The Importance of Changing Customer Buying Behavior

The broad-scale adoption of new technologies has empowered consumers in previously unimagined ways. As a result, customer buying behavior is adapting to these new technological advances so rapidly that marketers sometimes cannot keep pace.

We sound insightful when we forecast that the majority of customer interactions will go online. Marketers make money when they guess exactly how interactions will change and when customers will move. As when shooting at a moving target, marketers must make sure their massive marketing investments are ahead of the customers by a few steps. Along the way, there have been some hits — but also a significant number of misses.

Web sales are growing faster than catalog and store sales. Most direct marketers are now at least experimenting with online transactions. In the last year, for example, Lands’ End experienced 300 percent growth in e-sales while paper catalog sales growth slowed to 10 percent and margins shrank.

In 1996, people were curious about online banner advertisements and clicked through them at the noticeably high rate of 3 percent. Over time, the novelty wore off, and by 2001, less than half of 1 percent of online readers clicked through on the banner advertisement. This downturn can be attributed to a combination of user experience and banner fatigue.

Many marketers and entrepreneurs anticipated that online marketplaces would be the new gathering ground with heavy buying on their exchange and auction sites. These sites struggled or failed in 2000 because the early bluster did not translate into heavy traffic as marketers and entrepreneurs had thought. Alternatively, 38 percent of small businesses surveyed by IMT Strategies demonstrated interest in using this online channel to reach new markets inexpensively and felt that 25 percent of their revenue would come through online marketplaces by 2002.

In a separate trend, customers will increasingly use email and other media as a conduit for both business and personal communication. There is a slew of research that has defined this trend. More than one-third (37 percent) of the U.S. population currently uses email, according to a recent study by eMarketer, yet slightly less than one-third (32 percent) of the same sample surf the Web. Americans send more than three times as many emails per day as postal letters, according to recent U.S. Postal Service research. In fact, the U.S. Postal Service projects that first-class mail volume will decline 0.8 percent per year until 2008, largely due to increased email usage and online bill payment. According to a Harris Poll, 66 percent of households earning more than $75,000 per year use email; still other surveys show that middle-income families are the fastest-growing segment of the U.S. Internet audience.

New media, in excess of one billion cell phones, and the popularity of personal digital assistants (PDAs) are changing the market landscape further. Our research at IMT Strategies shows consumers are five times more likely to respond on a consistent basis to marketing messages on their PDAs. Increasingly, customers respond only to messages that are very relevant and timed appropriately.

Lastly, customer expectations have risen — to the point that customers expect more relevant, personalized services in their relationship with organizations. As technology life cycles shorten and the pace of innovation explodes, increasing numbers of customers will expect the quality of service to be continually upgraded; they will also expect personalization and access to more information.

All that will create new markets, inevitably making other markets obsolete. The choice is clear, but not simple: Businesses must anticipate and respond to these new market segments; they must deliver products and services that meet their needs, or lose market share. It will take a more concerted effort to understand customer buying behavior — a moving target — in this technological age and to determine what investments are necessary to develop the products and services that customers want; only then can we hope to consistently hit the moving target.

The next article will develop the true picture of online customers and how it will impact your go-to-market strategies.

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