1 Year Later: Gen Z College Students Weigh in Again on Personal Data Collection

Last February, I reported on some of the things my Gen Z students wrote in response to an assignment about who gains the most from the value exchange of convenience-for-personal-data. A year later, I gave the same assignment with the same supplemental readings to students, and the results were notably different.

Last February, I reported on some of the things my Gen Z students wrote in response to an assignment about who gains the most from the value exchange of convenience-for-personal-data between consumers and marketers.

A year later, I gave the same assignment with the same supplemental readings to a similar group of 40 students from Rutgers School of Business Camden, and the results were notably different.

Last year, I wrote, in “Gen Z College Students Weigh-in on Personal Data Collection — Privacy Advocates Should Worry”:

“Some Gen Zers don’t mind giving up their personal data in exchange for the convenience of targeted ads and discounts; others are uneasy, but all are resigned to the inevitability of it. However, the language they use to describe their acquiescence to data collection should be troubling to privacy advocates.”

This year’s students are far more concerned about the collection and sale of their personal data, but they are just as resigned to the inevitability of it. At the same time, some bask in the advantages it brings them and they’re sympathetic to the needs of marketers to provide a personalized data-driven experience to consumers.

The privacy concerns of the current group are more pronounced than the previous group.

“I used to believe that the consumer benefitted from the perks of technology. But more and more, I believe that marketers benefit more. Social media, search engines, TVs, refrigerators, Alexa or Google Home, Kinsa Thermostat are all ways that marketers can reach the consumer with things we use in our everyday lives. Some people don’t even realize they’re feeding right into it just by providing some information about yourself.”

Another wrote:

“Privacy has almost become a thing of the past. Places like our kitchens, bathrooms, and bedrooms have transformed from places behind closed doors to areas that are willingly shared with thousands of others on the receiving end of the data being collected for business purposes.”

Yet, like last year’s group, they are resigned to giving up personal data for access to information and services.

“Consumers are beginning to realize how often what they do, speak, and read are all being recorded. Personally, I’ve been more aware than ever of what is being tracked. I’m more aware of every ad I look at and every website I clicked on. This lifestyle is something that can’t be avoided.”

A common complaint involves the lengthy user agreements that consumers must accept to use web-based services and Internet-connected devices:

“This type of ultimatum often means that consumers regularly grant permission on their personal devices, rather than lose their access to a particular product.”

The proliferation of the Internet of Things may be behind much of the change in attitude since last year. (Caveat: I confess that I’ve warned about small sample sizes in the past [“Beware the Small Sample”]. I’m not drawing quantitative conclusions here, but rather reporting on a trend from qualitative research done with 40 students each year).

“Some people who purchase these tech-savvy devices often don’t understand the policies of the product. Understanding the policy and happily opting-in for your information to be used is one thing, but complying because you’re unsure is another. Did you know that brands can start tracking your information at the age of 13? How can a child understand the policy and process of how this works if a grown adult cannot?”

Another stated:

“The terms of agreement can exceed 10,000 words and not be accessible unless the consumer searches the web for it. Consumers don’t get the full story of how much the companies invade their personal lives. Even aspects like your political preference are being monitored and can aid in influencing your votes.”

One student is mounting a fierce resistance:

“I am one of those people that have a Post-it over the camera on my laptop. I shut off the location on my phone, even though I feel like it is being monitored without my consent a lot of the time. My smart TV is not connected to the Internet, and I rarely use streaming devices, such as Netflix or Hulu — if I do, it is usually on my computer. Devices like Google Home and Alexa completely freak me out and I do not believe I would ever purchase one for my home. Even some of the newer home security systems — like Xfinity Home or the video doorbell, Ring — introduce new ways for people to hack in and monitor your personal activity.”

Data leaks and potential misuse are another concern. One student worried about home assistant devices mishearing innocuous phrases as legitimate commands to record and send private conversations:

“Families could be going through a family matter and these devices are listening and recording what is being said. Next thing you know, it is being sent to your boss or colleagues who did not need to hear or know what is going in in the comfort of your home. Also, the refrigerators that know exactly what is inside can share this information with marketers who then share it with insurers who can possibly charge consumers more for unhealthy diets.”

But it’s not all gloom and worry. One student who recently booked a trip to Disney World was delighted by the collection and use of her personal data:

“Being able to get discounted magic bands and Disney exclusive accessories catered for my needs has been a huge bonus. This also benefits Disney, as they are getting my credentials and can alter their research based on my specific data. A part of the reason they are so successful is because of how personal they make the process feel. Even from the first search, they are there to help guide you and aid in your conversion to purchase. (They) get you to come back, because they have that initial information and the personal details of your preference.”

(BTW, how great is Disney? Offering discounts on those magic bands that they use to track your movement and purchases throughout the park. They not only get you to agree to it, they get you to pay for it and be grateful for the discount).

So the time may be right for privacy advocates to gain a foothold among the generation whose members have gone so willingly into the world of sharing personal data.

For Measurement-Oriented Marketers: The Best of ‘Here’s What Counts,’ 2019

Over the past year, “Here’s What Counts” opined on several topics. But the ones that gained the most traction involved Gen Z’s views on privacy, social media data collection, and 1:1 marketing.

Over the past year, “Here’s What Counts” opined on several topics. But the ones that gained the most traction involved Gen Z’s views on privacy, social media data collection, and 1:1 marketing.

The most popular post, “Have We Ruined 1:1 Marketing? How the Corner Grocer Became a Creepy Intruder,” was reposted on LinkedIn by Don Peppers, co-author of the book, “1:1 Marketing.”  The idea grew out of an assignment I gave my students at Rutgers School of Business in Camden, N.J. The students had to compare the 1996 version of database marketing, as described by Arthur Hughes in the introduction to his watershed book, “The Complete Database Marketer,” with the current state of online direct/database marketing. Hughes likened a marketing database to the Corner Grocer, who kept mental notes on his customers’ names, personal preferences, and family connections. Specifically, the students had to tell me how marketing technology innovations have enhanced database marketing since 1996.

The Takeaway:

While they concede that the targeted ads they experience are usually relevant, several of them noted that they don’t feel they have been marketed to as individuals; but rather, as a member of a group that was assigned to receive a specific digital advertisement by an algorithm. They felt that the idealized world of database marketing that Hughes described in 1996 was actually more personal than the advanced algorithmic targeting that delivers ads to their social media feeds.

It’s not surprising that Gen Zers expect a more personalized marketing experience. As I wrote in “Gen Z College Students Weigh-in on Personal Data Collection — Privacy Advocates Should Worry.”

Some Gen Zers don’t mind giving up their personal data in exchange for the convenience of targeted ads and discounts; others are uneasy, but all are resigned to the inevitability of it.

Student comments included:

Resignation

“I do not feel it is ethical for companies to distribute our activities to others. Despite my feelings on the situation, it will continue — so I must accept the reality of the situation.”

 Rationalization

“… I feel as though consumers gain the most from this value exchange. Marketers can do pretty much whatever they want with the information that they collect, but they do not really ‘gain’ from this exchange, until people actually purchase their products …  Even if this exchange allows marketers to play with people’s vulnerabilities, it is ultimately consumers’ choice on whether or not they want to buy something.”

 And, in response to a New York Times article about Smart TVs spying on people, one student expressed:

Disgust

“Marketers are gaining money and information through various means and have the ability to do so without risk, because consumers are not going to read [a] 6,000-word privacy policy just to be able to work a television.”

Lest we think that the younger generation is alone in eschewing concerns about privacy, take a look at “Getting Facebook Sober: What Marketers Should Know About Consumers’ Attitudes and Social Data.”

While people claim to be concerned about privacy, they’re not willing to pay for it.  A Survey Monkey poll done for the news site Axios earlier this month shows that three-fourths of people are willing to pay less than $1 per month in exchange for a company not tracking their data while using their product — 54% of them are not willing to pay anything.

As we charge into 2020, we need to carefully consider how the data we give up so willingly is used to manipulate not only our purchasing behavior, but our beliefs and values. In the post, “A Question for Marketers: Is it Social or Is it Media?” I recount Sasha Baron Cohen’s speech at the Anti-Defamation League (ADL) calling Facebook “the greatest propaganda machine in history.”

I sent The Guardian’s publication of Cohen’s speech to my children, two of whom have given up their Facebook accounts. My daughter replied, “Did you learn about this on Facebook? If so, irony is dead.”

Actually, I did. RIP, irony.

A Question for Marketers: Is It Social or Is It Media?

Sasha Baron Cohen took Facebook to task last week with his speech at the Anti-Defamation League (ADL) calling Facebook “the greatest propaganda machine in history.” Published in full by The Guardian, the speech was shared on the social media platform, to mixed reviews.

Facebook has 2.45 billion monthly users. Given that reach, it’s hard to classify Facebook as anything other than a mass media outlet. Compare Facebook’s reach to some of the most-viewed television broadcasts:

  • 600-650 million people worldwide watched the Apollo 11 moon landing live on TV (about 20% of the world’s population in 1969)
  • 750 million watched Prince Charles and Lady Diana marry in 1981
  • 2 billion-plus people watched the opening ceremony of the Olympics in Beijing (about one-third of the world’s population in 2008)

In 2017, Mark Zuckerberg told the first Facebook Community Summit, “Our full mission statement is: Give people the power to build community and bring the world closer together. That reflects that we can’t do this ourselves, but only by empowering people to build communities and bring people together.”

How’s that working out for us?

Sasha Baron Cohen took Facebook to task last week with his speech at the Anti-Defamation League (ADL) calling Facebook “the greatest propaganda machine in history.”  Published in full by The Guardian, the speech was shared on the social media platform, to mixed reviews.

Cohen states:
“Think about it. Facebook, YouTube and Google, Twitter and others — they reach billions of people. The algorithms these platforms depend on deliberately amplify the type of content that keeps users engaged — stories that appeal to our baser instincts and that trigger outrage and fear … On the Internet, everything can appear equally legitimate. Breitbart resembles the BBC. The fictitious Protocols of the Elders of Zion look as valid as an ADL report. And the rantings of a lunatic seem as credible as the findings of a Nobel prize winner. We have lost, it seems, a shared sense of the basic facts upon which democracy depends.”

My Facebook comment about the speech: “Why shouldn’t social media platforms be held to the same standards as other content publishers?”

Someone replied,

“But they’re not content publishers … they’re conduits for publishers. On FB, you and I and Joe and all kinds of media are the publishers. Think of the phone companies. They can’t be held responsible for what people say over their systems.”

My response:

“I guess that depends on whether you put the emphasis on social or media.”

And of course, most phone conversations are private (at least for now) while most Facebook posts are not.

I sent The Guardian’s publication of Cohen’s speech to my children, two of whom have given up their Facebook accounts. My daughter replied,

“Did you learn about this on Facebook? If so, irony is dead.”

Actually, I did. RIP Irony.

Have We Ruined 1:1 Marketing? How the Corner Grocer Became a Creepy Intruder

When Don Peppers and Martha Rogers wrote “The One to One Future: Building Relationships One Customer at a Time” in 1993, the Internet was a mere twinkle in Al Gore’s eye. But direct marketers felt excited about 1:1 marketing, and even vindicated.

When Don Peppers and Martha Rogers wrote “The One to One Future: Building Relationships One Customer at a Time” in 1993, the Internet was a mere twinkle in Al Gore’s eye. But direct marketers felt excited, and even vindicated, about the promise of a future where data-driven personalization would deliver the right message to the right customer at the right time.

But now that it’s here, are consumers happy with it?

Recently, I had the students in my direct marketing course at Rutgers School of Business read the introduction to “The Complete Database Marketer” by Arthur Hughes, which was published in 1996 when only 22% of people in the U.S. had Internet access. In the intro entitled “The Corner Grocer,” Hughes explains how database marketing can connect marketers with their customers with the same personal touch that the corner grocer had by knowing all of his customers’ names, family members, and usual purchases.

The students then had to compare the 1996 version of database marketing, as described by Hughes, with the current state of online direct/database marketing, where data collection has been enabled by e-commerce, social media, and search engine marketing.

  • What marketing innovations has technology enabled that didn’t exist before?
  • How has online marketing enhanced the concept of database marketing?
  • How have new marketing techniques and technologies changed consumer behavior?
  • How has social media affected direct/data-driven marketing for the marketer and the consumer?
  • What are some of the fundamental differences between the challenges and opportunities that today’s online marketers face vs. those that the 1996 database marketer faced?

Most of these digital natives were born after Hughes’s book was published. The students experience digital marketing every day, and they’ve seen it evolve over their lifetimes. While they concede that the targeted ads they experience are usually relevant, several of them noted that they don’t feel they have been marketed to as individuals; but rather, as a member of a group that was assigned to receive a specific digital advertisement by an algorithm. They felt that the idealized world of database marketing that Hughes described in 1996 was actually more personal than the advanced algorithmic targeting that delivers ads to their social media feeds. Hughes told the tale of Sally Warner and her relationship with the St. Paul’s Luggage Company that started with returning a warranty card and progressed with a series of direct mail and telemarketing. For example, knowing that Sally Warner had a college-bound son, St. Paul’s sent a letter suggesting luggage as a graduation gift. Hughes describes the concept of database marketing:

“Every contact with the customer will be an opportunity to collect more data about the customer. This data will be used to build knowledge about the customer. The knowledge will be used to drive strategy leading to practical, directly personal, long-term relationships, which produce sales. The sales, in turn, will yield more data which will start the process all over again.”

But Arthur couldn’t foresee the data collection capabilities of Google, Facebook, Instagram, and Amazon. Instead of the friendly corner grocer, database marketers have become a creepy intruder. How else could an ad for a product my wife had searched for at Amazon on her laptop generate an ad for the same product in my Instagram feed? (Alright, I will concede that we use the same Amazon Prime membership, but really?) We don’t have a smart speaker in the house, and I dread to think about how much creepier it could become if we did.

Recently, while visiting someone who has a Google Home assistant, I asked about the level of spying they experienced in exchange for the convenience of having voice-activated control over their household lights and appliances. They responded by asking, “Google, are you spying on us?”

The smart speaker replied, “I don’t know how to answer that question.”

Have we ruined 1:1 marketing?

Do you know how to answer that question? Tell me.

The Challenge of a (Really) Short-Form Direct Response Ad

It’s challenging for direct response marketers to fit all of the key elements of a good direct response ad into the space of a Facebook ad, Instagram ad, or Twitter post.

It’s challenging for direct response marketers to fit all of the key elements of a good direct response ad into the space of a Facebook ad, Instagram ad, or Twitter post.

Students in my direct marketing class at Rutgers were tasked with finding direct response advertisements in different media and detailing what made the ads direct — as opposed to general awareness advertising. Things like targeting, personalization, call-to-action, specific offer, etc.

Because their media consumption is almost exclusively online — social media, SMS, YouTube, and sometimes email, it’s not surprising that their examples showed the limitations of the media they consume.

The unlimited palette of the traditional direct mail kit, where repetition could be used to hammer home benefits and stimulate response, is all but extinct for this target audience. Even the traditional short-form, 120-second commercial has given way to shorter YouTube pre-roll ads that can be skipped after 5 seconds. (Make sure you get your main benefit and CTA out quickly.)

The examples students provided came mostly from their Instagram or email accounts, and many were limited to a simple illustration of the product, a brief description, and a “Shop Now” button. Although one student did provide a link to a classic DR spot for Flex Seal that made me laugh out loud (that’s long-form for lol). Over the course of two

direct response ad example
Credit: Chuck McLeester

minutes, Flex Seal was described as liquid rubber in a can, handyman in a can, and last but not least, the Hoover Dam in a can. There were several demonstrations, including one where the bottom of a small boat was replaced with a screen door coated with Flex Seal — no leaks, at all. This tried-and-true formula for DRTV sales doesn’t work in 280 characters; although, the ability to embed video into a tweet can overcome that limitation. The content of this short-form broadcast ad might make an interesting series of Instagram ads, but it would take four to five different episodes to include all of the content and demonstrations.

Reaching a young audience with direct response advertising is challenging, but not impossible. The best example of incorporating all of the essential elements of good direct response was provided by a female student from her Instagram feed. All of the elements are there: targeting, benefits, offer, and call-to-action — Girls Night. Delivered.

Shout out to Amazon Prime.

Rihanna and Amazon — Marketing Perfectly Together

Rihanna’s second Savage X Fenty lingerie show will be a highlight of New York Fashion Week, with its inclusive line-up of models representing all body types. Last year’s show was available to anyone on YouTube. But “this year’s Savage X Fenty Show will be available to stream exclusively on Amazon Prime Video.”

Rihanna’s second Savage X Fenty lingerie show will be a highlight of New York Fashion Week, with its inclusive line-up of models representing all body types.

Last year’s show was available to anyone on YouTube. But “this year’s Savage X Fenty Show will be available to stream exclusively on Amazon Prime Video in more than 200 countries and territories worldwide, beginning Friday, September 20,” according to Deadline.

So why limit access to the 100 million Amazon Prime members, instead of letting anyone view the show?

It’s a win for Rihanna, because those 100 million Prime members are excellent e-commerce prospects. Why not take advantage of their ability to shop the new collection and buy with a single click? And it’s a win for Amazon, which iis interested in making further forays into the fashion world as traditional department store retail sales wane.

Wired reports:

“Amazon isn’t exactly the most stylish place to shop for clothes. Most of its top-selling women’s fashion items are simple pieces: easy dresses, spandex workout gear, socks, and underwear — a lot of it from brands you’ve probably never heard of … Now, Amazon is experimenting to attract a new, more fashionable segment of consumers: social media influencers and the people who love to follow them.”

With 93 million Twitter followers (fourth highest), Rihanna certainly fits that bill.

What’s more, Rihanna can expect to benefit from Amazon’s targeting capabilities. Who’s purchased similar lingerie lines? Who’s purchased Rihanna make-up, perfume, clothing, and music in the past? Who are the big spenders? What else have they bought? When are they likely to buy?

Dazed writes:

“The Amazon Prime stream will include behind-the-scenes footage of the show and the making of the collection, allowing us a peak into Rihanna’s creation of an inclusive lingerie brand for all women.

“What can we expect from the lingerie brand’s second show? Last year, a diverse group of models hit the runway, while a heavily pregnant Slick Woods walked the catwalk in nothing but pasties and a bodysuit. No bombshell bras and mermaid hair here.”

Marketers, How Valid Is Your Test? Hint: It’s Not About the Sample Size

The validity of a test is not tied to the size of the sample itself, but rather to the number of responses that you get from that sample. Choose sample sizes based on your expected response rate, not from tradition, your gut or convenience.

A client I worked with years ago kept fastidious records of test results that involved offers, lists, and creative executions. At the outset of our relationship, the client shared the results of these direct mail campaigns and the corresponding decisions that were made based on those results. The usual response rates were in the 0.3 to 0.5% range, and the test sample sizes were always 25,000. If a particular test cell got 130 responses (0.52%), it was deemed to have beaten a test cell that received 110 responses (0.44%). Make sense? Intuitively, yes. Statistically, no.

In fact, those two cells are statistically equal. With a sample size of 25,000 a 0.5% response rate, your results can vary by as much as 14.7% at a 90% confidence level. That means that there was a 90% chance that the results from that test could have been as much 0.55% or as little as 0.43%, making our test cell results of 110 responses (0.44%) and 130 responses (0.52%) statistically equal. I had to gently encourage the client to consider retesting at larger sample sizes.

There are statistical formulas for calculating sample size, but a good rule of thumb to follow is that with 250 responses, you can be 90% confident that your results will vary no more than +10%. This rule of thumb is valid in any medium online or offline. For example, if you test 25,000 emails and you get a 1% response rate, that’s 250 responses. Similarly, if you buy 250,000 impressions for an online ad and you get a 0.1% response rate, you get 250 responses. That means you can be 90% confident that (all things held equal) you will get between 0.9% and 1.1% in the email rollout,  and between 0.009% and 0.01%, with a continuation of the same ad in the same media. (Older editions of Ed Nash’sDirect Marketing — Strategy, Planning, Execution contain charts that you can reference at different sample sizes and response rates).

A smaller number of responses will result in a reduced confidence level or increased variance. For example, with a test size of 10,000 emails and a 1% response rate (100 responses), your variance at a 90% confidence level would be 16%, rather than 10%. That means you can be 90% confident that you’ll get between 0.84% and 1.16% response rate  with all things being held equal. Any response within that range could have been the result of variation within the sample.

Marketers are not alone in using their gut rather than statistics to determine sample sizes. Nobel Laureate Daniel Kahneman confesses in his book “Thinking, Fast and Slow“:

“Like many research psychologists, I had routinely chosen samples that were too small and had often obtained results that made no sense … the odd results were actually artifacts of my research method. My mistake, was particularly embarrassing because I taught statistics and knew how to compute the sample size that would reduce the risk to an acceptable level. But I had never chosen a sample size by computation. Like my colleagues, I had trusted tradition and my intuition in planning my experiments and had never thought seriously about the issue.”

The most important takeaway here is that the validity of a test is not tied to the size of the sample itself, but rather to the number of responses that you get from that sample. Choose sample sizes based on your expected response rate, not from tradition, your gut or convenience.

A 4-year-old Girl Shows the Power of a Strong Brand

Recently, I was reminded about the power of a strong brand by my 4-year-old granddaughter who told me, “You know how I can tell when there’s a McDonald’s close by? There’s a sign with yellow M on a red background. That means there’s a McDonald’s near here.”

Recently, I was reminded about the power of a strong brand by my 4-year-old granddaughter who told me, “You know how I can tell when there’s a McDonald’s close by? There’s a sign with yellow M on a red background. That means there’s a McDonald’s near here.”

McDonald’s has certainly built the golden arches “M” brand over the course of many years; my earliest remembrance is from the early 1960s. But the fact that a 4-year-old girl learned the symbolism in a much shorter timeframe illustrates how powerful great branding can be.

When I recently Googled “direct marketing and branding,” I was surprised to see that there are a lot of search results positioning the two as separate marketing strategies. I thought that debate was put to rest years ago — you need both.

The Internet has turned everyone into a direct marketer, and those who have built strong brands are the big winners — think Amazon, 1-800-Flowers, Omaha Steaks, Zappos, etc. When I was with Roska Direct, our results showed over and again that when we did direct response marketing using the umbrella of a strong brand, we achieved better response and conversion rates than when we downplayed the brand in an attempt to juice response.

According to Statista, Google enjoyed a 90%-plus share of searches from 2010 through 2013, before it dipped into the high 80s, sneaking over 90 only in October of 2016 and 2018. So what’s Google doing about it? Running a national brand campaign on television, Here to Help, using The Beatles 1965 hit, “Help.”

Interestingly, if you try to find those branding ads by Googling “Google ad campaign,” you won’t. What you’ll find is Google in direct response mode, helping you construct your own online advertising campaign through Google.

Like I said, you need both.

Where Do You Start? Teaching Direct Marketing to College Students

What’s the best approach to engage college kids in understanding direct marketing? Principles first; metrics second? Or Metrics first; principles second?

What’s the best approach to engage college kids in understanding direct marketing? Principles first; metrics second? Or Metrics first; principles second?

I remember sitting in the parlor of a Catholic parish rectory in North Jersey while my wife was participating in a wedding rehearsal. The Mets game was on TV. The brother of a parish priest who was visiting from Ireland asked me to explain baseball. Explain baseball?!?! Where do you start?

Despite all of the professional speaking and training I’ve done in direct response marketing, the first time I taught a college course devoted entirely to it was last spring. I started with the fundamental concepts of media, offer, and creative. I had them write about each of these concepts from their own experience. We went over the various targeting opportunities marketers have online and offline. And at the end, we covered measurement and metrics.

At the end of the course, I asked the students to tell me what worked, what didn’t, and what should be changed. The most insightful comment was from a student who said:

“I wish you had covered all that measurement content at the beginning of the course. It made me realize why all that other stuff was important, and how it fit into the big picture.”

HELP!

Now, as I embark on teaching a course dedicated to Direct Response Marketing at Rutgers School of Business Camden, I’m looking for advice about how to sequence things.

Last year, when I bemoaned the lack of an appropriate up-to-date textbook for this discipline in this column, Dave Marold and Harvey  Markowitz stepped up and recommended the Fourth Edition of “Direct, Digital, and Data-Driven Marketing,” by Lisa Spiller. (Thanks for that Dave and Harvey; I’m using that book in the Fall).

What Do You Think?

Now I see the benefit of stressing measurement early. Even though I told the students every class that the coolest thing about direct marketing is that you can measure it, apparently the mechanical reality of measuring something like search engine keywords was not real for them. So:

  • Do I incorporate some form of measurement into every lesson?
  • Do I introduce a comprehensive measurement unit early in the course? (Spiller’s book does that early on, in Chapter 4).
  • Or, do I go full-on “math course” at the beginning, and thin a 40-student class down to 20 students after two weeks? (Just kidding).

Opinions welcome. (Actually, encouraged.)

Returns Are the Final Frontier for E-Commerce Dominance

E-commerce has had to overcome several barriers in its relatively short lifespan. (Well, relatively short for a Baby Boomer. But not so much for Millennials and Gen-Zers, who don’t remember a time when milk was delivered to your doorstep daily.)

E-commerce has had to overcome several barriers in its relatively short lifespan. (Well, relatively short for a Baby Boomer. But not so much for Millennials and Gen-Zers, who don’t remember a time when milk was delivered to your doorstep daily — but you couldn’t get almost everything else delivered for free in two days.)

First, there was online penetration. In 1999, only 44% of Americans had Internet access, either at home or at work.

Next, there was the fear of using your credit card online (65% in 1999). Most people got over that as they began to trust traditional retailers’ online sites and Amazon became a household word.

Shipping costs are too high. Enter Amazon Prime and FREE SHIPPING on orders over $30 from other retailers.

“I want to see it and feel it” and “I need it today” resulted in shopping online and buying offline, a common practice for several product categories even today, including high-end electronics and clothing.

Returns are a hassle and/or expensive. Yep! About 33% of global shoppers cited online return policies and processes as deterrents. (Chain Store Age, October 2015)

If there’s one thing consumers hate more than paying for shipping, it’s paying for return shipping. As counterproductive as it seems, I go out of my way to take Amazon returns to a return center to avoid paying $7 for return shipping. Returning an online purchase to a retail location is another option that consumers will choose — one that is probably more time-intensive, with a higher negative ROI. I don’t have firsthand knowledge, but I’m sure most online retailers have tested a higher price point with free shipping vs. lower price point plus shipping. Chances are, free shipping wins.

Zappos offers free returns so you can try different sizes and colors of shoes on in the comfort of your own home. However, free returns are met with the same skepticism regarding price as free shipping.

E-commerce continues to grow at a decent pace.

“Early analysis from Internet Retailer shows online retail sales in the U.S. crossed $517 billion in 2018, a 15% jump, compared with 2017. The growth in retail sales in physical stores reached 3.7% last year. This means that e-commerce now accounts for 14.3% of total retail sales, when factoring out the sale of items not normally purchased online, such as fuel, automobiles, and sales in restaurants. And it also means that in only a decade, the web has more than doubled its share of retail sales. Ten short years ago, e-commerce was at 5.1% of total retail purchases.”

While an almost threefold growth in 10 years is impressive, I think that making the return process more satisfying for consumers can accelerate the growth of e-commerce. Changing the consumer mindset about return costs may be the answer.  In his book, “Misbehaving: The Making of Behavioral Economics,” Richard Thaler notes that members view their Costco and Amazon Prime annual fees as investments and make no attempt to allocate those costs over the various purchases they make during the year.

Is there an opportunity for an unlimited free returns membership add-on from Amazon or another retailer? I know people who are chronic returners at brick-and-mortar stores who would welcome it. Pricing it certainly would be tricky. What do you think?