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DSM 3.0
A new study shows shopper technology has come of age.

" Any sufficiently advanced technology is indistinguishable from magic."
-- Arthur C. Clarke, author, 2001: A Space Odyssey

We're not usually given to quoting science-fiction authors, but we were struck by how true that assertion can be whenever new technologies arrive on the scene. The magic of early-stage technology is amazing to witness, but its application is more akin to mystery. Potential users who get early exposure to these miracles of advancement go through the predictable litany of mental questions: "Wow, how did they do that? ... How does it work? ... Wait, what does it do again?"

Way back in 2009, when we really started tracking Digital Shopper-Marketing (DSM) in earnest, that was a pretty good approximation for how shoppers viewed this market -- lots of cool, but experimental apps, widgets and interactive in-store hardware, but few real tools that could actually make the shopping experience faster, cheaper or better.

At that time, it was clear that as more tools began to crowd this market space, we would see a divergence -- a separation of winners from losers. "Magic" as the yardstick would begin to give way to real performance metrics, and ultimate market and financial success would be based on an individual technology's ability to garner attention, attract early adopters and solve a fundamental need for a broad cross-section of the shopping public.

Catapult's 2011 Digital Shopper-Marketing Study (DSM version 3.0), indicates the separation of winners and losers is now taking place in a very real way, making it more critical than ever for marketers to select the right tools with the right utility for their customers.

The study not only takes the pulse of DSM, but, as in previous years, performs a detailed diagnostic on shopper behaviors and the prevailing attitudes and perceptions that shape these behaviors. Fielded with more than 1,200 shoppers by our partner IPSOS-OTX, we took a deep dive into 34 specific tools across the path-to-purchase. We know of no other study that provides this depth of coverage over a three-year time horizon.

The proliferation of DSM tools is a success story, with caveats. Shoppers are now awash in DSM tools. Not only are new technologies appearing on the scene in ever-greater numbers, but shoppers also actually know about them. Twenty-six of the 34 tools we examined have surpassed 50 percent awareness, with an average of 63 percent, and several over 90 percent. Even the newest and most esoteric tools are registering with shoppers.

Even more encouraging, DSM tools are helping to create a more satisfying shopping experience and causing shoppers to change their behavior in meaningful ways. Fifty-eight percent of users report that they are more satisfied when they use DSM tools and 68 percent of shoppers changed their behavior because of DSM -- up 10 points from a year ago.

Specifically, they are more likely to buy brands or products that make use of DSM, spend more time shopping and make decisions faster. This certainly provides a reason to believe in this family of technologies as a whole!

However, as one might expect, acceptance of DSM tools is uneven. The more mature technologies -- self-checkout, digital coupons and online circulars -- all show very high levels of usage. In contrast, 13 of the tools we track still have usage stats that hover in the teens or below -- including many that have been available for several years.

In part, this is because not all tools are viewed as truly helpful. Self-checkout, digital coupons and online circulars are joined by handheld scanners (at Ahold), shopping lists (printable from websites or mobile), as well as mobile and paperless coupons as the most helpful tools. Media darlings such as Twitter, location-based services and QR Codes clearly lag the pack. Even more telling is that in many categories less than 50 percent of shoppers plan to use DSM tools to a greater degree in the future.

DSM fills many shopper needs -- just not always the ones you'd think. At the root of this variable performance is the stark fact that not all tools fill a shopper need to a sufficient degree, while others satisfy multiple needs. While it is true that at-home tools such as digital coupons online circulars, retailer-site promotions, price comparison tools and group purchasing all do a great job of saving the shopper money, they are under-leveraged by brand marketers and retailers.

Instead of delivering against a single need-state, there is a sizable opportunity to give shoppers new ideas or even surprise and delight them. With the exception of online circulars, that simply doesn't happen today. An even greater opportunity rests with repurposing Facebook or Twitter, which don't deliver against any core shopper needs.

On-the-go tools, aided by a surge in smartphone ownership, provide a good lead indicator of what might be possible. These technologies, as a whole, tend to a very broad spectrum of needs -- especially the higher-order experiential and self-fulfillment needs of providing new ideas, making the shopper feel smarter. Only location-based services, retailer text-alerts and mobile sites show weak utility.

In-store tools are very clearly delivering against convenience and increasingly providing an enjoyable experience. Only payment from cell phones has a relatively poor showing.

Privacy is another factor affecting DSM usage and potential. Seventy-four percent of shoppers shared some level of concern about privacy, with nearly 60 percent of these very or extremely concerned. Beyond simple wariness, one quarter of our respondents actually limited their use of DSM tools because of privacy issues. Technology providers, retailers and brands have a clear responsibility for protecting customer data and articulating a coherent privacy policy. Brands, whose existence hinges on a long-term bond of trust with shoppers, have a unique opportunity to be proactive on this front.

What does the future hold? As in previous years, we have developed a roadmap that classifies DSM tools into distinct lifecycle classifications to help brands and retailers make strategic investment decisions. Several of our recommendations deserve special comment:

Self-Checkout. Predictions about the demise of this technology are premature. While it is true that some retailers report lower usage of self-check out lanes and are considering removing them, others plan to maintain them as a core part of the customer experience. We believe it's a true source of shopper utility and delight -- giving control to the shopper especially during fill-in and impulse shopping trips. Our challenge as marketers is to work with retail partners to leverage self-checkout as a resource within shopper-marketing programs.

QR Codes. The QR code is an interesting technology whose true utility has not yet been revealed. While it provides the most advanced means for deeper engagement in-store, it remains frustrating for shoppers, with spotty performance and linkage to information that is not always useful. This tool could be replaced by easier-to-use technologies such as near-field communications, or other -- yet to be launched --technologies. QR codes are the greatest example of technology not yet catching up to shopper needs.

Social Media. While seriously lagging as a shopper application today, social media may yet evolve into a shopper tool -- the audience and opportunity are too big to ignore. As Facebook and Twitter continue to identify where social media fits along the path-to-purchase, a new model likely will be discovered that capitalizes on this audience.

Digital shopper-marketing is a bit like the "wild, wild west" -- there are a lot of providers speaking about a lot of technologies and opportunities to engage with shoppers. The space is incredibly innovative with new offerings emerging every day and even existing offerings are morphing and evolving at a moment's notice. To be successful and effective, it's important to have a foundational understanding of who's using what, why they're using it, and how it's affecting their overall shopping experience and longer-term shopping behaviors. Those who figure that out the fastest will win.

SETH DIAMOND is vice president of marketing insights for Catapult Action-Biased Marketing. Previously, he was a senior director of consumer insights and strategy at Kraft Foods. He can be reached at sdiamond-@-catapultmarketing.com. BRIAN COHEN is director of digital shopper-marketing at Catapult, with expertise in digital and brand strategy across a variety of industries. He can be reached at bcohen-@-catapultmarketing.com.

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