In various client conversations, questions come up regarding end-consumer buying behaviour – who is buying, what are they buying etc. In my view, the answer to these question keeps evolving, and in many ways is linked to lifecycle stage – Verb, Recognition, Top of Mind Awareness, Growth, Survival – that the brand is at. Here, I will like to discuss more about end-consumer buying behaviour and how it relates to the life stages of the brand.
As is well documented, consumer buying behaviour is categorised as below,
1. Complex Purchase –
High Average Order Value (AOV), well researched
2. Dissonance Purchase –
Usually, high AOV involved buying process, multiple-brand options
3. Habitual Purchase –
Recurring, low involvement
4. Variety Purchase –
Low involvement, impulse buying
In building the brand life stage – consumer buying behaviour model below, I have included AOV as one of the key factors. For one, AOV is central in revenue calculations: Online Revenue = Website Traffic * Conversion Rate * AOV, and as seen above, AOV is an important factor in consumer buying decisions. Also, it is important to differentiate between AOV (post discount order value) vs suggested selling price for products.
Also, as a note, I am restricting this model discussion to online sales. With tweaks, the model can be extended for offline sales.
Brand life stage – Consumer Buying Behaviour model
As brands evolve from the Survival through Verb life stages, the buying behaviour for consumers associated with the brands shifts significantly.
In early days, for most brands, the first consumer interaction starts with a variety purchase. This is early flirting stage for the consumer with the brand, with a very limited downside for the consumer. The first purchase will most likely be a low AOV. For the brand though, this is first-hand feedback on multiple fronts – number of clicks to purchase, payment methods used, shipping SLAs, website page load times (including add-to-cart and checkouts). I do know a few founders, who have personally called consumers who have added to cart, but not purchased. This call, was not a sales call offering a discount to convert, but rather a genuine attempt to know their consumer buying behaviour better, and what has stopped his/her from making the final purchase.
Product promotions, discounts, free shipping, limited time offers – all are ways to sustain this phase. Data however suggests that incremental benefits for discounts and offers over 40% are limited, and can hurt the business reputation in the long run.
Beyond the survival stage, brands take two paths in their pursuit for reaching the verb stage
Path I – Variety Purchase –> Habitual Purchase –> Complex Purchase
Path II – Variety Purchase –> Dissonance Purchase –> Complex Purchase
I will start with an example. Today we are hotly debating the best way to keep ourselves safe from the Covid19 threat. World Health Organisation (WHO) has clearly mentioned that regularly washing hands is the safest form of personal hygiene. WHO has NOT mentioned that anti-bacterial soaps are any better than a regular soap in keeping us safe. On the flip, there are enough studies documenting the side-effects, not all good, of using anti-bacterial soaps over the long term.
Knowing this background, what is the first brand of soap we buy? Dettol! Why?
Reckitt Benckiser has invested in a marketing strategy that has created the Top of Mind Awareness that links personal safety and hygiene with Dettol soap. In the model we have formed, clearly Dettol as a brand has taken the Path I track, having achieved the habitual purchase status as far as personal hygiene and safety is concerned.
For a Path I story, apart from revenue and transaction numbers, successful brands track for key parameters including Google trends/brand keyword uplift, social mentions.
In marketing literature, car buying is often referred to as a Path I complex purchase. For me though, unless you are buying a top end model (from Verb or Recognition phase brand), most mid-segment car purchases follow Path II. Today, if we are to buy a mid-segment car, you have the options of 6-7 auto brands. As an added layer, the sedan car segment is facing severe competition from SUV/MUV segment. In this scenario, most consumers will eventually buy a car, always thinking that I missed out on something else in the other car – a classic case of dissonance, justifying the decision once the purchase is done.
Several of the Growth phase brands demonstrate Path II behaviour. When there is early focus on revenues and margins, invariably the priority shifts to selling more products rather than creating the brand. While this strategy works great in the short term, with the particular product/service eventually becoming commoditised, the risk of losing out in the long run is very high. That said, success on this path is achieved by investing in developing the brand, and in increasing brand awareness within the audience pool.
For brands at a macro level, if we were to differentiate Path I vs Path II journey’s, it is the classic Path I – Selling to the heart vs Path II – Selling to the mind.
Path I brands spend enormous amount of resources, time and budgets in going up the Awareness –> Recognition –> Verb ladder. In doing so, they are making that emotional connect with their consumers that helps build loyalty. Once loyalty is built, it is that much more easier to have products in the complex purchase zone.
Path II brands can rely on repeat purchases. However, there is little loyalty built around the brand with repeat purchases. Eventually, Path II brands have to start investing in brand building to move away from the dissonance zone towards complex purchases.
To summarise, brand’s life stages and the related consumer buying journeys are ever evolving. Consumers today are spoilt for choices, with reduced attention span. That said, there always are scenarios like Covid19, tradewars – that test the resilience of brands, allowing the verbs to emerge.
As a closing note, I have considered AOV as one of the primary factors influencing buying behaviour. There are multiple other factors including macro / micro-economic conditions, variety of options, family – peer influences and other psychological – physiological aspects that impact buying decisions. Each of these are significant areas, and will require further analysis of their own.