Jupiter Research - Liane Dietrich & Nate Elliot

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Attracting and Retaining Customers in a Attracting and Retaining Customers in a Challenging EconomyChallenging Economy

An exclusive report into the UK’s online retail market, in An exclusive report into the UK’s online retail market, in association with JupiterResearchassociation with JupiterResearch

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AgendaAgenda

• Introductions– Liane Dietrich, Managing Director, LinkShare– Nate Elliot, Research Director, Jupiter

• Why this research?• Findings relevant to Affiliate Marketing• Takeaways• Questions

3 © 2008 JupiterResearcha Forrester Research company

Agenda

• Research objectives• Customer Perceptions of – and Reactions to –

the Economic Crisis• Understanding and Engaging Customers in

this Trying Time• Leveraging Customer Influence to Drive Sales• Key Takeaways


Objectives

• LinkShare approached JupiterResearch to offer unbiased research that would educate the market about trends in online shopping, and to discuss how publishers, marketers, affiliates will be affected by these trends

• The study offers insight into the behaviors, preferences, and opinions of UK online shoppers


Agenda





European Online Retail Spending Has Tripled In the Past Four Years

€ 16.5€ 24.6

€ 34.1

€ 47.2

€ 61.2

€ 75.8

€ 90.1

€ 103.8

€ 117.4

€ 131.1

€ 145.4

€ 0

€ 30

€ 60

€ 90

€ 120

€ 150

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Eu

rop

ean

On

lin

e R

etai

l S

pen

din

g

(in billions)

Source: JupiterResearch Internet Retail Model, 8/07 (Western Europe)

Note: Retail does not include auto, travel, or prescription drugs.


Britons Spend More Online Than Any Other Consumers in Europe

£3.7£5.4

£7.3

£9.9

£12.7

£15.6

£18.4

£21.0£23.4

£25.7£28.0

£0

£10

£20

£30

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

UK

On

lin

e R

etai

l S

pen

din

g

(in billions)

Source: JupiterResearch Internet Retail Model, 8/07 (Western Europe); Xe.com: €1 = £ 1.287 (an average of monthly exchange rate for Jan through Sept 2008, using the rate on the first day of each month)

Note: Retail does not include auto, travel, or prescription drugs; All years converted to Pounds based on 2008 average Euro/Pound exchange rate


Groceries Generate Highest Spending, Followed by Electronics

£0.3£0.2

£0.2£0.2

£0.4£0.4

£0.5

£0.5£0.6

£0.9£1.2

£1.8£2.6£2.6

£3.3

£0 £1 £2 £3 £4

GroceriesConsumer Electronics

OtherPCs & Laptops

ClothingBooks

Computer PeripheralsSoftware

MusicVideo

Events TicketsFootwear

ToysSporting Goods

Personal Care

2007 UK Online Retail Spending by Category(in billions)


Note: All years converted to Pounds based on 2008 average Euro/Pound exchange rate


UK Online Buyers •UK online buyers say they’ll spend an

average of £702 online in 2008

•UK online buyers made an average of 9.3 purchases online in the past 12 months

•34% of online buyers are frequent online purchasers**

•95% of online buyers research products at more than 1 site

**Frequent purchasers = have purchased products or services online more than 10 times in past 12 months

UK Online Buyers Spend More Per Capita Than Anyone in US or Europe

Source: JupiterResearch Internet Shopping Model, 11/07 (US only) JupiterResearch Internet Retail Forecast, 8/07 (Western Europe) JupiterResearch/ LinkShare Shopper Consumer Survey (8/08), n=788 (Online buyers, UK only); JupiterResearch/ LinkShare Custom Survey (12/07), n=777 (Online buyers, US only);

*Source; xe.com; €1 = £ 1.287 (an average of monthly exchange rate for Jan through Sept 2008, using the rate on the first day of each month


15%

63%

23%

28%

62%

10%

0% 20% 40% 60% 80% 100%

"The generalhealth of the UKeconomy does

not concern me"

"I believe the UKeconomy is in a

recession"

Agree Neutral Disagree

However, UK Consumers are Worried about the State of the Economy

Percentage of Online ConsumersQuestion: Please indicate to what extent each statement describes your attitudes. (Select one for each)

Source: Source: JupiterResearch/ LinkShare Shopper Consumer Survey (8/08), n=1,000 (UK only)


12%

17%

17%

33%

18%

39%

41%

13%

14%

17%

21%

23%

40%

51%

0% 20% 40% 60% 80% 100%

I'll plan offline shopping trips in more detail usingthe Web so that I make fewer trips

I don’t intend to change my shopping habits

I'll buy used or refurbished products so that I cansave money while maintaining my lifestyle

I will avoid any major purchases

I will do more of my shopping online rather thanoffline (in physical shops)

I will shop less overall

I will do more research online (before purchasing)to be sure I get the best price

High Spenders

Low Spenders

Consumers Will Turn to the Internet to Help Them Find the Best Prices

Percentage of Online Buyers

Question: Given the current state of the UK economy, how are you planning to change your shopping habits? (Select all that apply)

Annual Online Spend:

Source: JupiterResearch/ LinkShare Shopper Consumer Survey (8/08), n=645 (Online buyers who spent less than or equal to £750 online in last 12 months); n=143 (Online buyers who spent more than £750 online in the last 12 months), UK only

Note: Only select responses shown


Reduce

Stay the same

Increase

UK Consumers More Likely to Decrease Offline Spending than Online Spending

Reduce

Increase

Stay the same

In Billions of Euros

Source: JupiterResearch Internet Commerce Forecasts, 08/07 (Western Europe Only) excl Travel

Percentage of Online Consumers Who Know How Their Spending Will Change

Question: Due to the current economic conditions, how do you plan to change your spending online and offline in the next 12 months, as compared to the previous 12 months? (Select one for each)

Source: JupiterResearch/ LinkShare Shopper Consumer Survey (8/08), n=763 (online consumers who know how their online spending will change, UK), n=804 (online consumers who know how much their offline spending will change, UK)

Overall Online Spending Change = 4.9% Decrease

Overall Offline Spending Change = 6.4% Decrease

42% 56%46%

8%

46%

2%


That Will Continue to Push a Greater Share of Consumer Spending Online

£15.6£18.4

£21.0£23.4

£25.7£28.0

6.3% 6.6% 6.8% 7.0%5.8%

5.2%

£0

£10

£20

£30

2007 2008 2009 2010 2011 2012

0%

3%

6%

9%

12%

15%

UK Online retail spendingUK Online retail spending as percentage of total retail spending

UK

On

lin

e R

etai

l S

pen

din

g

(in billions)

UK

On

lin

e R

etai

l S

pen

din

g a

s P

erce

nta

ge

of

To

tal

Ret

ail

Sp

end

ing


Note: Retail does not include auto, travel, or prescription drugs; All years converted to Pounds based on 2008 average Euro/Pound exchange rate


Agenda





5%

19%

24%

24%

24%

26%

26%

28%

43%

61%

69%

0% 20% 40% 60% 80% 100%

Nearly All UK Online Buyers See the Benefit of Shopping Around

Usually like to shop around

Percentage of Online Buyers

Question: Why did you use more than one site when deciding what products to buy online? (Select all that apply)

See more prices

Validate/contrast info from the retailer/manufacturer

See more product information

See if other sites have similar products

Seek out expert reviews/opinions information

Better sense of what others said about the product

Not sure what store to buy from

Usually don’t trust single site for purchase decisions

Gather purchase suggestions from other sites

Note: Only select responses displayed

I did not visit more than one site

Source: JupiterResearch/ LinkShare Shopper Consumer Survey (8/08), n=788 (Online buyers, UK only)


35%

37%

41%

41%

59%

61%

68%

0% 20% 40% 60% 80% 100%

Shopping comparison sites

Visit shops/stores in person

Consumer review sites (e.g. Amazon, Reevoo,TripAdvisor)

Manufacturer websites

Search engines

Auction sites

Shop/store websites

Percentage of Online Shoppers

Question: Which of the following have you used when researching and purchasing products or services both online and offline? (Select all that apply) Note: Only select responses shown.

Source: JupiterResearch/ LinkShare Shopper Consumer Survey (8/08), n=914 (Online shoppers, UK only); JupiterResearch/ LinkShare Shopper Consumer Survey (6/08), n=1087 (Online shoppers, US only);

UK Consumers Use a Wide Range of Online Shopping Resources


31%

47%

46%

53%

56%

65%

65%

34%

31%

33%

35%

30%

27%

31%

35%

22%

21%

12%

14%

8%

4%

0% 20% 40% 60% 80% 100%

Voucher code/coupon sites

Websites that offer special rewards such as cashback, loyalty schemes, etc.

Shopping Comparison Sites

Manufacturer Websites

Sites that feature consumer reviews

Search engines (including Google Images)

Shop Websites

Useful Neutral Not useful

Percentage of Resource Users

Question: How useful were each of the following resources while researching your most recent online purchase? (Select one for each)

Sites Offering the Most Information are the Most Used, and the Most Useful

Source: JupiterResearch/ LinkShare Shopper Consumer Survey (8/08), n=788 (Online buyers, UK only)

% of Online Buyers Who Used Each Resource

70%

45%

37%

32%

17%

59%

42%


• Household income and average online spend is similar to all online buyers

•About as likely as average online buyers to decrease online spending due to the economy

• Two-thirds agree that “Using shopping comparison sites is the most efficient way to

find a product and make a decision of what to buy” (versus one-half of all users)

•One-half say in this economy they will research more online to look for low prices as compared

to 39% of all online shoppers

Bargain Shoppers are Average Online Shoppers who Focus Primarily on Price

Bargain Shoppers: 38% of UK Online Shoppers

Source: Source: JupiterResearch/ LinkShare Shopper Consumer Survey (8/08), n=1,000 (UK only); n=300 (Online consumers who look for the best bargains and always buy from the shop with the lowest price, even if they haven’t purchased there before, UK only)


• More affluent than the average online user

• 90% have purchased online in the past 12 months as compared to 79% of all online users

• Purchase more frequently, spend more money than all online buyers

• Will only decrease their online spending by one-third as much as average online buyers

Luxury Shoppers are a Select and Active Group of Online Buyers

Luxury Shoppers: 12% of UK Online Shoppers

Source: Source: JupiterResearch/ LinkShare Shopper Consumer Survey (8/08), n=1,000 (UK only); n=116 (Online consumers who make a point of buying luxury products and are happy to pay more for luxury brands, designer labels, UK only)


21%

35%

41%

37%

41%

59%

61%

68%

20%

42%

42%

39%

44%

63%

64%

66%

32%

35%

39%

48%

55%

59%

64%

66%

0% 20% 40% 60% 80% 100%

E-mail newsletters/Promotional e-mails



Visit shop(s) in person

Consumer review sites (e.g. Amazon, Reevoo)


Auction sites

Shop websites

Luxury Shoppers

Bargain Shoppers

All Online Shoppers

Bargain Shoppers Compare Shops, Products to Find Best Deal

Percentage of Each Segment

Question: Which of the following have you used when researching and purchasing products or services both online and offline? Please select all that applyNote: only select responses shown.

Source: JupiterResearch/ LinkShare Shopper Consumer Survey (8/08), n=914 (All online shoppers); n=351 (Bargain shoppers); n=108 (Luxury shoppers), UK only


21%

35%

41%

37%

41%

59%

61%

68%

20%

42%

42%

39%

44%

63%

64%

66%

32%

35%

39%

48%

55%

59%

64%

66%

0% 20% 40% 60% 80% 100%

E-mail newsletters/Promotional e-mails



Visit shop(s) in person

Consumer review sites (e.g. Amazon, Reevoo)


Auction sites

Shop websites

Luxury Shoppers

Bargain Shoppers

All OnlineShoppers

Luxury Shoppers Want to Hear About Others’ Experiences, Have Their Own

Percentage of Each Segment

Question: Which of the following have you used when researching and purchasing products or services both online and offline? Please select all that applyNote: only select responses shown.

Source: JupiterResearch/ LinkShare Shopper Consumer Survey (8/08), n=914 (All online shoppers); n=351 (Bargain shoppers); n=108 (Luxury shoppers), UK only


36%

38%

64%

42%

44%

61%

41%

33%

21%

36%

29%

26%

23%

29%

15%

22%

27%

13%

0% 20% 40% 60% 80% 100%

All Internet Users

Bargain Shoppers

Luxury Shoppers

All Internet Users

Bargain Shoppers

Luxury Shoppers


Luxury Shoppers Much More Loyal to Brands and Retailers

Percentage of Each SegmentQuestion: Please indicate to what extent each statement describes your attitudes. (Select one for each)

“When I find a brand I like, I tend to stick to it and rarely try

other brands”

“When I find a retailer I like, I tend

to stick to it and rarely try other

shops”

Source: JupiterResearch/ LinkShare Shopper Consumer Survey (8/08), n=1000 (All Internet users); n=375 (Bargain shoppers); n=116 (Luxury shoppers), UK only


18%

26%

24%

20%

23%

31%

45%

34%

24%

35%

36%

24%

32%

37%

56%

41%

36%

37%

40%

40%

41%

51%

52%

56%

0% 20% 40% 60% 80% 100%

Targeted email marketing messages based on my profile

A comparison shopping site

Offers from voucher code/coupon sites

Targeted email marketing messages based on pastpurchases

Offers from other affiliate sites to the seller

A promotional offer I saw when I searched for a product ona search engine

Regular promotions from the seller

Websites that offer special rewards such as cash back,loyalty schemes , etc.

Luxury Shoppers

Bargain Shoppers

All Online Buyers

Rewards, Promotions Can Drive Loyalty from All Shoppers if Properly Targeted

Question: How influential were each of the following in your decision to continue to purchase from an online seller from whom you have purchased in the past? (Select one for each) Note: only select responses shown.

Percentage of Online Buyers in Each Segment Who Say Each Tool is Influential

Source: JupiterResearch/ LinkShare Shopper Consumer Survey (8/08), n=788 (All online buyers); n=300 (Online buyers in the bargain shopper segment); n=104 (Online buyers in the luxury shopper segment), UK only


50%

5%

6%

5%

4%

5%

17%

26%

18%

51%

4%

6%

5%

5%

6%

18%

28%

15%

25%

12%

13%

15%

15%

21%

24%

30%

31%

0% 20% 40% 60% 80% 100%

I have not used my mobile phone for any of the above

Viewed an ad (e.g. SMS, banner ad)

Researched a product or service

Used SMS to get vouchers/coupons and discounts

Responded via a text message to a magazine or newspaperad

Used SMS to make a payment or donation

Sent SMS to a # found on product packaging to respond toan offer

Received a text message from my mobile carrier

Downloaded mobile content

Luxury Shoppers

Bargain Shoppers

All Internet Users

Percentage of Each SegmentQuestion: Which of the following have you done on or with your mobile phone in the past 12 months? (Select all that apply)Note: Only select responses shown

UK Consumers Are Increasingly Comfortable with Mobile Services



10%

14%

35%

25%

20%

20%

65%

67%

45%

0% 20% 40% 60% 80% 100%

All Internet Users

Bargain Shoppers

Luxury Shoppers


Question: Please indicate to what extent each statement describes your attitudes. (Select one for each) Percentage of Each Segment

One-Third of Luxury Shoppers Say They’re Ready for Mobile Commerce

“I would like to be able to shop and make purchases on my mobile phone”



Agenda





There Are Two Key Ways Customers Influence Each Others’ Purchases

Source: JupiterResearch (9/08)

!

!

!

!

!

!

?

?

?

?

?

?

New Influentials Classic InfluentialsPrimarily exert active influence by

proactively giving advicePrimarily exert passive influence byresponding to requests for advice


17%

19%

44%

26%

36%

47%

40%

35%

22%

39%

29%

25%

44%

47%

34%

35%

34%

27%

0% 20% 40% 60% 80% 100%

All Internet Users

Bargain Shoppers

Luxury Shoppers

All Internet Users

Bargain Shoppers

Luxury Shoppers


Luxury Shoppers Most Influential, but Others Can Be as Well

Percentage of Each SegmentQuestion: Please indicate to what extent each statement describes your attitudes. (Select one for each)

NewInfluence

I am the first person to tell people about a retail

site or new product

Classic Influence

I am the first person people come to for recommendations

about products to buy



27%

37%

37%

38%

42%

43%

60%

60%

0% 20% 40% 60% 80% 100%

Reviews Leverage Consumer Influence, Make Sites More Useful

Percentage of Online Shoppers Who Have Employed User Reviews

Question: How do you employ user-generated reviews while you research products online? (Select all that apply.)Source: JupiterResearch/Ipsos-Insight Retail Consumer Survey (4/06), n = 1,750 (online shoppers who have employed user-generated reviews, US only)

To get a sense of product reliability

To get a feeling for product quality

To decide on what product to buy

To narrow my options

To see how the product might fit me or my needs

To see if someone used the product same way I will

To get ideas

To get a sense of other, similar products


9%

10%

13%

14%

17%

31%

34%

41%

52%

63%

0% 20% 40% 60% 80% 100%

Sporting goods and equipment

Auto parts and car accessories

Tickets for entertainment

Fashion

Home furnishings

Toys, video games, and game consoles

Software

Books and videos (i.e., DVD, VHS)

Personal computers and computer peripherals

Consumer electronics, mobile phones, &accessories

Electronics and Entertainment Buyers Most Interested in Consumer Reviews

Percentage of Online Product Researchers Question: For what product categories do you find online consumer reviews most useful in making a purchase decision? Select up to five.

Source: JupiterResearch Consumer Survey (12/07), n = 821 (online product researchers, UK)


15%

15%

22%

49%

20%

46%

56%

0% 20% 40% 60% 80% 100%

Sites Must Build Depth and Context Into User Product Reviews

Percentage of Online Product Researchers Question: Which of the following features help you trust online consumer reviews? Select up to three.

Source: JupiterResearch Consumer Survey (12/07), n = 821 (online product researchers, UK)

Votes from other shoppers on the helpfulness of the review

Review offers a mix of positive and negative comments

Review is comprehensive and well written

Reviewers’ identification of where the product was purchased

Numerical rating with the review

Profile information that identifies reviewers

Review includes pros and cons about the product

Depth of reviews

Context of reviews


Agenda





Key Takeaways

• UK shoppers spend more online than their peers – but they’re worried about the economy

• Consumers turn to a range of online resources, especially those with lots of information

• Online marketers must understand their target audience; Luxury Shoppers are most valuable, but others can be valuable too if targeted correctly

• Mobile commerce is on the horizon• Most online shoppers use and trust consumer reviews;

they can help marketers leverage the power of consumer influence

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Any Questions?Any Questions?

Nate Elliott - Research Director, JupiterResearchNate Elliott - Research Director, JupiterResearch

Liane Dietrich – Managing Director, LinkShareLiane Dietrich – Managing Director, [email protected]@linkshare.com

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Jupiter Research - Liane Dietrich & Nate Elliot