Trade Talk: The Web drives sales, but not all by itself

Abstract

A Pew study shows that while consumers do rely on the Web for information searches when shopping for products and services, in many cases they also consult in-store salespeople as part of the process.

Word of mouth has always been an important influencer of purchase decisions. The transfer of knowledge and opinions about products and services that used to take place over the back fence or at a cocktail party now occurs online in ever-growing amounts, thanks to the explosion of Web-based venues for consumers to share their experiences with other prospective buyers.

Stories abound in the business press of marketers scrambling to tap into and understand the role that this so-called user-generated content is playing. The overall impression these articles leave is that the Web’s search and product comparison functions are now the dominant drivers of consumer buying choices.

But a recent study by the Pew Internet & American Life Project shows that, at least for the three product categories examined, while the Web plays a critical role, the good old-fashioned person-to-person sales function still has a strong influence.

The study looked at consumer purchasing behavior in three disparate categories: music, cell phones and real estate. As profiled by the organization’s Associate Director John Horrigan in the report The Internet and Consumer Choice, respondents were asked whether they had bought any of the three aforementioned goods in the past year and were then directed to one of three question modules that delved into their decision-making process.

The goal was to analyze consumer choice for the three products along four dimensions:

Search: How much people rely on the Internet in product research and to what extent online information smoothes the path to a purchase decision.
Influence: Where the Internet’s influence is great (or not) in a consumer’s decisions.
Participation: Whether Internet users get involved in online chatter or take other steps after purchase to engage with what they bought.
Disintermediation: Whether the Internet serves as a way to go around traditional means (e.g., going to retail stores) to buy products.

Not the only method

Space doesn’t allow for a full examination of the results (the report is free and can be found at www.pewinternet. org) but for me, these were some of the more interesting findings, as taken directly from Horrigan’s analysis:

The online mall helps people sort through product choice, but it is not the only method they use to assess products and not a place where people often close the deal. Among music buyers: 83 percent find out about music from the radio, TV or in a movie; 64 percent find out about music from family, friends or coworkers. For cell phone purchasers: 59 percent ask an expert or salesperson for advice; 46 percent go to one or more cell phone stores. For people looking for a place to live: 49 percent look at ads in the newspaper; 47 percent ask a real estate agent for advice.
No more than one-tenth of buyers in each product category said that online information had a major impact on their purchasing decision. In conjunction with the finding that people use multiple sources, this suggests that the Internet is part of a competitive information environment in product research. Because people are willing to use other sources for product research, online providers of product information have incentives to be reliable as they reach out to consumers.
When the product in question requires a large commitment by a buyer, the Internet’s influence on the choice is greater. The cell phone, which often requires a contractual commitment, and real estate, which typically requires a large financial commitment, demonstrate this. Some 10 percent of cell buyers (or 27 percent of those who used the Internet specifically for research on their cell purchase) and 11 percent of home buyers or renters (or 23 percent of those who used the Internet for research on their real estate decision) said online information had a major impact on their purchasing decision. (Because more real estate searchers used online resources in their research than did cell phone buyers - by a 49 percent to 39 percent margin - the lower figure for online real estate searchers’ impact translates into a higher figure when focusing on major impact as a share of all respondents to questions about a product. That is, 27 percent of 39 percent for cell buyers equals 10 percent, and 23 percent of 49 percent for real estate searchers equals 11 percent.) Before making the purchase, Internet users conduct extensive online research and, for many, it makes a difference in their final decision.
For a good such as music - which involves less commitment but more difficulty in determining quality before purchase - online information competes with other sources as buyers search widely prior to buying. This lessens its influence on purchasing relative to the other products; just 7 percent of music buyers (or 12 percent of those who used the Internet to find out about music) said it had a major impact on their choice.
Sizable numbers of those who use the Internet in product research for each of the three products report that they believe online information helped them get better deals.

Among those who used the Internet in product research: 42 percent of music buyers said online information helped them save money on music purchases; 41 percent of cell buyers said they spent less as a result of information they got online; and 29 percent of those who used the Internet in researching a new place to live said it helped get them a better price.

These figures suggest that, for some buyers, online information effectively improves their bargaining positions as they shop. There is, however, another side to the coin: People say online information can prompt more spending than might otherwise be the case. Among music buyers who use the Internet to find out about music, 37 percent said the Internet led them to buy more music than they otherwise might have. For cell buyers using the Internet for product research, 43 percent said online information led them to get a phone with more features than they otherwise would have.

Understand precisely

There is no doubt that the Web as a sales vehicle and sales influencer is a force to be reckoned with. But as the Pew report shows, the Internet’s impact in these areas varies widely by product and service category. A keen analysis of those variances will ensure that too much emphasis isn’t placed on the Web at the expense of other, still-viable sales-influencing factors. The hope is that, rather than shifting most of a firm’s focus to Web-based sales and communication with potential customers, marketers will take the time (and conduct the research) to understand precisely where and how the Web affects the purchase process.