CMO EXCLUSIVES | March 18, 2013
In one of my newfound pastimes as an academic, I had an illuminating discussion with the chair of a department I was working with. I showed him a draft course outline and proudly pointed to the final section, boldly entitled “Digital Marketing.”
But I was taken aback by his reaction–a frown followed by an explanation. “Digital,” he correctly asserted, “shouldn’t be treated as a separate topic. Rather, the exciting story is about how it interacts with all of the other things that are already there.”
The Digital Revolution is everywhere, and it’s the hottest topic of the day. Cloud computing, big data, the dramatic shift to mobile, and other related themes dominate the headlines of the business press. But let’s not mistake the means for the end. “Going digital” is not a desired goal for its own sake–rather, rebuilding infrastructure and business processes to include new technologies makes sense when the result is growth in Customer Lifetime Value (CLTV–which I wrote about last month).
The good news is that it does. Increasingly, companies are finding that most digital capabilities woven into existing activities and processes are resulting in tremendously promising increases in financial impact. The new combined with the old outperforms either alone.
Why Now?
The business world is changing at a remarkable rate. New capabilities and technologies–software-as-a service, social media, plummeting storage costs, soaring processing power, and the proliferation of devices and screens are all around us. At the same time, anyone who goes into an Apple Store on a weekday afternoon sees the tremendous broadening of acceptance and use. We may not all be digital natives, but most of the rest of us are digital immigrants. And as the Statue of Liberty attests, immigration made this country great.
But this explosion is taking place in stagnant economic conditions. The tide isn’t rising, and so growth will have to come from digitally driven increases in productivity due to:
- access to rapidly expanding numbers of prospects and customers through digital CRM and social;
- a newly feasible ability to link customer and product data together to understand (and deepen) entire customer relationships;
- exponentially lower up-front investment requirements due to software-as-a-service and other cloud-based business models; and
- step-function improvements in the ability to measure what happens, and refine accordingly. Perhaps the half is no longer wasted!
Naturally, these improvements also introduce risks, especially around social reputation management as well as exposure to negative peer reviews when customers are shopping. But all in all, it’s a bargain worth striking.
The Impact Is Across All The Elements Of Marketing
Let’s examine the enhancement to each marketing activities, in turn.
1. Customer insight: Understanding customer needs, and identifying new and better ways to meet those needs, is the heart of marketing, but this basic research is often under-resourced. Traditional customer research efforts can be expensive and often involve high fees to specialized research firms. Now, with the combination of robust CRM systems that make customers easy to reach remotely and online videoconferencing capabilities and software packages that make panel discussions and focus groups easy to structure and administer, time-consuming exercises become quick and inexpensive. Customers are eager to tell you what they need in hope of actually getting it.
2. Product development and launch: Cloud-based customer collaboration around product development is the real thing. Ongoing initiatives at universities such as MIT and Northwestern are steadily improving an organization’s ability to quickly obtain accurate customer input through online interactions, coupled with Web-based software supporting powerful techniques, such as conjoint analysis and ideation. Equally important, online-performance tracking enhances an innovator’s ability to support and assess distribution success when climbing the launch curve.
3. Brand management and communications: In many ways, this is the most obvious one. Digital enables direct metrics and broad, inexpensive distribution; social monitoring lets you understand what people are saying in real time. Digital nurture streams can be the organizing principle for content management and thought leadership development. And, of course, every company with a limited advertising budget daydreams about the 30-second video clip that goes viral. Tremendous investments by platform companies enabling creation, sharing, publishing, and storing of multimedia content means that state-of-the-art capabilities are within the reach of companies of all sizes. But traditional print, signage, and broadcast media still have impact as well, and understanding how digital fits and reinforces these other channels matters a great deal.
4. Customer relationship/experience management: Traditional CRM systems are in many ways the forefathers of the digital revolution in marketing, and a modern cloud-based CRM system typically sits at the center of any effective marketing program. Broad-based customer loyalty systems are also more workable in a digital environment–for example, the Transactional Net Promoter Score approach is a natural fit. Also, deeper engagement at many different points in the relationship/customer life cycle through many different channels is now possible, and increasingly possible to coordinate/integrate.
5. Financial metrics in the Customer Lifetime Value Framework: Digital capabilities greatly enhance marketing’s ability to improve performance against each of the three key components of CLTV. First, regular customer contact that becomes cost-effective in the digital context has a powerful impact on the churn rate. Second, assembling complete customer profiles across product sets allows marketers to target profitable areas in the customer base, thereby increasing margins overall. Finally, acquisition costs can be lowered by developing relationships with prospects by enrolling them in digital content nurture streams, which greatly increase their likelihood of choosing the company’s products when it is time to buy.
What It Takes To Move Forward
The longest journey begins with the first step, but a road map is always a good idea as well. Companies need to think in terms of systems of processes and infrastructure that are designed to increase CLTV. Probably the best first step is to select a flexible, cloud-based CRM solution as a platform that can grow with time. This will also help to ensure the approach remains centered on customers rather than products.
A good next step would be to select target customer segments to grow, understand segment needs, and develop/assemble offerings that will meet those needs (as confirmed by research). And then on to content: the right balance between informative and fun, with people and technology to develop bite-sized chunks in great enough quantity to support ongoing nurture streams. Next, a solid approach to measurement–first with interim analytics, but ultimately in financial terms–is essential to ongoing success.
A final, happy note: The digital revolution woven through all of traditional marketing is raising the value of and need for great people. And while companies need to strike the right balance between in-house skills and supportive ecosystem partners, the right economic choice will likely be to reduce spend on unmeasurable items in order to expand the in-house team.
It is a great time to be a marketer.
TPG Social Media