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I Have Not Yet Begun to Shop … or Have I?

Smarter phones, smarter shoppers and strategies for a new consumer perspective


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Deloitte Review - Did You Say Free?By Pat Conroy and Anupam Narula > Photography by Matt Lennert > Infographics by Troy Bishop

Shoppers wander grocery store aisles, checking items off of tattered shopping lists. They fumble for clipped coupons in the checkout line and scan loyalty cards at the register only to overspend anyway and come home to discover they overlooked an ingredient, bought something they already had in quantity or forgot the milk. Depending on one’s appetite for nostalgia, this scene is either a pleasant nod to the past or a costly and frustratingly outdated experience in a world that could—and perhaps should—offer something better. Fortunately for those with the latter point of view, the consumer seems poised to take much greater (and earlier) control of the shopping experience.

Smarter phones and shoppers empowered with shopping-related mobile applications are transforming the shopping process. Early adopters of smartphones in a shopping context—ordinary consumers who have embraced mobile technology to make their lives easier, make more informed product decisions and save money—are benefiting from increasingly capable devices and a proliferation of mobile applications, and it is likely that a far larger population of smartphone users will follow in their footsteps. For these mobile consumers, the pre-store and in-store shopping process is being redefined with a wide range of players vying for a prominent role in enabling, guiding and constructing business models around that process. While smartphone-equipped consumers currently comprise only a small percentage of the general public, their attitudes and behaviors may be indicative of a much larger customer base in the future.1

Stronger senses

Just as the smartphone vastly expanded the range of uses of the basic mobile phone beyond making and receiving calls, the emerging capabilities of advanced technology smartphones will continue to expand the way consumers perceive their shopping needs, learn about products and promotions, and make purchases.  One way to look at the emerging capabilities of mobile devices is through the discrete electrical components that make up a phone: antennae, microphones, speakers, displays and circuitry. A different perspective on future capabilities, however, views mobile devices as an extension of the human sensory system—helping shoppers make better decisions through broadened perception. While advances in the underlying guts of a smartphone are important, the potential implications of smarter phones are more apparent in the context of seven sensory dimensions: hearing, seeing, touching, sharing, navigating, thinking and imagining (see figure 1).

Mobile devices “hear” and “see” via a combination of microphones, speakers, speech recognition software, cameras, displays and image recognition algorithms. To a shopper, phones with greater speech comprehension and improved image recognition and displays may open the door for greater verbal and visual interaction while shopping. Similarly, smartphones enable “touch” through pressure-sensitive screens, keyboards, orientation sensors for input, external sensors and vibration. Mobile devices could guide the user through a store with haptic technology and receive tactile input similar to an interactive video game controller. Furthermore, mobile devices “share” and “navigate” with antennae, ever-improving networks, GPS, compass and proximity sensors. To a shopper, this could result in personalized location-specific information routed to them based on proximity to a store, within a store aisle, or near a product or display. Finally, there is a strong  interplay between the seven dimensions, particularly when mobile devices “think” and “imagine” with processors, memory, and cloud computing. To a shopper, this means mobile applications that augment the shopping experience with digital content, often via video.

A framework to understand the impact of advancements of mobile devices on consumers

These seven dimensions—via the underlying hardware and software—combine to create what seems like magic. An inanimate device seemingly always within arm’s length—next to a shopper’s ear, in a shopper’s pocket or purse on the go, or on the nightstand at bedtime—performing animated tasks like whispering suggestions in their ear or tracking their every move. For shoppers, these more acute sensory dimensions could manifest as follows:

Emma glances at the screen of her smartphone to see what remains on her shopping list. The night before, Emma read the retailer’s weekly specials and planned the meals for the week—all of which was easily accessible on her phone. In addition to reading reviews from other shoppers, she checks expert nutritionist analyses before deciding on the brand to purchase. Emma’s phone gently nudges her toward another item on her list, to help her find it on the shelf. She takes a photo of a product shelved near the brand she originally intended to purchase to learn more. A short video launches with a description of the product and a coupon offer. She decides to try the new product. Emma’s phone tells her that a few of the remaining items are less expensive at the nearby wholesale club store. She quickly preorders them for curbside pickup later in the day. Buying a week’s worth of meals for her family on a limited budget was never easy; however, with the priced shopping list on her phone the odds were much improved.  At the checkout aisle, her loyalty card information and coupons are transmitted from her phone to the cashier, and her bank account is debited. Emma leaves the store within budget—and without a tattered paper shopping list or crumpled coupons.

Looking to the future of shopping for consumers like Emma, advances along each of the seven dimensions may expand the role of mobile devices and technologies in influencing the shopping experience.

The fundamentals for our gripping (to us) fictional account above are falling into place. Smartphone adoption is sizeable and on the rise in countries across Asia, Europe and North America. For example, 29 percent of respondents in a recent online survey of 2,288 U.S. consumers used a smartphone as their primary phone.2 Most of the smartphone users accessed their email, searched for information online, browsed the Internet, used social networking sites, streamed video content and used online banking on at least a weekly basis.3 The use of smartphones for online purchases is also increasing: Most smartphone users purchased a product or service using their device in the past six months.4

Proliferation of shopping-related mobile applications

The term “mobile application” is used broadly to refer to not only applications, but also shopping functionality using a mobile Web browser or even text messages. Increasingly, retailers and consumer product companies are building their functionality to be more accessible on a smaller screen—whether for the most technology-savvy smartphone users or more mainstream mobile-phone-using counterparts. There is a role for both application- and browser-based functionality today, and both are offering a wider range of features for shoppers. Looking at  mobile functionality, applications support shopping activities in three process categories: pre-store planning, in-store experience and post-purchase interaction (figure 2). These categories provide a useful context for conceiving strategies  particularly suited to the expectations of technology-enabled shoppers.

Categories of shopping-related mobile functionality

Pre-store planning: For consumers, this consists of three primary activities centered on product choice, price and evaluation. First, customers decide which product to purchase. Functionality in this category includes updating a customizable shopping list and access to related recipes or accessories. Second, customers might explore incentives or cost-cutting strategies by downloading coupons, identifying special offers and viewing circulars of weekly specials. Third, customers can research products in more detail, motivated by their need for more information or lower prices. For example, consumers can compare product prices, search for additional product information, watch videos with additional product information and read product reviews on their mobile devices.

After the planning and initial purchase, mobile technology still has a role in the shopping experience, frequently in the form of ongoing interaction with retailers and manufacturers. For example, a consumer can scan a product's UPC or QR code to view retailers' and manufacturers' social networking sites, gather more information, or play a mobile game associated with a product

In-store experience: This consists of three primary activities focused on purchasing, payment and rewards. First, customers make a purchase in-store or online, for example, by pre-ordering products for pickup at a retailer or purchasing products for home delivery. Second, customers can use their smartphones to purchase a product or a gift card online using mobile-enabled electronic payments remotely or a “mobile wallet” at the checkout counter. Third, the in-store experience can be enhanced with reward-related offers—for example, by scanning retailer loyalty cards with a mobile device, receiving rewards for entering a store and accumulating information about product rewards.

Post-purchase interaction: After the planning and initial purchase, mobile technology still has a role in the shopping experience, frequently in the form of ongoing interaction with retailers and manufacturers. For example, a consumer can scan a product’s UPC or QR code to view retailers’ and manufacturers’ social networking sites, gather more information, or play a mobile game associated with a product. The post-purchase interaction experience can influence pre-store planning for subsequent purchases.

A path forward for consumer product companies

Advanced mobile devices and technologies and a proliferation of shopping-related mobile applications could result in profound changes in the shopping process. Improved mobile devices provide an opportunity for consumer product companies to enhance the pre-store planning experience, play a prominent and helpful role in-store, and maintain a valuable, ongoing conversation with shoppers.

Pre-store planning

Become a part of the planning process. Third-party application providers, retailers and consumer product companies have developed mobile applications that simplify and enhance the pre-store planning process. This includes applications that create and manage shopping lists, maintain shopping carts and identify meal plans or recipes. Many consumers shop with a list, whether the list is physically written down or stored in their minds. In some cases, a shopping list is simply a reminder; in other cases, it is part of a deliberate plan to meet a budget. Either way, the planning process for shoppers is important because it represents a starting point where awareness and consideration become initial purchase intent.

“One group of consumers is already planning shopping with lists,” according to Andrew Miller, founder and CEO of CardStar, a loyalty card mobile application provider. “[Mobile applications] really help them. The second group of consumers does not plan today, but phones will make it easier for them.”

Consumer product companies can work with third-party applications and retailers to position their brands and products in shopping lists or recipe applications, whether through advertising or product placement. For example, the meal planning and recipe mobile application Epicurious enables searching through existing recipes, creating personal recipes and developing shopping lists based on the ingredients required for recipes.5 Additionally, consumer product companies should consider creating their own planning or shopping list applications to promote their own products and understand their customers’ overall shopping habits including competitor product purchases. For example, the Kraft iFood Assistant is a meal planning and recipe management application that allows consumers to search among recipes that promote Kraft brands, create and share recipes, watch video content supporting recipes and check off items on the shopping list by typing or barcode scanning.6 The challenges are twofold. First, simplify the process of creating and fulfilling a list, which may mean supporting fulfillment in a range of ways across channels, including in-store, online using home delivery or store pickup, and direct-to-consumer sales. Second, influence the front end of the  shopping process to build awareness, consideration and intention during planning that result in product purchases.

Consumer product companies can foster customer loyalty, as measured by repeat purchases and higher product trial rates, by supporting the planning process. Additionally, personalized mobile advertising and promotions could provide a route to consumers with greater return on marketing spend based on a data-driven understanding of the products that shoppers consider and purchase on their  shopping list.

Embrace online product comparison. Consumers can compare products and prices using myriad mobile applications. For example, shoppers can use retailer applications that increasingly include weekly sales circulars and pricing information. Many retailer sites also highlight product reviews from consumers and experts based on their usefulness as rated by other site users. For example, GoodGuide provides expert reviews of the health, environment and social responsibility aspects of products based on quantitative measures by scientists. For example, for food products, ingredients and nutritional content are assessed compared to other brands in the same product category.7 Furthermore, shoppers have access to many third-party applications that provide price comparison for even relatively small-ticket purchases like food, personal goods and household goods across many online and traditional retailers.

Consumer product company applications that include product information, reviews and ratings, and highlighted recommendations are one route to the consumer prior to a store visit, but equally or perhaps more important are third-party applications with expert product assessments and reviews. Alexa Andrzejewski, the founder and CEO of the mobile application company Foodspotting, which aggregates user reviews of menu items at restaurants, has been working to make reviews more relevant through the use of “more contextual information, including a reputation system” to prioritize the most applicable and relevant reviews.

Due to the increased transparency of product information via mobile devices, three possible approaches to comparison shopping emerge as particularly applicable. First, cultivate a forum that allows consumers to share opinions and reviews of your products. Consumer product companies that develop their own forum are better positioned to curate conversations, respond to accentuate positive comments and mitigate negative opinions. Second, commission independent, expert reviews that help consumers make decisions. Even if your product is what consumers intend to purchase when they enter a store, expert reviews can play a role in defending the purchase intent during the shopping process. Third, become an honest broker of reviews, including competing products. In each of these approaches, companies can begin with an honest assessment of their product’s strengths and deficiencies compared to competitors to understand those situations where their product is especially suited and where to improve their product.

There are several potential benefits to embracing comparisons, foremost among which is that they tend to encourage a closer connection with the discerning consumers who could become brand advocates and amplify positive reviews.

“When consumers are getting enough all-around value from a brand, they like to show it off within their social circle,” according to Jamie Thompson, co-founder and CEO of Pongr, a mobile and social gaming company. “The process can start in-store, but when it happens post-purchase, you know you’ve done a good job because the consumer actually bought your product and now is marketing it for you.”

Cultivating a forum or monitoring popular third-party forums can also allow companies to respond constructively to reviews and participate in discussions as a contributor of accurate information.

Companies should also consider narrowly targeted product promotions. It is  remarkably easy to distribute electronic coupons via smartphones and for consumers to subscribe to receive them. While mobile devices offer a potentially effective  channel for price-based promotions, however, excessive broadly available discounts can encourage customers to delay purchases until the next promotion. Consumer  product companies should consider designing promotional programs that are narrowly targeted and based on information like location, shopper demographics and  purchase history.

“Merchants [and consumer product companies] have the ability to create targeted one-to-one personalized digital circulars but are not there yet,” according to CardStar’s Miller.

Similar to nonmobile promotions, consumer product companies should explore measuring a promotion’s effectiveness in terms of reaching new consumers and convincing undecided ones without distributing unnecessary discounts to price-insensitive customers. Uncertain usage rates of mobile promotions can result in significant demand forecast errors, so consumer product companies should consider experimenting with small pilots before a broader rollout.

There are several potential benefits for consumer product companies that rein in price-based promotions. First and foremost, narrowly targeted promotions can spur revenue growth while reducing reliance on promotions that often destroy margins. In addition, reduced reliance on price-based promotions can result in more accurate demand forecasts and profit projections. Furthermore, removing an abundance of price-based promotions from a marketing mix can result in a better understanding of brand loyalty and account profitability.

In-store experience

Enhance the in-store product experience and brand conversation to help consumers save time and make better decisions. The evolution of smartphone capabilities has brought unprecedented personal connectivity into the physical world of shopping. In the same way the people never leave the house without a wallet or purse, smartphones are nearly always along for the ride. They are effectively co-pilots on shopping excursions, with the smartphones and shopping-related applications representing a new route to consumers in physical stores or online. This path can be used by consumer product companies to engage consumers in a range of ways, including location-based promotions and links to video content using product barcodes.

Social networking that includes location-based customization and rich media can help consumer product companies embrace brand advocates and mitigate critical comments in a genuine, in-store conversation. Consumer product companies should try to enable in-store conversations that help consumers in the short term (e.g., product recommendations and information) and in the long term (e.g., targeted new products based on consumer feedback). Similarly, advertising and negotiating favorable merchandising on retailers’ mobile websites can bring brands into the in-store conversation. For example, the wholesale retailer Sam’s Club’s multifunction mobile application helps consumers to access promotions, read product reviews, determine product availability and navigate the store.8

"When consumers are getting enough all-around value from a brand, they like to show it off within their social circle. The process can start in-store, but when it happens post-purchase, you know you've done a good job because the consumer actually bought your product and now is marketing it for you." - Jamie Thompson, co-founder and CEO of Pongr

There are several potential benefits of extending the in-store product experience and brand conversation. Mobile channels can increase brand awareness and consideration very near to the point of decision and point of sale. In addition, smartphones can build brand loyalty through product promotion when it is most relevant. Stronger in-store presence can also result in higher product sales whether through a retailer’s mobile channel or a manufacturer’s direct-to-consumer site for hard-to-find SKUs or mainstream products.

Pursue greater collaboration with retailers, shopping-related application providers and payment companies. Advances in shopping-related mobile functionality are coming from many sources. Many traditional and online retailers have developed multifunction mobile applications that help consumers throughout the shopping process. Similarly, third-party application providers have developed innovative shopping-related applications to help with distinct steps during the shopping process. For example, shopkick is a location-based loyalty rewards program to encourage foot traffic in physical stores. When consumers enter the promoted stores they receive rewards points and, often, targeted promotions. Brand companies can promote their products with rewards for scanning select products in-store to encourage product consideration.9

Underlying these mobile applications and functionality is an emerging ecosystem that also includes mobile providers and payment companies to develop and distribute mobile content. Along with consumer product companies, all of these players are shaping the mobile-enabled shopping landscape, making collaboration an attractive possibility. For retailers, this could include joint business planning efforts to align goals and identify opportunities to work together, such as mobile merchandising and advertising. Similarly, consumer product companies can work with retailers and payment companies to make the checkout process easier for consumers by promoting electronic delivery of receipts and corresponding coupons, providing in-store shopping cart price totals while shopping, and supporting consumer product loyalty programs. In fact, smartphone-related technology is often ahead of companies’ abilities to apply it to create a competitive advantage.

“Most people would say that the technology is there, and that deployment is the problem. But, technology keeps evolving,” according to David Schafran, co-founder of EyeNetra, an innovative company that has combined a mobile diagnostic application with a low-cost, clip-on eyepiece that allows consumers typically unable to afford seeing an optometrist to measure their own eyes for glasses or other treatment. “The challenge is the development of the right product. One has to have a product aligned with a business model that brings a delightful experience to all stakeholders in the chain.”

For consumer product companies, there are potential benefits of greater  collaboration with retailers, third-party application providers and payment  companies. Consumer product companies that collaborate with others may have greater visibility into innovative mobile shopping functionality that can promote their brands and products—for example, brand loyalty programs and promotions on retailer mobile applications. Additionally, consumer product companies experimenting with emerging technologies have a greater opportunity to shape the mobile shopping ecosystem.10

Post-purchase and ongoing interaction

Extend the product experience. A mobile presence can serve not only to prompt or initiate purchases, but also to maintain a post-purchase conversation that helps consumers. For example, Kellogg’s Special K Challenge is a weight management program where users can select and customize meal plans and recipes based on Kellogg’s Special K products. Consumers are able to track progress  towards their weight and fitness goals, access tips and receive motivational  messages daily.11

Consumer product companies should consider the full lifecycle of their products and enhance it with additional interactions that enrich the product experience and extend the conversation, particularly for brand advocates—those valuable consumers that spend an above-average amount on that brand and are actively involved with the brand through engagement and advocacy.12 For example, the Tide Stain Brain app and website provide stain removal instructions for different stains—written by experts and other users. Consumers are able to share cleaning solutions, provide feedback and ask questions with other community members.13

Conversations with consumers can yield data for new product development, including personalized products and broader improvements. For consumer product companies, there are several benefits to extending the product experience across channels and away from home, including maintaining and growing brand awareness and consideration among existing customers and identifying unique ways to personalize products and the product experience.

“You can’t make up genuine enthusiasm, and when a brand finds it, they should promote and reward the socialization of authentic brand love,” according to Pongr’s Thompson.

Build a lifecycle view of consumers through sophisticated data analysis. Advanced mobile functionality and applications enable rich data collection and analysis across the entire shopping and consumption lifecycle, including contextual information such as physical location, demographics and buying behavior.  The view begins with awareness and consideration and extends to trial and subsequent use. Companies can begin by aggregating and modeling data derived from shopping lists, loyalty card programs, payment transaction history, coupon use, photos and location-based analysis of shopper movement.

“When we look at consumer shopping data, very few consumers are scatterbrained—patterns are emerging,” Miller said.

For consumer product companies, there are several potential benefits of building a lifecycle view of consumers across channels and buying situations. Advanced segmentation analysis enables predictive modeling that can help project the  effectiveness of consumer-specific promotions by better characterizing market preferences and consumer behaviors from large pools of data. The amount of data generated from the planning process to in-store consideration and actual purchases is unprecedented—allowing for broad ethnographic consumer analysis that previously required market researchers observing consumers in stores and at home. In addition, analytical capabilities can help detect and respond to signals more rapidly than competitors through predictive modeling. Furthermore, advanced analytics can help companies automate the way they collect information.14

Forging ahead

Smarter phones that enhance pre-store planning, in-store experience and post-purchase interaction seem poised to transform shopping for consumers. The potential advantages of connecting with current and prospective customers from the early stages of decision making, to point of purchase and afterward in various user communities and forums represent new ground. Never in the history of commerce has it been possible to acquire as much data or participate so extensively in the process of connecting with consumers. Consumer product companies that systematically fine-tune these connections as well as their marketing strategies can be well positioned with regard to creating mobile-enabled paths in sync with evolving consumer needs. DR

Pat Conroy is vice chairman and U.S. Consumer Products leader, Deloitte LLP.

Anupam Narula is a senior research manager with Deloitte Services LP.

The authors would like to acknowledge the contributions of Ryan Alvanos, Deloitte Services LP; Chandra Gajjar, Deloitte Support Services India Pvt. Ltd.; and Siddharth Ramalingam, Deloitte Support Services India Pvt. Ltd.

Endnotes

1. Deloitte UK, Global Mobile Consumer Survey—U.S. results, Survey conducted in January and
February 2011, n=2,288

2. Ibid.

3. Deloitte UK, Global Mobile Consumer Survey—U.S. results, Survey conducted in January and
February 2011, n=705

4. Ibid.

5. <www.epicurious.com>, accessed September 15, 2011

6. <www.kraftrecipes.com/media/ifood.aspx>, accessed September 15, 2011

7. <www.goodguide.com>, accessed September 15, 2011

8. <www.samsclub.com>, accessed September 15, 2011

9. <www.shopkick.com>, accessed September 15, 2011

10. Divakar Goswami, “Cell me the Money: Unlocking the value in the mobile payment ecosystem,” 2011,
<http://www.deloitte.com/us/cellmethemoney>

11. <www.specialk.com/challenge/mobile>, accessed September 15, 2011

12. Pat Conroy and Anupam Narula, “A new breed of brand advocates: Social networking redefines consumer engagement,” February 2010

13. <www.tide.com/en-US/stains/iphonelanding.jspx>, accessed September 15, 2011

14. Doug Standley and Jane Griffin, “Signal Strength: The rise of asset intelligence: moving business analytics from reactive to predictive—and beyond,” Deloitte Review, Issue 7, 2010

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