The December 2010 issue of Harvard Business Review has a spotlight on ‘Social Media and the New Rules of Branding’. As part of the spotlight, McKinsey’s David Edelman has written a thought-provoking article on how CMOs need to allocate their budgets based on stages on the customer decision journey, not types of media.
Here are the highlights from the December 2010 Harvard Business Review article by David Edelman, and the June 2009 McKinsey Quarterly article by David Court, which it heavily draws upon:
1. Consumer behavior is shifting from the purchase funnel to the ‘Consumer Decision Journey (CDJ)’. Instead of progressively reducing their choices, today’s consumers take a much more iterative and less reductive journey with four phases.
David Edelman and David Court use different words to label the four phases, so I am choosing to call them Consideration, Comparison, Conversion and Commitment.
2. Advertising is most effective in the Consideration phase, peer reviews are most effective in the Comparison, retail promotions are most effective in the Conversion phase, and positive post-purchase experience (along with peer reviews) is the most effective in the Commitment phase.
3. Brands spend 70% to 90% of the marketing budget in the Consideration and Conversion phases, on advertising and retail promotions. However, consumer decisions are often made in the Comparison and Commitment phases.
4. Brands should map the Consumer Decision Journey for their market and their brand, based on three sets of insights: what they do (focus groups), what they see (ethnographic research) and what they say (conversation mining).
5. Brands should create a marketing and communication plan to create a consistent consumer experience across the touchpoints in the Consumer Decision Journey. Usually, this will involve shifts from paid media to owned and earned media.
I agree that marketing spends need to change as the Consumer Decision Journeys become more complex. I like the approach of combining insights from what they do/ what they see/ what they say to map the Consumer Decision Journey for the market and the brand. Finally, it’s obvious that owned and earned media are becoming increasingly important.
However, consumer behavior in emerging India and China is quite different from consumer behavior in the mature markets on which McKinsey’s Consumer Decision Journey model is based. Most consumers in India and China (with the exception of the biggest cities) don’t spend as much time on the Comparison phase, and are less likely to show their Commitment by actively acting as advocates for the brand. So, brands in India and China will continue to focus on the Consideration and Conversation phases, and allocate as much as 90% of the budgets to paid advertising and retail promotions, at least in the foreseeable future.
What do you think? How will the Consumer Decision Journey in India and China differ from mature markets like North America, Western Europe and Japan? Do share your insights in the comments below.