At the simplest level, we’ve always known that consumers tend to go through a multistage journey as they make purchasing decisions. Yet most companies still concentrate marketing resources on only two stages: brand marketing up front to woo consumers when they first consider products, and promotions at the final point of sale to sway them as they are about to make a purchase.
Digital technology is changing all that. Consumers who used to seek out family and friends for word-of-mouth product recommendations now read online reviews, compare features and prices on Web sites, and discuss options via social-networking sites. This information flow not only empowers consumers but also allows marketing departments to be part of the conversation consumers have as they actively learn about product categories and evaluate choices. In fact, both business-to-consumer (B2C) and business-to-business (B2B) purchasers increasingly want marketers to help them make smart decisions. They just don’t want to feel subjected to the hard sell—they expect marketers to engage them, not dictate to them.
Moving from a one-way, company-driven sales mentality to a two-way relationship with consumers requires core changes in the way marketers do business. While some of them have adjusted effectively, most simply tried everything that came to mind, because they weren’t sure what would work. Companies have explored digital-marketing vehicles such as video ads, sponsored content, and online promotions. New forms of targeted online ad delivery have emerged. Web sites have been overhauled, and microsites for specific products or promotions have multiplied. Companies are buying thousands of search terms across their lines of business, and new agencies keep popping up to serve marketers’ increasingly keen desire for innovative content, user tools, or social experimentation. While these initiatives usually make sense, their implementation often doesn’t: most companies merely add them to their other operations and thus stretch their organizations financially and operationally. According to McKinsey, companies must thoughtfully integrate such initiatives by focusing on four core sources of value.
Orchestrate an integrated consumer experience
Whether by receiving marketing e-mails, searching for products online, or using mobile devices to find retail coupons, customers today continually interact with brands as they move closer to making purchasing decisions. Yet completely different parts of an organization manage most such contacts. It’s not easy to coordinate content across the entire consumer experience. When done right, television commercials should at the very least inspire keywords for consumers to search. Great search positioning should offer easy-to-find Web links to specific offers being promoted in other media. Links should go deep into specific places to help consumers learn about and buy products. Retailer sites should show the same product with the same image, rich descriptions, and inventory availability. And all of these images and messages should be consistent. Similar rigor is required to ensure that marketing investments are proportional to the influence they may have on a prospective customer’s purchasing decision.
Inspire customers to help you stretch your marketing budget
Traditional marketers spend about 60 percent of their budgets on “working media” (or paid placement), 20 percent on creating content, and the balance on employees and agencies. Digital channels, with their social nature, reverse these economics, focusing on a smaller core of engaged people who can spread positive impressions, or simply share information, with a broader audience. Active digital marketers tend to devote about 30 percent of their marketing budgets to paid media and 50 percent to content. Customers do more of the heavy lifting as they decide what to look at, play with content, and forward it to their online communities. We have found that by making the right investments, active digital marketers can spend significantly less on marketing as a percentage of sales, with little to no deterioration in performance.
Allowing consumers to make brands their own inevitably raises concerns among companies that are fearful of losing control over brands. The key is to strike a balance between retaining control and creating opportunities for consumers to embrace your content.
Adopt a publisher’s discipline to curb costs
Supporting the consumer’s decision journey requires a vast and growing range of content—well beyond advertisements. As companies chase digital opportunities, most have slowly but steadily begun publishing everything from static content, such as product descriptions, to games and other multimedia. Marketers are syndicating content and applications to flow across the sites and mobile platforms of other organizations and people. Content is increasingly being pulled on demand by consumers (who, for example, subscribe to alerts or become “fans” on Facebook) or is tailored to their preferences (determined through their past behavior), the context of an interaction, or the time of day. Most companies have now essentially become publishers.
Use intelligence wisely to drive performance
When a prospective customer actively evaluates product options, the right message is needed immediately, in the right location. When online conversations start to trash your brand, no response can be fast enough. When you need to optimize your search and other media spending on ever-faster cycles—eventually daily—there’s no time to waste. Marketers need the ability to assess and utilize intelligence in real time to drive performance by using it. Dell, for example, has a full-time team that monitors its IdeaStorm discussion boards and rapidly responds to posts. Packaged-goods companies are starting to manage thousands of search terms on a daily basis, not only optimizing what they spend but also looking for the keywords customers are using in association with their brands. Marketers must prioritize what to measure, as well as assign a cross-functional team to analyze the data generated.
Then they must have clear processes to act upon insights, track results, and follow up with action.
Taken together, these changes force companies to step back from tactical, day-to-day execution and take a more strategic view of where to invest and make changes. Companies often find that they must enhance their technology infrastructure, expand analytic skills, adjust organizational structures across business unit boundaries, and build processes that impose a new operational discipline. Tough decisions need to be made, such as who takes the lead in developing a new-product launch plan; how budgets for content creation are reallocated across global, regional, and local groups; and how to rebalance the roles of traditional media and digital agencies. Technology and marketing functions need to work together more closely, with clear service-level agreements from IT to maintain adequate support for much more information-intensive marketing operations.
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Source: McKinsey Quarterly 3/10