THE FUTURE OF CUSTOMER ENGAGEMENT

Presented at SEAMLESS ASIA, 27 June 19

Creating the perfect customer through advanced analytics and experiential impression (Part 1 from AIDA to IDEAL model)

Each day, an American adult will be exposed to more than 4,000 advertisements on the average (Forbes, Marshall, 2015). Advertisers are bombarding the potential customers with thousands of advertisements based on a simple marketing concept that has been guiding the marketing strategy for more than a hundred years, the AIDA model (Wikipedia).

AIDA is based on a simple concept of

• Attention – The consumer becomes aware of a category, product or brand (usually through advertising)
• Interest – The consumer becomes interested by learning about brand benefits & how the brand fits with lifestyle
• Desire – The consumer develops a favorable disposition towards the brand
• Action – The consumer forms a purchase intention, shops around, engages in trial or makes a purchase

Limitations of the AIDA Model

This model has worked well in the past when there were very few channels of marketing and where the range of products and services were not as abundance as today. The stores were almost the only channel for customers to obtain further information about the goods and services, and to purchase them. As such, the whole idea of AIDA was to attract the customers to the store to execute the transactions (i.e. take action).

However, in today’s world where there are multiple marketing channels, media and mediums of communication in which the brands can reach out to potential customers (such as emails, Instagram, Facebook, YouTube and other social media channels), the AIDA model has become much less effective. Coupled with the abundance of new products, services, the low costs fast production and and speed of replacements (e.g. fast fashions in the fashion industry), advertisers are competing for the short attention span of the modern consumers. Without the ability to get the customers’ attention among the thousands of other advertisers, the AIDA model falls flat right from stage one. In addition, with so many marketing channels it will impossible for marketeers to invest in all the channels with similar intensity with the same marketing budget. Marketeers will need to know how best to strategically spend their marketing dollars to achieve greater effectiveness by being more targeted. The question would then be how can marketeers do this?

The growth of eCommerce and new opportunities of engaging customers

While marketeers are facing the challenge of competing for customers' attention across multiple marketing channels, some exciting have happened over the last 10 years in two areas; first, the exponential growth of eCommerce and second, the proliferation of data analytics.

According to studies by Statista, the worldwide retail eCommerce sales is expected to increase nearly four times from USD 1.3 trillion in 2014 to nearly USD 4.9 trillion in 2021 (Statista, 2019). The increase of number of people having access to the Internet and people owning smart phones have also fueled the exponential eCommerce growth. Just within China more than 800 million people have access to the Internet (Forbes, Statista, 2018). As reported by CNBC, Alibaba alone has set a new recorded during its singles day in 2018 with more than $30.8 billion in sales in 24 hours. To put that in perspective, this is more than the global revenue of H&M in 2018.

Besides looking at the increased in sales number, the interesting thing is that such growth in online transactions have also generated million of terabytes of consumer data, purchase patterns and consumption. Therefore brands are now able to gain better insights of their customers through such data to generate a 360 degrees intelligence of their customer profile.

In the past, engagement with the customers were rather linear. Whenever there is a new product to push to market, brands will go through the AIDA cycle to promote the product. Each new cycle is quite independent from the previous cycles. Today with data analytics, advertisers can do a lot more before reaching out to their potential customers through more accurate and targeted customer profiling.

For example, brands can know their customers in depth like who they are, where they are from, what were their purchase patterns, what are their spending power, who they are associated with and their content preferences. Marketeers also want to know which customers would bring the highest long term value to their brands. With this information. they can better segmentize and target their customer groups and design the right engagement models. Therefore instead of launching mass advertisement campaigns without focus, brands can now be more intelligent in analysing their customers and select the best and most effective channels in reaching out to them through the right channels to achieve the maximum results.

Unlike the previous method of using commercial advertisements alone, increasingly advertisers are adopting the influencing and recommendation techniques to push more personalised messages to their target groups thereby creating that desire in them to purchase the products and services. Furthermore, data collected from the customers’ actions (purchase) could be re-injected to the model to refine the brands' understanding of their customers and reinforce the models. This is now made possible with AI and machine learning.

We are already see this happening. Companies that have invested heavily in consumer insights and behavioral studies to provide targeted recommendations have yield great results. In fact, 75% of Netflix viewer activity is driven by recommendation and its recommendation system have saved the company an estimated $1 Billion per year through reduced churn. Similarly, 35% of Amazon’s sales are generated through their recommendation engine. (DeAsi, Pointillist). According to research cited by McKinsey, organizations that leverage customer behavior data to generate behavioral insights outperform peers by 85 percent in sales growth and more than 25 percent in gross margin (DeAsi, Pointillist).

With this understanding and observation, we can therefore refine the existing AIDA model to the “Smiling AIDA” model where we drive customers' action through analytics.

Importance of Personalised Engagement

Studies have also shown that today’s customers have more inclination in buying products and services based on the experience of the customer journey (US Census data). According to a study conducted with 7,000 consumers over 52% of consumers and 65% of business buyers have indicated that they likely would switch brands or vendors if there is no personalised communications with them (Bedgood, business2community, 2018). As we know, the costs of acquiring new customers are much higher as compared to retaining the existing customers, it is therefore important for brands to invest in customer analytics to optimize and generate the right type of messages when communicating with their clients. Further, through such analytics, brands will also be able to determine and predict the overall customer value which each customer can bring to the brand and focus on targeting the customer group with the best customer value.

Changing role of the stores and customer experience

One may ask, now with the growing eCommerce transactions are physical stores still relevant?

A report on the neuroscience of retailing by The Wall Street Journal (2018) mentioned that "research shows that people often do get a high from shopping -- the brain releases chemicals such as dopamine or serotonin when a person is stimulated by discovering something new, such as a handbag. Sometimes, aspects of the shopping experience such as friendly sales clerks, eye-catching displays or aisles that are easy to navigate can trigger brain activity that brings about these "euphoric moments," says Dr. David Lewis, director of neuroscience at Mindlab International, a United Kingdom-based consultancy whose clients include athletes, retailers and advertising companies. "The brain is turned on by novelty.""

Shopping is a six-senses sensory experience (sight, sound, touch, smell, taste and emotion). Today's online shopping can only engage the customers mostly on sight and sound and is still not able to replicate the full experience shopping can bring to the consumer. What online shopping has done really well is in providing the convenience of purchase, wide range of products and possibly at a cheaper price. However, it is still not able to replace the real shopping experience.

According to U.S. Census data and Harris Poll conducted by Eventbrite (2014), 90% of consumers who are comfortable making purchases online are still shopping in stores, while 78% prefer to spend money on a desirable experience or event over a desirable object. Therefore, the fact is that stores are still as relevant today as in the past. The thing that need to be changed is the role of the store and the experience of shopping provided by the stores.

With this understanding, brands are beginning to transform their stores. Today, transactions can happen through any of the online channels, stores as the place to purchase the products are becoming less important. However, they can become a more effective channel that provide the physical brand experience where the customers can experience the feel and touch of the products through well designed experiential journeys.

For example, in the Nike store, shoppers can try on the shoes running on a treadmill with synchronized virtual running. While Albert Heijn has incorporate urban farming concept when shoppers can pick the spices and experience the full freshness of the herbs.

Henceforth, we have also observed the transformation of the stores to be places of experiential shopping and community engagement, where customers are again reengaged with the 5 senses plus emotional engagement with the brands. This brings back the real shopping experience as compared to online shopping. This concept is powerful as the experience will create a longer lasting connections and loyalty with the brands building long term emotional engagement with the customers.

From AIDA to IDEAL

The Smiling AIDA model is an interim model which advertisers can use to leverage analytics and influencing to enhance the way they engage their customers today and continue to stay relevant in their engagement strategies. To truly transform the way brands engage the customers, and leverage the power of analytics and both online and offline channels, an upgraded IDEAL model can be adopted.

The more effective new IDEAL model proposed here advocates that advertisers look at using Intelligence to understand the customers, followed by Direct Influencing them to be interested in brands, products and services. This will then be followed by designing activities to create deep Emotional Engagement with the customers so that the customers will want to be Associated with the brands, hence creating the Long-term Attachment.

• Intelligence – brands use data analytics to gain 360 degrees intelligent insights of the consumers and their preferences
• Direct Influencing – leverage multiple relevant channels to carry out direct influencing and recommendations to the consumers to drive their desire for the products & services
• Emotional Engagement – through experiential shopping and customer journey design to engage consumers emotionally
• Association – using communities building on top of emotional engagement to capture consumers interest in being associated with the brand (this will be further explained in Part 2 of the article)
• Long-term Attachment - continuous engagement with the consumers to drive consumers long-term attachment with the brand

In the next article, I will explain the science of influencing and the reasons of creating the experiential shopping to drive behavior modifications to create our preferred customers personas.

Readers may also refer to my previous article on The Future of Consumer Analytics on how we can use analytics to drive customer behavior changes.

.. to be continued in Part 2

The Smiling AIDA and IDEAL models have been developed by Edmas Neo, MBA. Acknowledgement of the author and link to this page will be appreciated when referring to the models.

About the Author

Edmas was an eCommerce consultant with the previous Pacific Internet Ltd during the early years of his career. He has worked as an eBusiness Manager with a large hotel chain with priority focus on customer experience, and has developed a large scale B2B procurement platform. Later he was also involved in creating one of the largest whole-of-gov internal social media platform that promoted mindset change for over 5 years. In recent years, he has advised multinational brands in consumer insights co-innovation programmes, and is mentoring a number of startups providing eCommerce and online shopping services.