Payments Innovation

The Case For Contextual Commerce

Before there was on demand, there was time shifting.

In 1985, cable companies introduced consumers to the idea that they could use their VCRs to record movies airing on movie channels late at night when most people weren’t watching TV so they could watch them later.

The pitch was convenience: no more getting in the car and schlepping to the video store to rent a VHS to watch a popular movie.

The introduction of the DVR in 1999 made the notion of on-demand television programming easier, more accessible and more robust.

Consumers were no longer bound to the content tied to a network programming schedule or the selection offered by a particular TV or movie channel. DVRs gave consumers free rein to record any show broadcast on any channel at its usual time to watch later.

This innovation ushered in a sea change for consumers, content producers and content distributors.

By 2012, only 64 percent of consumers reported watching primetime television “live” — down from 83 percent just four years earlier. Millennials loved it even more: Only 57 percent reported watching primetime TV live that year, opting instead to watch prerecorded and/or streaming video or to play video games.

Time shifting was a win for content producers too, who no longer had to bank, literally, on having enough eyeballs tuned in at 8:00pm to watch their show. Not only did this on-demand programming option add a measure of convenience for the consumer, it also expanded the potential audience for shows and, ironically, the time people spent watching television by three hours a week.

Since then, mobile devices connected to the internet have further piqued the consumer’s penchant for using technology to consume television and movie programming according to a schedule that fits into their busy lives, instead of one made by broadcast executives.

In 2017, Pew reported that more than a quarter (28 percent) of all U.S. adults said they mostly get television and movie content from streaming services — Netflix and Hulu — and consume it mostly using mobile devices. That’s nearly two-thirds (61 percent) for 18- to 29-year-olds and more than a third (37 percent) for those aged 30 to 49.

 

Marching to the Beat of “Consumer Time”

In the three-plus decades since consumers were first introduced to a technology that gave them the power to control when and how they access content, innovators have been inspired to use connected devices, new technologies, software and data to power a world now driven by delivering convenience to the consumer.

A consumer who wants a ride now can open Uber or Lyft and get one.

A consumer who wants to read a book now can open Amazon and get it in one click on their Kindle, or listen to it via Audible books.

A consumer who wants dinner delivered now can open DoorDash, pick a favorite restaurant and have the food delivered to their home 30 minutes later.

A consumer who wants a new outfit for a hot date tomorrow night can use Nordstrom’s app or mobile site now, pick it out, put it on reserve, go to the store the next day, try it on and walk out wearing it.

Companies understand that having a meaningful and long-standing relationship with consumers means running their business on “consumer time.”

Today that means being anywhere on the web the consumer might be when they’re looking to buy something a brand has to sell and getting it to the consumer right now, or at least pretty soon.

It’s why the next evolution of “on demand” will see innovators enable commerce at a time that’s convenient to the consumer, inside new places that are too.

The buzzword for this wave of commerce innovation is contextual commerce.

 

From Time Shifting to Place Shifting

Introducing new commerce opportunities to consumers inside the ecosystems they’re visiting for other reasons is valuable because those contextual prompts can deliver new, often incremental, sales.

Booking a dinner reservation on Airbnb at a restaurant a consumer might never have found near the house they just rented on that site.

Buying a lookalike of the pink dress Meghan Markle wore to Prince Charles’ birthday party after reading a story about it in People magazine from a brand that was unfamiliar to them.

Buying a pair of shoes from a store that a friend shared on Facebook that they’d seen but never tried.

Booking a massage at a nearby spa with great reviews discovered on Google Maps after searching for a place “nearby” with availability.

Whether purchases inside an ecosystem are prompted by the recommendation of a friend or a fashion influencer, or via a vertical aggregator they trust and may have used before, consumers who make purchases this way value it for its convenience, for being able to buy something without leaving a site to do it and for the ability to buy what they want while things are still fresh in their minds.

And because they trust it — and like the experience they have when they make purchases that way.

These are among the findings we uncovered when we asked 2,000 consumers to tell us about their experiences over the last 12 months when making purchases outside the more conventional commerce channels, like retailer sites or traditional commerce marketplaces like Amazon and eBay.

This work, done in collaboration with Braintree, gave us new insight into why and where consumers made such purchases, and what kept them buying — or not.

 

Shopping in Context Is How Consumers Like to Buy

We were surprised to find that in the overall evolution of commerce-enabling ecosystems that weren’t initially set up to power commerce so many consumers have already used them. Fifty-eight (58) percent of consumers said they had, and 84 percent of them were so satisfied they said they’d do it again.

We also discovered that there were five contextual commerce consumer personas, defined largely by how much they spent and how often they shopped this way:

One and Done: the 9.4 percent of consumers who made a single contextual purchase but don’t plan to make any more. They’re aged 40 to 45, employed, with annual incomes averaging $53,000.

Regulars: the 25.4 percent of consumers who were about the same age as the One and Done consumers but who earned $66,000 annually on average. This group made between one and five contextual purchases over a 12-month period.

Evolving: the 11 percent of consumers who were younger (25–34), earned upwards of $100,000 a year and made between six and 10 such purchases a year, spending more than $50 each time they shopped that way over a 12-month period.

Committed: the 12.4 percent of consumers who also earned at least $100,000, who made between 10 and 12 purchases a year and spent more than $50 each time they did.

Observers: the 41.8 percent of mostly older consumers who’ve yet to give it a try.

Even more surprising was how diverse those contextual commerce experiences were: Only a quarter of those consumers said they made such a purchase inside the social media platforms like Facebook or Instagram that have become almost synonymous with this concept.

That’s not surprising.

Facebook, hands down, is the way in which most consumers have experienced such a purchase — with more than one-third (37.5 percent) of consumers saying they’ve bought something from their Facebook News Feed. Facebook, and Instagram, is clearly the gateway, if you will, for many of the consumer’s contextual commerce experiences.

But that’s not where the richest contextual commerce vein is to be tapped.

That belongs to the vertical aggregators and ecosystems like Houzz, Yelp, SkyScanner, Vivid Seats, blogs, Spotify and many other ecosystems that help consumers both discover and purchase items when they’re already there. That also often leads to more expensive purchases — a hotel room for a week, two front row concert tickets, dinner for two, a new kitchen table and chairs, band and concert memorabilia, etc.

As consumers reported an increase in the frequency of their contextual commerce experiences, the percent of those purchases done via Facebook decreased as the use of these aggregator ecosystems became more relevant.

Committed users averaged 15.6 purchases a year, spending $56 each time they did, with only 9 percent of those users saying they made a purchase via Facebook one time and the remaining on other contextual platforms.

Evolving users averaged seven purchases, spending $53 each time they did, with only 17 percent of those users saying they made a purchase on Facebook one time, with the remaining on other contextual platforms.

The One and Done users reported spending an average of $43 on that first visit, with 34 percent of those users reporting they made one purchase via Facebook.

This suggests that before there is commerce to be had in these ecosystems, there first needs to be the right context.

Facebook may be the place where billions of consumers still spend a lot of their time every day, but it’s not — yet — the place consumers use to find and buy things on a regular basis.

 

Why Context Matters

Commerce in context is a new commerce channel for brands and payments players because it offers consumers much more than simply making a purchase online.

Commerce enabling new paths to purchase is the next evolution of commerce — one that satisfies another requirement of today’s on-demand consumers: finding something they want to buy fast and free of friction while they’re doing something else.

It’s perhaps one of the reasons why Reserve with Google reports getting traction and the small businesses that are using it say they are getting thousands of new customers to book reservations since they’ve signed on. Thirty percent of mobile searches reference location, and more than a quarter of the 76 percent of all searches for “something nearby” result in a sale within a day of the search. Reserve with Google is helping those businesses turn that context into commerce.

And why Houzz, with its 40 million-plus active monthly users, has a market valuation of $4 billion-plus — equal to Yelp’s but with half as many active monthly users. Houzz is helping consumers find home furnishings and locate suppliers in the context of a home decorating or remodeling project — and turning that context into commerce.

The demand for commerce to happen outside the more conventional commerce channels consumers may already use but inside an ecosystem they know and trust is driven by convenience and the chance to discover new products or services they hadn’t specifically set out to buy. Turning those contextual discoveries into actionable commerce opportunities gives brands a new way to capture a sale along the consumer’s very dynamic, and often unpredictable, path to purchase.

Context is what makes these commerce opportunities powerful and important for brands and the ecosystems powering the commerce opportunities for them. Connected devices help everyone connect those dots.

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