Close ☰
Menu ☰

The decision making revolution hits home

Posted on: Monday 1st of August 2016

Last week British Gas reported that it had lost 400,000 customers over the year, leading to a drop in profits. It’s not alone amongst the ‘Big Six’ energy providers. The week before SSE announced it had lost 370,000 customers. Why is this happening?

Simple answer. Because consumers are getting used to the idea of using price comparison services. They are shopping around more.

How big a deal is this? At Ctrl-Shift we think it’s a very big deal. Consumer decision-making processes and journeys are being transformed by the rise of new decision support services – and that’s transforming the key ingredients of success for all brands and marketers.

 

McKinsey’s research

The scale of this shift is underlined by new research from McKinsey which delved in to the decision-making process of 20,000 consumers across five industries and three continents.

Here are two extracts:

“Marketing used to be driven by companies; ‘pushed’ on consumers through traditional advertising, direct marketing, sponsorships, and other channels … In today’s decision journey, consumer-driven marketing is increasingly important as customers seize control of the process and actively ‘pull’ information helpful to them. Our research found that two-thirds of the touch points during the active-evaluation phase involve consumer-driven marketing activities, such as Internet reviews and word-of-mouth recommendations from friends and family, as well as in-store interactions and recollections of past experiences. A third of the touch points involve company-driven marketing.”

“Marketers have been taught to ‘push’ marketing toward consumers at each stage of the funnel process to influence their behavior. [But the research shows that] actually, the decision-making process is a more circular journey, with four primary phases representing potential battlegrounds where marketers can win or lose: initial consideration; active evaluation, or the process of researching potential purchases; closure, when consumers buy brands; and post-purchase, when consumers experience them.”

 

Behind the times

We are not surprised by these findings. We said exactly as much seven years ago in our first major piece of thought leadership research on ‘the rise of Volunteered Personal Information’ (VPI), published in 2009.

In this report, we said three interlinked tipping points were driving a “once-in-a-century” change in how individuals and organisations interact and relate. They were:

  1. A tectonic shift in the core information flows in our society, from mainly top down (from organisations to individuals) to mainly bottom up and peer to peer (from individuals to organisations and each other).
  2. A shift in value and trust: in an information age, the trustworthiness and usefulness of the information provided by organisations is as important as the trustworthiness and value of their products and services. Brands need to become ‘information services’.
  3. Individuals seeking increased control over their own data so they can use it for their own purposes.

 

The decision making revolution

Marketing and consumer decision-making would be one particular hotspot of this transformation, we argued. Historically, we noted, marketing was about the information organisations provided customers; information designed to influence customers’ decisions.

Increasingly, we argued, consumers were turning to new information services to seek out and use the information they needed to make better decisions. They were bypassing the classic marketing ‘funnel’ and transforming the way markets and marketing work, particularly via:

  • New services. Decision support is now a consumer service in its own right, we argued, and most of the value delivered by decision support services happens outside individual companies’ sales funnels as consumers seek best value from the marketplace as a whole. (Think VRM, which is about consumers managing their relationships with suppliers, rather than CRM, where companies manage their relationships with customers).
  • New processes. Instead of consumers organizing their buying processes and activities around the ways sellers choose to sell their products, sellers would have to organize their selling processes and activities (including the types of information they provide) around the ways buyers choose to buy. The core consumer decision-making activities we identified were Scoping (identifying what’s available on the market), Considering (what’s right for me), Acting (e.g. making a purchase) and Managing (everything that needs to be managed post-purchase). These are exactly the same activities that McKinsey talk about in their research (under different names).

 

Still on the wrong track

It’s great that, seven years on, McKinsey has confirmed our analysis.  Unfortunately, they’re still missing three crucial facts about the new environment. The fact that:

  • as decision support establishes itself as a consumer service in its own right, brands that fail to enter this market will be disintermediated by those that do.
  • old marketing strategies that worked perfectly well in old times are becoming counter-productive in the new environment. The energy market is a classic example. For decades, companies have found that exploiting consumer inertia is a much easier, lower-cost way to boost profits than alternative strategies. Today however, as decision support services go mainstream (from first generation intermediary price comparison services to more advanced NGIs), they are killing inertia-based marketing strategies. Five years ago, the ‘Big Six’ energy companies had 97% of the market. Now it’s down to 85% and falling fast. How long before these companies are forced into a root-and-branch marketing re-think?
  • the changing consumer decision-making journey is not just about consumers ‘pulling’ information to them; it’s also increasingly about consumer specifications: consumers generating and sharing new information about their preferences, intentions, circumstances etc to get the information they really need to make informed decisions. New information sharing processes are creating new forms of consumer value that make old methods look thin indeed.

 

Learn more at PIE

Tomorrow’s marketing leaders will be those that adjust to the trends still missed by McKinsey. Our PIE (Personal Information Economy) conference on Achieving Growth Through Trust (London September 29) will explore how to ride these trends to create new business and strategic opportunities. You can get tickets here.