goods or services, including media companies, understand this.
What brought this to my attention was a survey produced earlier this year by IBM’s Institute for Business Value, which covered 30,624 consumers in 13 countries, including more than 2,200 consumers in Australia, asking them what they really think when they shop. The survey plotted the rise in online shopping but underneath that rise was a change that was just as profound.
Yesterday, one of the presents we are going to give to the grandchildren on Christmas day arrived via Australia Post – purchased by one of our children online. The survey says over 20 per cent of respondents said they regularly bought clothing, groceries, consumer electronics and personal care products for their parents. So the purchasing decision is moving beyond the four walls of the traditional home.
That’s a totally new game.
Remember the days when we relied on advertisements and the salesperson in the store to tell us what to buy? That game is also all over but most services and goods suppliers are only just waking up to this.
IBM says that thanks to social networking in all its forms – including Tweeting, using Tumblr and video hauling – consumers engage in a constant and instant dialogue with each other. They discuss their interests and their experiences with different retailers, products and brands.
These online conversations and consumer-generated content are rich sources of information for purchasing decisions.
Many consumers today know exactly what they want when they enter a retailer’s website or shop, because they’ve already asked for advice.
In Australia, more than half of the respondents to IBM said they turned to friends and relatives for honest information about products and services. They are less trusting of external sources, such as customer reviews (19 per cent) and product experts (17 per cent). Only 13 per cent of consumers believe product information from retailers and manufacturers. As further evidence of this lack of trust, 50 per cent of respondents said they wouldn’t give a retailer their primary email address if asked.
Consumers were most likely to trust the opinions of family and friends – and distrust retailers and manufacturers – when buying groceries and apparel. Those shopping for consumer electronics and luxury brands gave more weight to the opinions of external sources, particularly customer reviews and product experts.
In former years, customers could not easily contact each other. Now they can and do, not only with families and friends but also on a global scale. Price will motivate customers to buy a product they already know or intend to buy – often as a replacement.
It's not just retailers who must change their business model to match the increased "productivity” of their customers – it's also service and goods suppliers and media companies.
To see IBM's survey, Capitalising on the smarter consumer, click here.