Are 76% of purchase decisions REALLY made in store?

 

A recent report from POPAI stated that 76% of purchase decisions are made in store – this is a great sound bite but if you ask me it’s both misleading and counter-productive. Why?

 

Let’s start with the idea of a purchase decision. What the report is saying is that the final product choice is the only decision that shoppers make. Sure it’s the important decision – it’s where the rubber hits the road, it’s the FMOT and so on. But as we all know shoppers go through a series of decisions that lead up to the final choice – all of which are purchase decisions. Think about it: shoppers have to decide that they need to buy a product to meet a consumption need (like ‘I’m out of toothpaste’ or ‘We need salad for dinner tonight’); they have to decide how much time and money they want to spend in the shopping trip; they need to decide which store they are going to; they have to decide where in the store they’ll find what they need and finally shopper need to choose the actual product they are going to buy.

The key truth in what POPAI is saying is that the final decision shoppers make is in the store. But it’s misleading to say that all ‘purchase decisions’ are made in the store because, in the chain of decisions that shoppers  make, it’s really only the last two that can ever happen inside a shop.

Lets then look at the stats: POPAI states that the figure of 76% is derived by adding all of the occasions when purchases are unplanned to those which were ‘generally planned’ and those which were ‘category substitutes’. In the absence of a completely clear definition for these groups or quantification of them, we have to assume that before going into the store some (perhaps many) shoppers had already made a decision to buy a product in a category. POPAI’s claim suggests that the in-store environment is the only determinant of what these shoppers buy, when it needs to be remembered that the decisions they had made outside the store are highly influential on what they actually buy.

We know from our own research at engage and research by others as diverse as Nielsen, TNS and Harvard Business School that most people buy from a repertoire of brands and shop these brands habitually. The fact that people might switch within a repertoire is hugely important but so is the existence of this repertoire. POPAI’s headlines gloss over this.

Lastly let’s look at the implications of a catch all statement like “76% of purchase decisions are made in-store”: it would be fair to say that POPAI’s has a clear motivation to encourage consumer goods companies to spend in-store. Yet in-store expenditure is the fastest growing part of the marketing mix with Deloitte suggesting that its growing at 65%. Other data shows that trade spend is now the largest cost for CPGs after the cost of goods and that it eclipses traditional ATL by more than 50%. Finally, with returns running between 30 and 55 cents in the dollar – a lot of in-store money is being wasted – we estimate that the top 250 consumer goods companies probably lost near to US$200 billion last year alone. Statements like “76% of purchase decisions are made in-store” fuel this growth in expenditure and are widely quoted as justification for moving more money in-store. Instead, I personally feel that POPAI would be better at leading the way in illustrating how money should be spent more wisely.

Bearing the above in mind, here’s what I wish POPAIs would do: Firstly they should make their data widely available and for free, that way we could all understand the detail behind the headlines and use it to plan more effectively. Secondly, they should spend more effort propagating messages on how to get the best out of shopper marketing initiatives based on their experience and network. Thirdly, as Google have done in developing the ZMOT concept, they should be engaging a wider network of practitioners to ensure the industry is being lead with robust insights. Lastly they should be less focused on creating sound bites which might do their case more harm than good in the long-run.

The in-store environment is a hugely potent influencer on shoppers’ behavior, it has a diverse and complex role to play in the entire marketing mix and its influence varies across categories and channels enormously. To fully grasp the value of marketing to shoppers in-store, leaders in the consumer goods industry need a deeper understanding of how shoppers’ behave and how this behavior can be influenced. Simple statistics and generalizations like “76% of purchase decisions are made in store” are no longer enough to deliver real long-term returns on investment.

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5 thoughts on “Are 76% of purchase decisions REALLY made in store?

  1. Toby, couldn´t agree more. Simple stats based on some arbitrary sample are not sufficient for strategic decision-making. I am always thinking of the magic “70% of brand decisions are made in-store”. To me it seems that many players want to get into the new shopper marketing industry by selling us impressive but highly questionable stats. To me it’s more interesting to focus on results. What did you do with this insight? What changed for your shopper marketing strategy? And ultimately what affect on results did it have?

    So, my advice: Stop selling and start delivering results if you want shopper marketing to advance.

    Best,

    Johannes

  2. A general comment and question: Many years ago the same study reported in-store decisions at the level in the mid to high 60% range. Then the figure grew to 70% and now it is at 76%. An assumption that the study now can be compared to the study then… If so, is it fair to say that what ever the number is, it is higher in this environment that it was 10 and 20 years earlier? Where do you think the actual number of in-store decisions really stands?

    • Hi Tom, In responding to you observations, a caveat; I cannot speak to POPAI’s methodology so I have no idea whether the survey findings this year can be compared to those in the past. But to the point that it would appear that more final decisions on what to buy appear to be made in-store today than they were in the past I would suggest a number of causal factors: The increased proliferation of product choice (c.10,000 new lines are launched in the US every year) means that categories and brands are more fragmented today; the personalisation of media means that brand cut-through is reduced so shoppers today are more likely to “just see it in-store” and lastly retail consolidation has continued driving more expenditure in to store which increase the chances that a shopper might change a decision on a brand or variant at the point of purchase. As to what the true number is – I’m afraid its impossible for me to provide an answer – it varies widely by category, brand, shopper segment, channel, store, activities at the actual point of purchase. So much so that the actual answer to the question “how many purchase decisions are made in-store” becomes meaningless. What’s important for marketers to understand is what influence a given retail environment has on a target groups of shoppers’ behaviour and how can this leveraged to change these shoppers’ behaviour to drive sales and ultimately consumption.

  3. Pingback: Every Decision Begins and Ends With the Shopper | FRiCH: Everything Shopper Marketing from a SA Perspective

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