Price of empowerment

Online spending will hit 42bn this year, but brands would be wise to use impartial channels in their marketing mix because traditional methods are not getting through to empowered consumers

British consumers will spend £78bn a year online by 2010 – doubling the Web’s share of retail sales to 20%, according to IMRG. Internet sales have exploded over the past six years, growing by 3,553% between April 2000 and December 2006, and this year UK consumers will spend £42bn online – equivalent to the turnover of supermarket giant Tesco.

An ever-increasing number of companies are getting in on the act, as is seen by Thompson Local’s announcement this week that it is launching a price comparison site for financial products and services.

However, the relationship between online consumers and marketers has changed radically and many marketers are failing to understand and capitalise on the opportunities emerging from this shift in consumer behaviour. The emerging empowered consumer is becoming increasingly sophisticated in selecting purchasing opportunities, increasingly cynical in evaluating information and increasingly immune to traditional marketing methods, according to the 2007 Online Shopping Report from Quidco, the cashback co-operative. These online co-operatives refund commission usually paid to referral websites (affiliates) back to the consumer.

The days of consumer loyalty to specific online brand outlets are gone. Quidco questioned 1,652 UK consumers and found that only one in three online shoppers (33%) go directly to well-known brand websites such as Amazon and Direct Line, while the remaining two-thirds (67%) start the buying process at a search engine, cashback co-operative or price comparison website.

The success of these intermediary sites has been driven by growing consumer scepticism towards traditional marketing methods.

A total of 35% of British consumers no longer wish to be targeted by traditional online methods such as banner ads and e-mail marketing.

The overwhelming majority (82%) want brands to meet them in the middle, marketing to them in a highly-targeted fashion once they have shown a specific interest in a type of product or service. Consumer wariness towards marketing messages means they would also prefer to receive this information about products and services via impartial and trusted sources. The challenge to marketers is to continue successfully communicating their message and generating effective returns.

The desire for information via impartial, trusted sources is demonstrated by the fact that price comparison websites are the latest to feel the cold shoulder from consumers. One in three (30%) has already stopped using such sites and a further 47% say they will not use them again after discovering the results are often biased or selective.

When shopping online, 65% of British consumers want good customer service and price from an impartial source – only 5% of consumers actually care about website design and a surprisingly low 23% are concerned about security.

Responding to this challenge, brands are realising the importance of working with trusted impartial channels, such as cashback co-operatives, as part of the marketing mix.

The cashback co-operatives engage consumers by presenting brands and messages in an impartial way and empowers consumers by paying back the affiliate revenue as cash to the member who generated the transaction.

More than half (52%) of British consumers are aware of cashback co-operatives and 31% of those actively use them for the majority of their online purchases. The sector is set to grow further as awareness continues to spread. Of those consumers yet to wake up to cashback co-operatives, 86% would use a service that enabled them to access branded sites to accumulate cashback and 57% would use them to make the majority of their online purchases.

Brands promoted on cashback co-operatives have seen sales volumes jump by as much as 4,200% with promotions that acknowledged this change in consumer behaviour.

The increasing immunity of online consumers towards marketing, the difficulty of using traditional methods to communicate marketing messages and the effectiveness of trusted impartial sites means those brands not fully using this channel are not engaging with, nor distributing their message to this large part of the consumer market.

Marketers need to realise that consumers have not just moved their old high street buying habits online, but that the way they go about shopping has changed forever.

Paul Nikkel, director of Quidco, contributed to this week’s Trends Insight

parsonsThe Quidco research shows today’s online consumers are more savvy, and no longer take for granted what companies offer, but now tell brands what they want from them. Gone are the days when companies could spend their marketing budgets and wait for the consumer to contact them. Comparison sites are a marketing success story because they present a straightforward solution to what looks like an overwhelming task; they have saved the consumer from the “misery of choice”.

But while the thought of saving time and money will always appeal, this won’t add value in the longer term.The one-price-fits-all approach doesn’t build relationships with consumers who may be attracted by the initial saving but left with a sour taste by the online experience and the overall quality of product.

The new wave of comparison sites recognise that loyalty online comes from adding value impartially and making the purchase process easier, enjoyable and ultimately more satisfying.

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