Based on the works of cognitive psychologists, marketers started to develop and adopt decision-making processes leading to a so-called conversion funnel. With every stage achieved, the conversion of consumers to customers becomes more likely. Sharing links to hierarchy-of-effects models such as AIDA (Kotler and Armstrong 2011), the most popular conversion funnel divides the customer journey into an awareness (upper funnel), a consideration (middle funnel) and a purchase stage (lower funnel) (Jansen and Schuster 2011).
Because each touchpoint along the customer journey affects conversion, companies need to be aware of the different stages within the decision-making process. Within the awareness phase, the consumer recognizes his need and explores options that could satisfy this need. In this stage, consumers expect objective information about the product/service to build a fundament for decision-making. In the consideration phase, the consumer evaluates and compares the different options. Responsive to more detailed information, he might turn to comparison sites. The final decision is made during the purchase phase when the consumer converts to a customer.
Because of the various customer journeys consumers encounter, decision-making processes may be clustered into low- and high-consideration decisions. Low-consideration decisions, e.g., buying Fast Moving Consumer Goods (FMCG), typically involve a short transaction cycle. Decisions are made easily and quickly without intense information retrieval. Marketers focus on creating awareness through social content and by including influencers. Products or services acquired in this low-consideration set are typically referred to as low-involvement goods. In contrast, high-involvement goods typically require a high-consideration decision, e.g., buying a car, with multiple decision-makers, extensive information research through a multitude of channels with many decision criteria involved. Hence, high-involvement goods require an effortful and long-term decision-making process. Statistics show that 69% of German consumers start researching three months before their potential car purchase. These consumers spend around ten hours in researching before visiting a retailer or dealer. Further, 60% of the respondents said they seek advice online. (Deloitte 2018). Overall, the extensive consideration phase provides opportunities for companies but also bears the risk of lowered influence once the consumer has reached the purchase phase and initiates contact with a company.
Promotional mix in marketing along the conversion funnel
With customer journeys evolving, companies need to adapt by changing their communication strategy and channels accordingly. Companies target potential customers through a mix of offline and online communication channels, the media mix. Previously, companies focused on outbound marketing known as pushing information. Now, they emphasize the importance of attracting consumers through inbound marketing known as pulling consumers. This approach uses content marketing and search engine marketing (SEM) to offer relevant content and attract attention. Even though, consumers still consult both consumer-initiated communication (CIC) and firm-initiated communication (FIC) through which companies initiate marketing interventions. A consumer evaluates each available channel according to its ability to guide him/her to the desired information in the most cost- and time-effective manner.
Achieving (or optimizing) advertising effectiveness requires an appropriate outcome variable, termed indicators of advertising effectiveness. These indicators often include return on investment (ROI), return on marketing investment (ROMI), cost per win, cost per lead, conversion rate, incremental sales or customer lifetime value. A channel with a higher indicator (or for cost: lower) should be given more budget, that is, more budget should be allocated to this channel. A growing body of literature has examined the relationship between investment in advertising and profit.
Online channels contribute to the achievement of increased measurement quality as compared to offline channels.
We incorporate a wide variety of online advertising channels (i.e., referral, paid email, paid search, display ads) and assesses their impact on conversion according to funnel stages. Even though the psychological component impacting consumer decision-making cannot be revealed, our research considers the influence of time, particularly carry-over effects (preceding advertising expenses). Finally, the methodology behind our study is needed to generalize the findings in different contexts.