Discoveries Regarding Marketing with the Use of the Circulation Marketing

Transcription

1 Discoveries Regarding Marketing with the Use of the Circulation Marketing Akira Shimizu Professor, Faculty of Business and Commerce, Keio University He was born in Tokyo in He graduated Faculty of Business and Commerce, Keio University, and also MS and Ph.D from Keio University. He has been working as a professor since 2009 and before joining Keio, he worked as a full-time lecturer, an assistant professor and a professor at Meiji University. He also held some positions such as a guest professor at Kellogg School ( ), a guest lab worker at The University of Sydney ( ), and a guest professor at The University of Pittsburgh, Katz Graduate School of Business ( ). His main publications are Japan s First Marketing (Chikura Shobo, 2013), Strategic Theory in Consumer Behavior (Chikura Shobo, 2006), Retailing Strategy From the Viewpoint of Consumers (Chikura Shobo, 2004, awarded the Japan Society of Marketing and Distribution s Encouragement Award) and New Consumer Behavior (Chikura Shobo).4- Since I proposed circulation marketing, a new decisionmaking process concerning consumers two years ago, I have received some feedback from people attending conferences and people related to practical businesses. Such feedback was probably because both researchers who are eager to find a new consumer-based decision-making process, one that suits the age of the Internet and practical business people who are trying to investigate the relationship between informational connections of consumers and shopping share a common need. In this column, I will confirm the validity of circulation marketing using actual data and at the same time indicate new insights. What is circulation marketing? First, I would like to describe the basic idea of circulation marketing briefly. Studies concerning consumers decision-making processes in the past were performed mainly based on an Behaviors before purchasing the product Mass media including TV ads Web sites of business enterprises Purchase products through mass media + stores individual s process of purchasing a product and were not focused on Word-of-Mouth (WOM hereinafter) sharing of an individual s purchasing experience. However, as you can see by the development of SNS in recent years and the popularization of new ways of thinking such as AISAS or SIPS, product recognition driven by WOM is becoming more and more Figure 1 Figure of circulation marketing Stimulated by WOM and repurchase the same product After purchasing the product WOM on the Internet WOM in the real world Send information via WOM after purchasing the product through mass media + stores Purchasing behavior In-store promotions Many purchasing behaviors can be explained by interpreting Purchase products mainly in stores new frameworks AD STUDIES Vol

2 important. The idea that WOM regarding purchasing experiences and product-using experiences influences potential consumers and stimulates a new purchasing action cannot be found in existing decision-making processes. Circulation marketing is an all-embracing decision-making process model that can even explain such a new type of purchasing behavior. (Refer Figure 1) The characteristic of this model is that it generally divides consumers decision-making process into the following three steps. 1. Before purchasing the product. 2. Purchasing the product. 3. After purchasing the product. At the same time, it organizes information that can be obtained in each step and assumes that consumers are influenced by this decision-making process and this information is circulated. Previously, when traditional studies concerning consumers decision-making process were performed, researchers were thinking that mass media was triggering each consumer s decision-making process and therefore they recognized TV and newspapers ads mediums. Moreover, they assumed that relatively cheap products that can be found in supermarkets are often recognized or purchased because of sales promotions. Mass media and sales promotion of course influenced consumers recognizing of a product and purchasing of a product but traditional studies cannot explain the fact that decision-making processes often start from information distributed by SNS sites like Twitter and Facebook provided by a product s purchaser. Therefore, I have added another step to this decision-making process, that is after purchasing so that the mindset of the consumers who recognize the existence of the product via WOM can be fully described. Thus, circulating marketing is a model that comprehensively describes the actions of each consumer who makes a decision using many kinds of informational sources before purchasing the product. Another characteristic of this model is that it allows us to grasp communication accomplishments by understanding consumers overall decision-making process. Traditional communication strategies have been developed based on the idea that business enterprises are controlling the product s purchasing process by utilizing TV to have consumers recognized their products and promotions to make them purchase their products. However, consumers are uploading their purchasing/utilization experiences on SNS freely now- adays. More and more new consumers who make good use of this uploaded information sources which business enterprises cannot control are appearing on the market and therefore it can be said that it is outdated to think business enterprises have control of consumers product recognition and decision-making process before purchasing products. I think it is reasonable to say that we should always make sure that correct information is flowing from one consumer to another and the product is well established on the market and rated properly. By keeping this circulation marketing in mind, business enterprises can confirm that the communication at each step of the consumers decision-making process is coordinated with the communication of its latter step and can make sure that information is provided to potential customers spontaneously via consumers and that the flow of information circulation is sustained. I think this will become a new paradigm of measuring the effects of communications. Investigation summery In this column, to prove the validity of circulation marketing, we performed some studies on the members of Minrepo (a social medium directed by DIM which stands for DO- COMO Insight Marketing) through DIM using smartphones. During the investigation period (from September to November, 2014), we performed three studies on the same members. We also monitored the surveyed products during the same period of time. The sample number of the first investigation was 3,566, the second investigation was 1,600 and the third investigation was 800. Some investigation items were as follows. The demographic characteristic of each sample, the flow of the decision-making process after recognizing new products and the actual condition of medium contact regarding the category of the new product, the name of the brand that the rosters are actually purchasing in each category and each member s perspective on one s daily purchasing behavior and the actual usage of SNS such as Twitter and Facebook. The surveyed new products were mainly newly developed processed foods and private brand products which were chosen in consideration of their frequency of WOM but some products like private brands at major convenience stores which are usually not advertised by the mass media were also chosen. 26 AD STUDIES Vol

3 The total number of surveyed new products was 21. I have gathered the newly discovered facts and sorted them into 7 items. They are indicated as follows. Discovery 1 : A great number of people search for information before purchasing a product In general, it is thought that people are greatly affected by in-store promotional activities when products are sold in places like supermarkets because consumers can obtain information about the product without spending any money and tend to get stimulated by discounting/end island promotion. For this survey, we picked up seven decision-making processes in total. These are unrecognized, recognized only, gathering information before purchasing, recognized purchased (purchased the product right after the recognition), purchased the product after considering, willing to purchase the same product again, and spreading information about purchased product. In consequence of searching each process s configuration number of people, we have learned that there are many people who research information about the product before purchasing a product which means that existing common sense can no longer be used nowadays. In particular, we compared the component ratio of newly developed products of the following three processes, gathering information before purchasing, recognized purchas ed, purchased the product after considering, and discovered that an instant noodle s ratio value for example was 15.7%, 2.6%, 4.5% which means that gathering information before purchasing was the highest. Additionally, the ratio value for ice cream was 15.8%, 20.1%, 9.0%. This indicates that even though recognized purchased was the highest, the ratio value of other two processes increased greatly. Looking at other products, we found that the percentage of recognized purchased in general decreased and there are many people who search for information before purchasing a product. This result indicates that it is crucial to provide information about the product to potential customers before promoting the product. Discovery 2: The definition of a leading edge consumer has changed General conceptual ideas regarding a leading edge consumer discovered in the past included an opinion leader who spreads new information, an early adapter who rapidly purchases newly released products, an influencer who influences other consumers, and a market maven who is good at catching market trends. These ideas have been used to estimate a new product s demand and future trends but I have to say it is pretty difficult to understand the mindsets of leading edge consumers using the ideas noted above when looking at circulation marketing. This is because market-leading consumers must have the ability to convey their product usage experiences to other consumers (information circulation) as well as the ability to gain a correct comprehension of new information and a product. For this reason, we analyzed the answers obtained by the questionnaire and abstracted three factors that are the ability of circulating information (the ability of conveying information to other people), early adapting ability (sensitiveness to newly released products) and information collecting ability (the ability of making good use of rich informational sources such as a maker, distribution and WOM) and created eight clusters based on the score of each factor. The clusters that scored high in all of these three factors (circulation, early adapting and collecting) were set as the leading edge consumers and we searched their daily activities such as sending/collecting information. According to this research, information sending/collecting regarding beverages for instance includes items such as I often look at the shelfs of supermarkets and convenience stores to find a new product (45.6%, 26.4% - average), I often use campaigns and coupons (26.2%, 15.8% - average), I often directly tell my family members and friends about the drinks I purchased (20.8%, 9.0% - average), I often watch commercials carefully (21.6%, 11.3% - average), I always read product descriptions carefully (18.9%, 8.4% - average), I often stop when I find displays displaying a new product (39.7%, 24.7% - average) and therefore we found out that they are the consumers who are leading circulation marketing as expected. To sum things up, the leading edge consumers who will lead circulation marketing in the future must have a combination of information circulating, early adapting and information collecting abilities and these abilities must be a high quality compared to the leading edge consumers in the past. The word leading edge consumer noted hereinafter corre- AD STUDIES Vol

4 sponds to the group of consumers described in this column. Discovery 3: Leading edge consumers use different mediums and decision-making processes than the other consumers By using all the samples and gathering the percentages of consumers medium contact frequency of each product category, we have also discovered that 80% of any product s user obtains information about a product via TV and 45% of users gather information about a product in stores. Moreover, the percentage of consumers who obtain information via social mediums such SNS was only 5%. And so, because we assumed that consumers in general are viewing several mediums on a routine basis via TV, we searched the patterns of media accessing. As a result of this research, nine patters were extracted which are TV programs/tv commercials (hereinafter refer to as TV), information at shops only, TV + information at shops, TV + information at shops + WOM, TV + information at stores + mass media other than TV, TV + WOM, TV + mass media other than TV, consumers who use medias other than TV and etc. In addition, the word WOM noted here includes both WOM on SNS, in reality. We compared the eight clusters of information circulating ability, early adapting ability and information collecting ability noted previously and these patterns of media accessing, and discovered that the percentage of TV + information at stores + WOM was predominantly highest for leading edge consumers in all products. TV mainly delivers information provided by makers, stores delivers information provided by retail sellers and a WOM is information sent by consumers. Stated another way, it can be said that the leading edge consumers are mixing-and-matching various information provided by many different kinds of informational sources when making a decision. We also compared the decision-making process of each new product and eight clusters and found out that the composition ratio of leading edge consumers of the three decision-making processes which are purchased the product as a result of consideration, willing to purchase the same product again and spreading the information regarding the purchased product was high. They are able to evaluate the purchased products seriously because they use many kinds of informational sources when making a decision. Hence, it is understandable that their motivation to repurchase the same product is fairly high and so they can recommend the product to other people with confidence. Looking from the perspective of makers, it is obvious that being accepted by the leading edge consumers is a must in order to secure a place for a new product in the market. Discovery 4: Leading edge consumers purchase many kinds of products We studied how often consumers are purchasing products in the surveyed six product categories (canned coffee, green tea, carbonated drink, ice cream, chocolate, shampoo) of each of the eight clusters created by the factors regarding information. As a result of this study, we discovered that almost all consumers as being categorized into the leading edge consumers ( circulation, early adapting, collecting ) answered purchasing more than four brands in any product category. On the other hand, most of the consumers categorized into the circulation only cluster and the nothing cluster which its abilities are all below the norm answered often purchase products made by a certain brand. Taking ice cream for instance, even as (theoretical value) consumers of the circulation, early adapting, collecting cluster Taste Figure 2 Selection criteria and cluster Promotion Topic Circulation early adapting collecting Circulation collecting Early adapting collecting Collecting only Accessibility Royalty People around CM Circulation early adapting Circulation only Early adapting only All none 28 AD STUDIES Vol

5 were estimated to answer more than four brands, the actual value was 210. Noting about other two clusters, even as 87.6 consumers of the circulation cluster were estimated to answer often purchase products made by a certain brand according to the theoretical value, the actual value was 113 and even as consumers of the nothing cluster were estimated to answer often purchase products made by a certain brand according to the theoretical value, the actual value was 165. These results indicate that the leading edge consumers are purchasing many products and making a comprehensive review of the purchased products with their own eyes. Consequently, information sent by the leading edge consumers is information of high value. In reverse, it is hard to say that information about a product sent by consumers categorized into circulation only who can also be called royal users is not valuable enough to convince other people to purchase the product because royal users usually do not rate the product in comparison to other products. This result indicates that even though the users of the WOM marketing often interpret the quantity of shared information on SNS (the number of times the information was sent and the number of one s follower) as the performance indicator, the most important thing is to make sure what kind of person sent the information and what kind of people are following the information sender. Discovery 5: Selection criterion between the leading edge consumers and non-leading edge consumers is not the same The selection criteria depends on the method of collecting information and the product usage experience. Here, I picked seven judgmental standards. They are favorite product, promotion (price promotion), purchasable in many places (availability), content of its commercial (promotion), royalty, news hook, used by people around one and asked the surveyed consumers to answer which of them is considered to be the most important when purchasing the six products noted above (canned coffee, green tea, carbonated drink, ice cream, chocolate, shampoo). I totaled the number of the answers and compared them. The result can be seen in the figure 2 noted below. Viewing the clusters in which their scores of early adapters were low, the highest judgmental standard was favorite product, following by promotion, availability, royalty. On the other hand, news hook was considered to be a very important judgmental standard in the clusters in which their scores of early adapters were high and we found that news hook was the second most important judgmental standard to the consumers categorized into the circulation, early adapting, collecting. This result shows that they care a lot about news hook when selecting which product to purchase. Viewing the purchasing prediction model using the ID attached POS data, the fact that the prediction accuracy increases when installing instore promotions and price reductions as an independent variable was proven. However, the assay result here indicates that it is necessary to install the variable regarding news hook into the independent variable in order to predict the purchasing behaviors of consumers accurately. In fact, by searching the buying intention of a certain new shampoo in each cluster using the logit model, we have discovered that the consumers categorized into the circulation, early adapting, collecting cluster put a positive sign on the judgmental standards of because it matches my hair, because I like its scent, because I always choose the same product, because it can be purchased everywhere, because it is popular among many people right now and put a negative sign on because my friends and acquaintances are using this product. Looking at this result, it is obvious that consumers who lead circulation marketing tend to purchase much-talked-about products and products that are not used by their friends and acquaintances. Discovery 6: leading edge consumers do not react to SNS information released by business enterprises Leading edge consumers who lead circulation marketing tend not to react to SNS information released by business enterprises probably because they have lots of buying experiences, advanced commodity knowledge and have mature judgment skills. We extracted samples who answered I usually purchase more than four brands in each category regarding ice cream and chocolate and compared the purchase rate of each cluster s brand. Taking a look at a certain luxury ice cream brand first of all, the average percentage of all consumers buying AD STUDIES Vol

6 experience was 49.3% whereas the percentage of the circulation, early adapting, collecting cluster was 61.0%. In the case of a certain ice cream of a certain brand that puts much value on building buzz for their products, the percentage of all consumers buying experience was 47.2% whereas the percentage of the leading edge consumers was 48.1% which means the values were almost the same. Seeing the percentage values of the circulation cluster on the other hand, the buying experience rate of the same latter ice cream noted previously was as high as 60%. The purchasing rate of the other ice cream which its maker is trying to build a buzz aggressively in general was 46.1% whereas the circulation cluster was 58.2% in the same manner. With regards to chocolate, the circulation, early adapting, collecting cluster s buying experience rate of the five brands that use SNS in a proactive manner was almost the same as the average rate or about 5% higher than the average rate. On contrary, the circulation only cluster s buying rate in each category was higher by more than 10% compared to the average rate and this tells us that the circulation, early adapting, collecting cluster, the leading edge consumers are not be driven by business enterprises SNS information. According to the above results, we have learned that the circulation cluster was the only cluster that is usually driven by business enterprises SNS information. They are surely a good customer to their favorite business enterprises since they are not so interested in other brand s products. Nonetheless, evaluating the result just by looking at the number of the information on SNS is not recommendable since it is doubtfull whether the information sent by them is valueadded due to their low information collecting/early adapting abilities. Discovery 7: Leading edge consumers browse different new products than other consumers There are only a few information senders and browsers on Minrepo in reality. Extracting the reports about 21 products noted above, the number of reports during the period of the survey was 166, the number of information senders was 93, the number of viewers was 322 and the number of the people who were both sending and viewing information was 55. In consideration of the fact that the numbers were very small even though the survey was performed on an SNS community site and the parameter (the total number of people using Minrepo) was 3556, it seems that not so many people are sending or viewing information on SNS. Out of the 21 products, we searched the breakdowns of 14 products which were viewed by more than ten people and discovered that the early adapter only cluster and the circulation, early adapting, collecting cluster accounted for a substantial fraction of the total number of consumers. Yet, the early adapting only cluster was viewing more information about national brands new products whereas the circulation, early adapting, collecting cluster was viewing more information about the products which people in the know, know such as new private brands of convenience stores and coffee chains as well as new products of national brands. As shown in the research of consumers purchasing frequency and behavior when buying shampoo noted previously, leading edge consumers tend to select products that are not used by many people as well as much-talked-about products. They are the people who can pick up products that are not well known by using their sense but also can be conscious to trends. Assay result It became clear that understanding many types of consumers including not just the leading edge consumers who utilize the Internet and WOM when purchasing products but traditional consumers who purchase products driven by in-store information. It also became clear that recent leading edge consumers have to have the ability to collect information and convey their product usage experiences to others, not just accepting anything new like the leading edge consumers in the past. These recent leading edge consumers likely have a wealth in experience of purchasing many kinds of products and have a high sensitivity in finding new products. Because many consumers including the leading edge consumers are collecting information before purchasing a product, the number of consumers who purchase products just by viewing in-store promotions is thought to be decreasing. Indeed, the number of consumers who attach much value on the unnoticed point of news hook has been growing in recent years but consumers who are influenced by SNS driven by business enterprises and consumers who often 30 AD STUDIES Vol

7 browse SNS about new products of a certain maker were not categorized as being leading edge consumers. By presupposing circulation marketing, we can understand what kind of consumers are reacting to the measures carried out by business enterprises. In conclusion, we have learned that the theories of consumer behavior and leading edge consumers which originated from Western countries is facing limitations. The market in Japan is highly competitive and information is distributed throughout society. Furthermore, consumers in Japan are sophisticated. Needless to say, the market in Japan is different from Western markets and therefore now is the time when a new marketing theory, unique to Japan, should be developed. AD STUDIES Vol