By Martin Elling, John Forsyth and Brian Salsberg
What if you could watch customers make a major purchase, from start to finish—and after? And listen to them all along the way? That would be fascinating, and illuminating.
That is the premise of McKinsey’s Global Digital Diaries project. We monitored, with permission and for a small fee, almost 100 consumers from eight markets (Brazil, Britain, China, France, Germany, Hong Kong, Japan and the US) as they went about buying a smart phone. We chose smart phones for this experiment because the major brands are global and because it is more interesting to track a dynamic target rather than a more static one. And smart phones are certainly dynamic. In the US, according to Nielsen as of March, about half of US mobile subscribers owned smart phones—a 38 percent increase over the previous 12 months. More than two-thirds of recent mobile handset purchasers (ie, those who bought in the prior three months) chose to get one with brains. And in China, smart phone penetration is rising fast, reaching 33 percent in urban areas.
We asked the participants to describe, in a confidential website, what they were thinking and experiencing as they went through their Consumer Decision Journey The CDJ is a concept McKinsey developed in 2009 to describe how people interact with companies and interpret their own preferences as they make a purchase. It has four phases:
- Initial consideration set—What brands/products do consumers have in mind as they contemplate a purchase?
- Active evaluation—Consumers gather information to narrow their choices.
- Moment of purchase—Consumers decide on a brand and buy it.
- Post-purchase—Consumers reflect on the buying experience, creating expectations/considerations that will inform a subsequent purchase.
In addition to written posts, many of the participants got into the spirit of the thing by adding videos, cartoons, photos and the like. A number enlisted their Facebook friends and Twitter followers for advice. Some were cryptic; some were genuinely creative. We supplemented this work with a 10-question survey. Together, these materials make up the Global Digital Diaries project.
This is a small sample, and we know that the Global Digital Diaries are not definitive. But we believe that they are interestingly indicative: They put clothes on the CDJ model.
Later this week, we will publish separate articles on the first three stages of the CDJ, but here is an overview of some of the project’s more intriguing insights.
Don’t count on consumer loyalty: A good experience through the CDJ, we have argued, can help to pull customers into the “loyalty loop,” so that next time they buy the same product, they will be pleased enough to skip (or shorten) the first two stages, going straight to the moment of purchase. Classic examples of this loop are the car buyer who always buys a Toyota; the fashionista who will wear anything as long as it’s Prada; or the parent who swears by Tide. That kind of loyalty, quite literally, pays dividends.
When it comes to smart phones, though, the project indicates that loyalty is weak. And this is not because people hate their phones. Rather the opposite. Almost everyone who already owned a smart phone when they started the CDJ was happy with it. Nevertheless, a majority changed brands. Those who only had cell phones were quick to consider new brands as they sought to upgrade. In a fairly typical comment that must be the stuff of despair for marketing managers, one participant remarked, “I am not really attached to any sort of brand. I usually change the brand every time I buy a new phone.”
It didn’t take much for people to shift. One person didn’t like the shape of her phone; another complained about the shape of the plug. Small price differentials can loom large, as do the costs/reputation of telecom providers. Apple owners were noticeably more likely to stick, valuing the brand’s ineffable sense of style; moreover, the synchronization with various I-things made changing a bother.
After using their new phones for a few weeks, only a couple of respondents had even the mildest complaints. In fact, they reported an extraordinary degree of satisfaction (97.5%) for an expensive and complicated item. But, they said, that didn’t necessarily mean they would get the same phone next time; they’d wait and see what the market was like.
There are two reasons for weak loyalty in CE purchases—a phenomenon, by the way, that McKinsey has documented in other studies. We believe the most important factor is that the technology development cycle in consumer electronics is lightning fast, and consumers know it. So they do research both online and offline to better understand the latest technology; in effect, they start the CDJ from the beginning again rather than falling straight into the “loyalty loop.” The digital diary recipients clearly follow this pattern. With information so easy to get, and knowing that new and better features are always emerging, very few simply went back to their current provider. That makes for a vibrant market—and weak loyalty.
CE consumers in the digital diaries project also demonstrate another attitude—what we call “variety seeking” is that even when companies succeed in pleasing their customers, their loyalty is up for grabs. One German named Jacek reported that he has owned three Samsung phones and liked them all. But that counted for nothing this time. “I just don’t feel like buying a Samsung,” he wrote. “I think it is time to give another company a trial.” So, Samsung performed well, three times—and Jacek bought an iPhone. Jesse, a self-proclaimed “digerati” put it more colorfully. Over the years, the American has owned an AT&T cellphone, a Blackberry and an early iPhone. Looking to upgrade, he proudly swears no fealty: “I am so ready to explore all the options out there. It’s like I’ve been in a long-term monogamous relationship the past 12+ years and I’ve just joined a swingers club.”
So should companies give up on loyalty? Probably not. The comparatively strong connection of iPhone owners suggests that building a degree of loyalty is not an entirely lost cause. There is also a positive dimension to keep in mind: Weak loyalty means that it is possible to pick off a wide range of consumers, perhaps by offering special deals to those who switch brands.
One area to explore: The connection with telecoms providers. Our diarists cited the expense of long-term contracts as an important reason to stick with what they have, even if they were not particularly thrilled with it.
The death of distance: This term has been used in the past to refer to how distance is no longer a factor in determining the cost of communications. What’s interesting is that communications itself has shrunk distance, or at least diminished its relevance, when it comes to making actual purchases. We were struck by how many people volunteered that they were willing to go quite a distance to buy a smart phone, either virtually (via the Internet) or physically (ie, waiting to buy while travelling to a different market). A number of German and French respondents, for example, mentioned checking out the prices at British stores/sites. Hong Kong respondents looked at China (and one almost bought while on vacation in Las Vegas). Several Chinese arranged to have friends buy their chosen phones in Hong Kong, where the prices were better and more brands were available. Brazilians looked at the US (Americans, though, were not much interested in other markets, perhaps assuming that home cooking would be cheapest.)
In our research on the global luxury market, McKinsey has found that thanks to the Internet, consumers are increasingly, and keenly, aware of cross-country price differentials. As a result, they often save their buying until they can hit an airport duty free store or visit a lower-cost destination on holiday or business. The same dynamics appear to be operating in regard to smart phones.
Take Nico, a German participant. “Why not compare across borders?” he asked himself, and checked out Amazon’s prices not only in Germany but also in Britain, where he would shortly be travelling. In the end, he bought his Samsung Galaxy S2 from a local store, MediaMarkt. Last year, though, he bought an iPhone in Britain for a friend because it was so much cheaper. But the warranty was shorter (German warranties must be two years) and the friend wasn’t able to run updates or use the iOS with his telecom provider. He ditched it after a few months.
All this suggests a couple of interesting things. First, companies have even less authority over pricing than they might believe. Second, in addition to the online versus in-store options, there is another alternative —in store, elsewhere. And third, for companies to take advantage of this possibility, a good price is necessary but not sufficient. The entire life-cycle of the product must be considered.
The small stuff matters: There’s lots of smart phones out there; they all work pretty well; and they all say they’re the best value. So how do shoppers decide which to buy? Our consumers typically looked at major questions first, such as operating system and price, to make relatively obvious cuts. Then, they looked any excuse at all to expel items from the mix. The reasons to eliminate were often highly specific (can’t get Netflix; no front-facing camera) or individualistic (my brother-in-law swears by Android; the Droid “felt funny”). Other deal-breaking niggles included: hypersensitive on/off buttons; ease of charging; and placement of the menu. The mountain bike attachment sealed the iPhone deal for one participant, while a German thought one phone’s background made the icons look “messy.” That was enough to get it booted.
For smart phone providers, listening in on this part of the winnowing-out process may be maddening. What is one to do with the Frenchwoman who really likes a certain phone, but kisses it goodbye because it doesn’t come in white? It is not possible to satisfy every whim of every customer, particularly since a recurring complaint in the Global Diaries is that the market is too crowded and complicated already.
But the larger (and more optimistic) point is that when it comes to smart phones, people assume the product is going to be good. There were only a handful of problems reported on such fundamentals as WiFi, texting, camera or email. In the context of general competence, things that might seem trivial assume exaggerated influence.
Perhaps the lesson is that the small stuff can be crucial—but companies should not fuss too much over evaluation criteria that are unpredictably quirky. Or quirkily unpredictable. The key is to excel at the big stuff; just about everything else is out of the brand’s control. There was a broad consensus on priorities. Asked which features were most important to their evaluation, the top three answers were quality, cost and brand, followed by carrier reliability, the “cool factor” and functionality. Companies that are believed to fall short on any of these factors fall out of consideration, fast.
To read the rest of this report, download “Introducing the Global Digital Diaries project” (PDF–1.68 MB).
Later this week, we will publish reports on three phases of the consumer decision journey, and then four descriptions of individual consumer journeys.