Chatbots, artificial intelligence, and customer experience are just some of the trends that have been touted as the hot new things in eCommerce in recent years. The breathlessly hyped trends urge you to optimize your online store and adopt new technology in order to maximize your store’s full potential.
Now, enter contextual commerce. What if someone told you that all those apps we have on our phones could be condensed into one? That the different apps we use to update our Facebook, order our Ubers, and book hotels could all be rolled into one app, eliminating switching between apps and payment gateways? Or what if someone told you that we could simply press a button located in our houses that can automatically reorder certain groceries? These ‘what ifs’ are a current reality, known as contextual commerce.
This is big news for brands and customers alike. The general idea behind contextual commerce is threefold:
- The use of existing customer data reduces the amount of time between customer engagement and eventual purchase
- Products are taken to the user in their ‘natural environment’ (e.g. an app they are already using)
- Transforming single-use applications or technologies into multiple-use platforms to reduce friction during transactions.
In this article I delve into current examples of contextual commerce, and how this shift in retail is disrupting the relationship between brands and customers.
Context is everything
Let’s put a bit of context behind contextual commerce. As it’s a relatively new trend there is no exact definition of what contextual commerce is in terms of which medium of technology should be used or which brands are most suited for its use. But, as mentioned, contextual commerce at its most basic means taking your goods or services and putting them directly in front of customers precisely when they need them.
Citi’s Disruptive Innovations report defines contextual commerce as:“Giving a consumer what they want when they want it without requiring the consumer to take the initiative or expend much effort in any way.”
In terms of the technology powering contextual commerce, Citi believes the method of delivering contextual commerce should be defined by the end user:“Contextual commerce is the concept, or technology/platform that enables a consumer to interact and transact with their chosen merchant/brands in the consumer’s preferred context or medium. The context can be a social networking conversation, an exchange on a messaging platform, an online session, a chat or a (voice) call.”
Thus, contextual commerce presents a fork in the road for online customers: they can buy directly from a merchant’s website, or, they can browse, purchase, and order from other apps or websites they happen to be using at the time. Additionally, they can bypass apps and websites altogether with new technology.
Let’s take a look at a few examples.
Uber and Hilton Hotels
Uber and the chain of Hilton hotels partnered to create a frictionless customer experience by embedding the functionality to allow Hilton guests to not only order an Uber from directly within the Hilton HHonors app, but once in the Uber vehicle, guests can also check into their hotel room from the Uber app, receive a digital key, and avoid the hotel desk altogether.
The result is simple: guests spend less time switching between apps, waiting for a cab, and checking in, providing a seamless and rapid user experience.
Amazon’s Dash buttons are one of the most noteworthy examples of contextual commerce in action. Customers install small wi-fi linked buttons in their house which they can press when they need to reorder items they frequently buy, such as laundry detergent, pet food, and toilet paper. The buttons, which are brand specific, act as a visual prompt, placed in locations where customers utilize the products, e.g. a button on a laundry machine, or next to where they store their pet food.
Software such as this targets consumers in their home, where they know specifically when they run out of a certain product – targeting customer need at the very heart of the home.
Amazon’s Echo is a wireless speaker device which receives voice commands through its ‘Alexa’ voice control system, which then carries out certain tasks given to it by the owner. It can order food from a specific restaurant at a specific time, compile shopping lists and order the items, recite weather reports for upcoming trips, and more. Again, this technology allows the consumer to stay at home while carrying out tasks, not even requiring the user to open the lid of their laptop.
These types of technology not only eliminate a vital piece of the transactional journey for the customer – this being either the visit to the store or physically using technology to search for what they need – but it also reduces the amount of time needed to make purchase decisions between different brands.
How is contextual commerce disrupting the relationship between customers and brands?
As it stands, contextual commerce is limited to the behemoths in the eCommerce industry. However, the effects on traditional B2C relationships trickle down to smaller businesses, forcing smaller online retailers to consider how they are poised to react.
Below, I take a look at some of the ways that contextual commerce is disrupting relationship between the brand and the customer.
Reduction in cart abandonment
85% of consumers admit to abandoning a purchase online. Long checkout processes, confusing checkout flows, and forced logins that require passwords are just some of the issues that prevent customers from completing at checkout.
Given the reduction in customer touch points and paint points, contextual commerce is poised to reduce the amount of cart abandonment. Speaking of the reduction in purchase friction, Augustin Kennady, Media Relations Director for ShipMonk says,
“The clients we have who utilized contextual commerce have demonstrated a statistically significant uptick in orders for us to fulfill – on average they see a 22% uptick in sales volume from baseline growth over a three month implementation window. They attribute this to the removing of friction, which ostensibly negates the issue of cart abandonment”.
Increased competition with eCommerce giants
Small online retailers already feel the burn of competing with eCommerce giants; Amazon accounted for 53% of online sales growth in the US alone in 2016. Now, with Amazon taking its place as the juggernaut of both the online marketplace and contextual commerce, the inability to compete is as evident as ever.
Of the lost opportunities within search in particular, Dustin Montgomery, Digital Marketing Director for Shippers Supplies says,
“It can already be hard for small companies to compete with the likes of Amazon but contextual commerce will make it worse. We’re already seeing some of this struggle in the form of Amazon Echo. Not only are you cut out of a search on Google, but out of a search on Amazon, too.”
Furthermore, he believes that this type of technology can foster further brand loyalty to larger eCommerce juggernauts:
“All of this technology feeds into brand loyalty (and/or purchasing convincibility). It cuts out the search and goes straight into an almost effortless purchase. It is hard for small businesses to compete with effortless free shipping”.
Contextual commerce challenges traditional marketing strategies
As disruptive as contextual commerce is to the traditional online transaction process, the potential for it to disrupt the traditional forms of online marketing is compelling. Contextual commerce drives the customer directly to the product, rather than a website or app.
“We are moving more and more to one-app/one-site systems, and contextual commerce is the natural evolution of that progression. However, it does present challenges to our clients from a marketing perspective as the approach to marketing with contextual commerce deviates significantly from the strategies used to attract users to a particular website”, says Augustin Kennady.
He continues, “Regarding the reshaping of marketing strategy, there will be a slight pivot in ‘marketing spend’. With Adwords, for example, people are spending money and choosing carefully selected words to drive traffic towards their site. With contextual commerce, it’s not so much about ad spend — it’s about partnerships and sponsorships. The lines between sales, marketing, and business development are already blurred, and this adjustment in strategy only serves to blur those lines further”.
Will contextual commerce mean less or more brand dependency?
With the integration of apps within other apps and voice activated technology cutting out the visual search and visual choice that a traditional web browser search presents, it seems reasonable to assume that brand dependency will decrease. Unless customers have complete brand loyalty, contextual commerce presents the opportunity for them to not only save time and effort, but also to choose the most ‘convenient’ brand.
However, Gwen Schlefer of online marketplace Bonanza believes that contextual commerce will only serve to elevate consumer dependency on brands. She says,
“Contextual commerce sells a lifestyle rather than an item. By creating a shoppable experience in everyday media, consumers make buying choices based on the content they feel connected to. Brands that create relatable experiences for their audience are more likely to build loyalty amongst their customers. The more accessible brands make themselves, the more consumers will begin to view them a reliable source for goods”.
Additionally, with the success of Amazon Dash buttons, consumers can, without realizing, become more dependent on specific brands. Instead of browsing the type of pet food they want to purchase, they will become reliant on the same specific brand for every repurchase.
Chad Rubin, founder of Skubana, believes that contextual commerce will consolidate the customer and brand relationship. He says,
“I strongly believe that contextual commerce will be the link that keeps the consumer and the brand unified and connected. Where as Google Home and Amazon Echo are forecasted by some to dismantle the consumer-brand relationship and cut out the brand, contextual commerce via Facebook and Instagram will keep the brand in the picture. I also believe voice search will be adopted as a means of commerce for commodity products and brands with little connection to their customers, but that this will have little to no implication for curated, aspirational non-commodity brands”.
How will contextual commerce affect traditional eCommerce technology?
Brands have had to adapt their apps and websites in order to accommodate for contextual commerce, so far as integrating other brands inside their own technology. Should this trend see smaller businesses adopting similar strategies, eCommerce software and technology will be forced to adapt.
Jesse Ness, Marketing Manager at Ecwid, says that,
“eCommerce software will have to allow for such interactions by providing the technology of the buy buttons. But going further, eCommerce platforms will need to be able to offer a seamless omnichannel option for web, mobile web, native apps, and to connect with advertising platforms”.
Looking further ahead, Krista Fabregas, staff writer for Fit Small Business, believes that the technology that we see Amazon using will soon be utilized in the purchase journey. She says,
“Going forward, artificial intelligence, advanced speech recognition, and virtual reality technologies will further insert smooth, obstacle-free instant purchasing into all points of daily life. Voice purchasing via Amazon Alexa and Google Assistant are two examples of this technology already in action today”.
Reflecting on the pain points of the customer when it comes to checkout, Gwen Schlefer expands on the effect of contextual commerce on traditional eCommerce technologies:
“Traditional eCommerce could suffer as contextual commerce continues to grow into more platforms and devices. Marketplaces like Etsy and Bonanza offer listings with images and very rarely include video or other interactive experiences for the buyer. Additionally, one of the major benefits buyers experience with contextual commerce is the ease of checkout. eCommerce platforms that require buyers to enter a payment method for each purchase could see sales slow down if they are not able to create more direct processes for payment”.
How do you think contextual commerce will alter the dynamic between brands and customers?
Do you have any insights about how contextual commerce could further disrupt the relationship between brands and customers? Leave a comment below, or email me at firstname.lastname@example.org.
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