What Your Tracking Study Should Measure About Your …...What Your Tracking Study Should Measure About Your Customers Page 6 Metrics for the Funnel As we’ve described, the funnel

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What Your Tracking Study Should

Measure About Your Customers

Dr. Bruce Isaacson, President of MMR Strategy Group

What Your Tracking Study Should Measure About Your Customers Page 1

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In many companies, the management of the marketing

budget focuses on two main questions: how much will

we spend, and where will we spend it? How much is

spent is typically measured in either dollars or rating

points, while where it is spent is usually viewed in terms

of media mix, i.e., whether the spending will go to

broadcast advertising, sponsorships, promotions, direct

mail, or other types of marketing activity.

The size of the budget and the allocation of marketing dollars across media are both issues that

evaluate the marketing budget from the company’s viewpoint. Unfortunately, neither of these

measures considers the customer’s point of view, even though the marketing budget, for most

companies, is entirely directed toward customers.

To re-focus on the customer, it is helpful to think about the primary purpose of marketing,

which we believe is to make customers more likely to buy. Tracking studies should support that

primary purpose, by measuring whether customers are more or less likely to buy and by

identifying strategies and tactics that are likely to move that measurement in the right

direction.

This article presents a series of essential measures that indicate whether customers are more

likely to buy by mapping, describing, and measuring the customer buying process. Although

they are easily learned, the measures are also likely familiar to many managers and marketers.

Putting these essential measures at the core of any tracking study can help generate insights to

identify the best paths for future growth.


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Introduction: The Essential Measures

Let’s imagine a hypothetical consumer, Fred, whose car is on its last legs. Fred is considering

what type of car he needs, in terms of number of people it should seat, gas mileage, price, and

other factors.

Fred’s search process may be conducted online, at search

engines such as Google. He may start with cars that he knows,

and visit websites where he learns about other possible cars.

He may then go to dealerships to test drive a number of

different cars. Finally, he may negotiate price on one specific

model of interest.

Fred’s purchase process is an example of the Consumer Decision Funnel. In our experience, the

funnel is a useful framework to identify the variables that any company should track about its

customers.


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The Consumer Decision Funnel

The Consumer Decision Funnel describes the process consumers follow when making a

purchase decision. As shown in Figure 1, the funnel shape signifies the concept that consumers

begin with a large number of options that might satisfy their need. As consumers progress

through each stage of the process (i.e., down each stage of the funnel), they eliminate more

and more options, and are left with fewer and fewer brands they may potentially buy.

Figure 1: The Consumer Decision Funnel

Determine satisfaction and re-buy or re-shop

Select one option to buy

Consider and evaluate alternatives

Become aware of brands

Repurchase

Purchase

Consideration

Awareness


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The funnel has four stages, which are usually familiar to most managers. They are as follows:

Awareness: This stage measures the brands or products that consumers are aware of in

the category. Consumers may already know of certain brands from prior experience

and advertising, and they also may learn of new brands through shopping.

Consideration: This stage measures the brands that consumers would consider

purchasing. In most categories, consumers are aware of many more brands than they

actually consider. The best example of this process is the speed at which most

consumers move through a supermarket, focusing only on certain preferred brands and

products, while bypassing many others.

Purchase: In this stage, consumers select one brand for

purchase. There are various methods by which

consumers may choose one from a set of brands they

have considered. Some consumers may use a

compensatory model, mentally rating each brand on a

variety of attributes, and determining a total score for

each brand. Others might use a non-compensatory

system of eliminating brands that don’t meet the most

important criteria, then those that don’t meet the next criteria, and so forth, until only

one brand remains. Regardless of the specific process used, the end result is that

consumers select one brand from those considered.

Repurchase: In this stage, consumers evaluate their purchase and decide whether or

not they will buy the same brand again in the future. Consumers who are satisfied with

their choice may be considered to be likely to repurchase the same brand again under

similar circumstances in the future. Dissatisfied consumers may be more likely to repeat

the decision process and select a different brand in the future.


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Consumers do not progress through the funnel in a uniform and step-wise manner from top to

bottom. Some consumers may skip a stage, while others may iterate from one stage to

another. However, by measuring the percentage of consumers who are at each stage, and the

reasons for not progressing through the stages, a company can understand the efficiency with

which consumers move through the funnel and identify the key tasks that marketing needs to

accomplish in the marketplace.

In other words, the shape of the funnel will differ across categories, consumers, and segments.

A company that has low awareness has a different set of marketing challenges than one that

has low consideration or low rates of repurchase. As an example, a restaurant with low

awareness needs to let consumers know that it exists, while a restaurant with low

consideration needs to give consumers a reason to eat there as opposed to eating somewhere

else. These two restaurants may both advertise, possibly in the same media, but the goal of

their advertising should be very different.


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Metrics for the Funnel

As we’ve described, the funnel depicts the pathways by which customers become prospects.

By gathering key metrics at each stage, a marketer can identify a brand’s strengths and

weaknesses in the marketplace. A list of possible measures is shown in Figure 2. By gathering

these measures, a company can determine the shape of the funnel for a particular category or

group of customers.

Figure 2: Consumer Decision Funnel Metrics

Stage Metrics

The shape of the funnel is easy to measure either on a one time basis or as part of a tracking

study. Here are some examples of the ways to measure the four stages in the funnel:

Satisfaction with the brand

Intent to repurchase the brand

Intent to recommend the brand to others

Market share

Trial

Brand purchased most often

Likelihood of considering a brand

Brands considered

Level of interest in brands

Unaided and aided brand awareness

Unaided and aided ad awareness

Unaided and aided awareness of features

Repurchase

Purchase

Consideration

Awareness


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Awareness is one of the most familiar measurements for most marketers. It is typically

measured either unaided or aided.

Unaided brand awareness is measured by asking consumers to name the brands

that come to mind when they think about a category, simply based on what comes

to mind first.

Aided brand awareness is measured by asking consumers if they have heard of

specific brands, using a list to select those that are familiar.

The difference between aided and unaided

awareness is that the aided question prompts

the consumer’s memory with a list of brands.

Because unaided brand awareness shows

whether a brand is top of mind without any

prompting (what marketers call an initial

evoked set), it is generally viewed as a more

powerful measure than aided awareness.

Besides brand awareness, many tracking studies also measure advertising awareness. Like

brand awareness, ad awareness can be measured on an unaided or aided basis. In fact, several

studies have found unaided ad awareness to be a strong indicator of purchase likelihood.

Yet another possibility is to measure awareness of specific features that describe brands in the

category. For instance, consumers might be aware of a brand of car, such as the Toyota Camry,

but be unaware that the Camry offers an optional hybrid engine.


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Consideration can be measured in a variety of ways. The most common is to ask consumers to

indicate what brands or products they would consider if they were shopping today.

Even though a consumer might be aware of a brand, if they have negative attitudes toward it,

they might not consider buying it. For example, a car shopper might not visit the showrooms of

certain brands he or she believes to be unreliable or not having the right image.

For studies which survey recent shoppers, consideration measures may ask those consumers to

indicate what brands they actually considered when they were shopping.

A third possibility is to measure the consumer’s degree of interest in buying a specific brand or

series of brands.


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Purchase is typically measured by market share, or the percent of category sales accounted for

by a particular brand. Market share can be measured either on a unit basis or on a dollar basis,

and provides the most essential of purchase measures. The best tracking studies also provide

more granular measures of purchase, such as:

Trial: The percentage of consumers who have ever purchased a brand.

Recent Purchase: The percentage of consumers who have purchased a brand within

a specific time period. A relevant time period might be the past month, for

frequently purchased items (e.g., consumer packaged goods), or the past year, for

less frequently purchased items (e.g., hotel or restaurant visits).

Preference: Purchase can also be measured as the percentage of consumers who

purchase a given brand most often or who prefer to purchase that brand.

Repurchase is often measured by satisfaction, which is a

consumer’s attitude toward a brand after having used or

experienced it.

Another common measure of repurchase is consumers’ intent

to repurchase the brand. This might be a difficult metric to

determine for durable goods that have long repurchase cycles. But, it may work well for fast-

moving consumer goods.

Other measures for repurchase may focus on consumers’ willingness to recommend a brand to

other shoppers or to friends and family.


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How to use the funnel

The consumer decision funnel provides a powerful framework to understand the process that

consumers follow when making a purchase decision. As we described earlier, not every

consumer moves through the funnel in the same manner. This is particularly true when

comparing high-involvement and low-involvement goods. High-involvement goods, such a

house or medical care, tend to be higher risk and involve greater deliberation. Consumers

purchasing higher-involvement goods may spend more time at each stage and may move back

and forth, iterating across stages. High involvement goods tend to be expensive, complex, or

high risk (either financial or emotional).

By comparison, consumers would be unlikely to go through the same steps to buy a pack of

chewing gum, or other low-involvement goods, which tend to be lower risk and involve less

deliberation. For such items, would be a waste of time and effort.

Once a company has identified the shape of the funnel,

there are two primary activities to put it to use. The

first is to identify those stages in the purchase process

where consumers drop out or become stuck in their

transition toward purchase. By applying resources

(such as marketing or sales) to those sticking points, a

company can move more consumers towards purchase.


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Conversion rates from one stage of the funnel to the next are the best measures of where

consumers get stuck. Conversion can be calculated as the percent of customers at one stage of

the funnel who proceed to the next stage of the funnel. One way to show conversion rates is

depicted in Figure 3.

Figure 3: Consumer Decision Funnel Conversion Rates

The figure shows that 27% of consumers are aware of Brand 1, while 24% consider Brand 1.

This yields a conversion rate of 24% / 27% = 89%, meaning that 89% of consumers who are

aware of Brand 1 also consider Brand 1. Another 13% of consumers purchase Brand 1, giving it

a conversion rate of 13% / 24% = 54% from consideration to purchase. In contrast, Brand 5

converts only 72% of consumers from awareness to consideration, and only 29% from

consideration to purchase. Brand 5 lags behind Brand 1 on both conversion rates, making it

weaker all around.

Brand 1 89% 54%

Brand 2 75% 33%

Brand 3 80% 33%

Brand 4 88% 40%

Brand 5 72% 29%

13%

2%

12%

6%

6%

27%

8%

45%

17%

29%

24%

6%

36%

15%

21%

Awareness Consideration Purchase

x Conversion x Conversion


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A second and highly important use is to compare the shape of the funnel as described by the

consumers’ journey toward purchase and the shape of the funnel as described by the

company’s marketing budgets. A comparison is illustrated in Figure 4.

As the funnel on the left side of this figure shows, the company has allocated its marketing

budget according to the traditional funnel shape, with a large percentage of the budget

allocated to awareness, and very little at point of purchase. Most company marketing budgets

are established in this manner, with large expenditures towards activities such as advertising.

Figure 4: Consumers’ Decision Funnel In Reality vs. the Company’s Marketing Spending

Purchase

Consideration

Awareness

General Marketplace

Brand Customers

Marketing Spending ($)

Consideration

Awareness

General Marketplace

Brand Customers

Consumers’ Decision Funnel(Time & Importance)

Purchase


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However, the funnel on the right side of this figure shows that consumers actually move

through the funnel in a different manner, spending the most time and making key decisions in

the consideration stage, and also making key decisions in the purchase stage. To meet this

marketplace reality, a company might reallocate its marketing budget to be proportional to the

shape of consumers’ actual decision process, rather than the standard funnel-shaped model.

Understanding the consumer decision funnel and properly

measuring its different stages can help marketers gain a fuller,

more accurate understanding of their consumers, and make better

marketing decisions.

The funnel is based on well-accepted principles. Experienced

marketers are usually trained in concepts similar to these, and

frequently think about their brands and products in terms of

measures such as awareness, consideration, and purchase.

We believe that these measures should form the heart of any tracking study, and the progress

of brands, products, and ads should be measured against these variables. The same measures

can also be connected to the budgeting process, so that choices in resource allocation are

linked directly to these critical marketplace variables.


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How has the funnel changed?

In recent years, the Internet has also changed consumer behavior in profound and important

ways. These changes have affected the shape of the funnel and the means by which consumers

pass through the stages in the funnel.

For example, consumers can now comparison shop and see reviews, learning about other

customers’ experiences with a particular seller. To take a few examples, reviews can be found

on sites such as Amazon.com, TripAdvisor.com, or Yelp.com.

Consumers also have much more information available.

They can learn much more about products before they make

any purchase.

The internet has made also information about prices much

more transparent and more readily available. Traditional

brick-and-mortar retailers, such as Toys ‘R’ Us and Best Buy,

are finding that their consumers are much more

knowledgeable about prices, and have more knowledge

about prices and price differences relative to alternatives.

Finally, consumers have a bigger choice in media. The days when consumers watched three

main channels on television or reliably listened to certain radio stations are long gone. Today,

consumers have many more opportunities and options for entertainment at home or on the go.


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As a result of these changes, consumers have changed. They are now:

More self-directed: Rather than passively accepting advertising directed toward the

masses, consumers are now are able to seek out the information which is most relevant

to them. Online, advertisements which are not relevant or not interesting can often be

bypassed.

More self-empowered: Consumers now have greater control over their purchase

process, using tools such as comparison shopping and consumer reviews to evaluate

products, brands, and services.

More informed: Consumers are now able to access information about products,

services and prices, making them more informed. As they gather information, they may

decide to move across stages of the funnel in unusual directions, moving forward and

backward across stages.


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Conclusions

For many companies, these changes in how consumers make purchases also suggest the need

for changes in marketing budgets, to allow consumers to encounter their brands in more self-

directed, self-empowered manners.

Despite these changes, or perhaps because of them, tracking the core variables within the

funnel remains critically important. The funnel is the best means to identify how consumers

are progressing through the different stages of their purchase process, and to identify

opportunities to focus marketing budgets on the highest potential opportunities within those

stages.

About MMR Strategy Group

MMR Strategy Group is a full-service market research-based consulting firm. We help our

clients grow by leveraging customer insight to develop marketing and sales strategies. In order

to support critical business decisions, we combine the data gathering capabilities of a research

firm with the business analytics of a strategic consulting firm.

Want to learn more? Please contact us at 818.464.2400 or email [email protected].

© Copyright MMR Strategy Group, May 2012. All rights reserved.

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What Your Tracking Study Should Measure About Your …...What Your Tracking Study Should Measure About Your Customers Page 6 Metrics for the Funnel As we’ve described, the funnel