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06 Jan
2015

Karen

Senior Associate Consultant
 

This post originally appeared on The Financial Brand

 

According to pymnts.com:

“Two years ago showrooming was something of a boogey-man for brick-and-mortar retailers. But shopping has changed since 2014, and while showrooming didn’t go away, it’s changed its form. Consumers are getting savier, and are now increasingly likely to browse for items online for price, and actually make the purchase in the store. The practice is called reverse showrooming, or webrooming, and some have been calling it the brick-and-mortar retailers’ secret weapon in 2014.”

My take: Wait, hold on…I’m still laughing too hard at this ridiculousness to write. OK, there, that’s better. Slapping a new word on an old behavior does not make it something new.

 

***

Let me ask you something: How do you think Google got to be worth a gazillion dollars? In large part, it’s because of one word: SEARCH. People discovered that finding stuff on the Internet was a lot easier if they used a search engine than if they…oh, I don’t know…tried typing out different URLs to see what worked and what didn’t.

Of the many things they searched for was…maybe you should sit down for this in case it comes as a shock…products they intended to purchase. People wanted information about products to help them make their decisions. One of the pieces of information they wanted was price.

I shouldn’t have to explain this, but apparently there are people out there (not readers of this blog, of course) who think webrooming is something new.

 

***

Although it doesn’t actually prove the prevalence of webrooming–because it didn’t capture channel behavior–a recent study from Insurance.com quantifies the amount of product research consumers do for a range of products/services, and the savings they achieve from their research. Or from their “webrooming” if you were born yesterday.

According to the study, consumers spend, on average, 10 minutes when shopping for car insurance. I imagine that number is the result of the half of people who took 15 minutes to shop at Geico.com and the half of people who took 7.5 minutes shopping at eSurance.com. These were 10 valuable minutes, however, as the average savings produced by these 10 minutes totaled $540, or $54 per minute.

In contrast, consumers spent an average of 97 minutes shopping for cellphone plans, which resulted in savings of $179 (or just $1.86 per minutes. And when shopping for cable TV or other programming, consumers spent 144 minutes, and saved $248.

My take: It’s not very surprising that an insurance shopping site would find that shopping around for insurance would produce the highest savings per minute. But some of the findings regarding the amount of time consumers spend researching by product area are interesting–if they’re reliable, that is. The savings part of the equation is a bit suspect, in my opinion.

 

***

It’s a fairly straightforward process to calculate the annual savings on an annual car insurance policy. You paid $500 last year. You found a new policy for $450. You saved $50.

But how did consumers determine that they saved $1,054 when shopping for a new car? Is that $1,054 saved on the sticker price of the car? People aren’t that stupid, are they?

And how did people figure out that they saved $119 per year by shopping around for gas? It’s entirely possible that I’m the only idiot on the planet who can’t tell you how much I spend on gas in a year. But even if I did know, I’m not sure how I’d figure out how much I saved by shopping around. And how did consumers determine that they 5 and a half hours per year shopping around for gas? And why does “waiting time” figure into this equation?

 

 ***

What I find more interesting in the study is consumers’ estimates of the time they say they’re willing to spend to find a better price.

Apparently, consumers are willing to spend  63 minutes to find better car insurance rates.

Let’s do a little math here (just a little, because I know how it much it hurts for some of you to do this). According to Insurance.com, the average consumer who researches car insurance saves $54 for each of the 10 minutes they shop around. But consumers are willing to spend another 53 minutes to find better rates. That means consumers are leaving more than $2,800 on the table (53 times 54 equals 2862, in case you were wondering).

In other words–according to Insurance.com’s math–if consumers spent the full amount of time they were willing to invest in researching rates, they could save more than the cost of the policy.

 

 ***

The study also found that, in order to find better prices, consumers were willing to spend the following amount of time (in minutes) researching other product categories:

68 Airfare
68 Laptops
53 Hotel rooms
41 Clothing
34 Prescription drugs
17 Beer/alcohol

Unfortunately (for my area of focus), the study didn’t ask about checking accounts or credit cards. I really don’t know what consumers would have said. One part of me says they’d say they were willing to spend closer to an hour, and another part of me says that number would’ve come out closer to the time they’re willing to spend researching beer/alcohol prices.

I’m also torn on how much time consumers would say they actually spent researching their checking account or credit card decisions. 

 

Source:http://goo.gl/AMjv0Q

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