Social media calls for mindset reform

Diageo, Wells Fargo, Tesco change marketing strategies to gain digital customers

By The Boston Consulting Group

The Internet, social media, and mobile technologies have transformed how consumers interact with brands and how companies market their products and services. Besides having an effective strategy that integrates traditional and digital media, companies need to restructure their marketing organizations to fully capitalize on today’s opportunities. But too many companies are jumping onto the digital bandwagon without thinking through this critical step.

Success requires a fundamentally different mindset. Unlike traditional media, social media such as Facebook pages and Twitter “handles” are free. But they do require a commitment of resources: people, training, new-content creation, tracking, and follow-through. Just as important, these new platforms mean that for the first time, companies can easily engage with consumers directly, but the learning curve for doing this effectively can be steep.

To gain a better understanding of how marketing organizations are dealing with these profound changes, the Boston Consulting Group (BCG) recently surveyed marketing executives at more than 30 major corporations, approximately two-thirds of which were Fortune 500 multinationals.

Meeting new challenges

The research revealed industry-specific challenges and opportunities. For instance, consumer products companies, which rarely interacted directly with consumers in the past, now have new ways to test new products, distribute coupons, share product information and user reviews, and engage influential buyers with advocacy marketing.

But successfully integrating multiple brands and product lines under a single umbrella is hard to do well. One company that has successfully met this challenge is Diageo, a leading alcoholic-beverage business, whose well-known brands include Guinness, Crown Royal, and Jose Cuervo. Diageo launched an iPhone app, thebar.com, in 2010 to increase customer engagement. The app helps users find nearby bars and liquor stores, provides a wide range of drink recipes, and integrates with Facebook and other social media to allow sharing and reviews.

Thanks to digital platforms and mobile devices, banks can now provide financial services to their customers around the clock and do a better job of meeting their needs _ for instance, by delivering mortgage and payment information to potential homeowners at an open house. And the convenience of services such as online bill payment makes it harder for customers to switch from one bank to another.

Wells Fargo gives customers seamless access to its services across a full range of digital channels. Customers can track their budget and savings goals online, manage their accounts remotely using a mobile app, and receive ATM receipts by e-mail.

Retail companies must deal with the declining effectiveness of traditional print ads and circulars and the challenge of integrating sales channels so that customers can seamlessly shop in stores, online, or with their mobile devices. For creative retailers, digital platforms offer enormous opportunities. In Seoul, for instance, Tesco Home plus has set up “virtual” grocery shelves in subway stations so that time-stretched commuters can do their grocery shopping while waiting for their trains _ and Tesco can get more sales without building more stores. Shoppers use their smartphones to scan the QR, or quick response, codes of pictured items, and the items are delivered to their homes. The new platform helped increase the domestic online sales by 130 percent, making its website the country’s top e-commerce site.

Getting it right: digital best practices

Best-in-class companies are making major changes across the marketing organization to capitalize on the new digital opportunities. According to the survey respondents, marketers must address four critical areas: strategy, capabilities, organization design and culture.

Strategy:

Companies must consider all of their marketing activities when developing a digital strategy and an organization model. Best-in-class companies use digital media to achieve core business and marketing objectives, such as greater consumer awareness, deeper consumer engagement, a higher rate of conversion and sales, and greater customer satisfaction and usage. These objectives should shape companies’ use of digital platforms to engage with consumers.

Digital platforms provide an inexpensive, scalable way to gather real-time feedback and consumer insights. Best-in-class companies dedicate resources to analyzing, interpreting, and categorizing feedback by type and sentiment (such as positive, negative, or neutral), and they forward the results to the appropriate department, such as customer support, product development, or sales.

For each digital platform, leading companies define a role and assign metrics to measure impact. Because different platforms can yield very different results, companies must experiment to learn what works for their brands.

For instance, although Facebook can attract lots of fans, a company’s own website can deliver a richer experience and greater engagement. Best-in-class companies use social media to drive traffic to their own websites, where they can collect more data, conduct better analyses, and deepen the customer relationship.

Capabilities:

To fully capitalize on digital opportunities, marketing organizations must develop capabilities in the areas of consumer segmentation and training.

Best-practice companies segment consumers on the basis of how they use different digital platforms. This segmentation allows for more tailored communications with greater impact. For instance, U.K.-based Tesco serves two main types of consumers: those who shop in their grocery stores and those who buy online at tesco.com, although the two types certainly overlap.

For each group of shoppers, the company mines loyalty card data to create highly targeted offers that customers welcome and value. To reach its store shoppers, Tesco sends direct-mail coupons and vouchers ― and achieves an impressive redemption rate of 20 to 40 percent. To reach its online customers, Tesco sends targeted offers and electronic bar codes through e-mail and to mobile phones using location-based technologies. Sixty percent of the company’s customers say that they welcome those marketing e-mails.

Training is another critical capability. The digital landscape requires skills different from those traditional brand marketers currently have. To address this gap, most companies must build the expertise they need internally by developing junior employees through training programs, distributing digital primers, and learning from suppliers such as Facebook and Google.

Best-in-class companies also add digital capabilities to marketing job descriptions. But leading companies also recognize that they may have to make some hiring tradeoffs, as few people and agencies have all the needed skills. Most companies will need to hire both traditional and specialty agencies. But given the growing strategic importance of social media, outsourcing the management of these platforms may not be the best option in the long term. Bringing these capabilities in house should be the end goal, although most companies are not there yet.

Organization design

Best-in-class companies have a center of excellence for digital marketing, but they distribute expertise and the responsibilities for execution to business units or brand teams where possible. The center typically has five to ten full-time employees who set policy and strategy for all digital platforms, innovate and test different mixes of marketing activities, define analytics and metrics, ensure that tools and processes for sharing best practices are in place, consolidate media buys where possible, and provide regular guidance to teams.

In the center-of-excellence model, each business unit or brand typically has one or two full-time digital employees as well. Most marketing organizations move toward this model as their experience and investment in digital marketing increase.

The survey respondents agree that separate silos for e-commerce, brand, and store marketing can lead to a fragmented customer experience and internal disconnects. For instance, e-commerce marketers may not believe that their offers need to be integrated with brand campaigns, and store marketers may see the online business as a competitive channel instead of a complement to in-store sales.

Best-in-class companies address these issues by integrating campaigns through joint strategy and execution, consolidating online search-and-display purchases, managing all marketing through the chief marketing officer, aligning metrics and incentives to encourage cooperation, and looking for ways to integrate channels from a supply chain perspective. Each major marketing function needs to strike the right balance between roles and decision rights to increase speed and responsiveness.

Culture:

Cultural changes are critical for companies that truly commit to digital marketing _ and to integrating it into the fabric of their organizations. For best-in-class companies, this commitment starts at the top, with senior executives who lead by example and reward new ways of thinking and working.

Most best-practice companies have leaders who show their commitment by dedicating resources and sending a clear message that digital channels are important. For instance, JetBlue’s chief marketing officer posts Tweets regularly, and the company encourages bloggers to share their travel stories online. Cisco expects employees to make social media part of their jobs and provides links to training and resources.

CEOs at leading companies push their organizations forward by empowering employees to respond quickly to changes in the marketplace and by encouraging experimentation ― even setting aside a portion of the marketing budget for innovation efforts. Google’s Innovation Time Off encourages employees to spend 20 percent of their work time on projects that interest them. Gmail, Google News, and other products are results of this policy. By rewarding noble failures and setting up systems that capture learning, companies can create a culture in which taking calculated risks is applauded.

According to the BCG research, investments in digital marketing can deliver exceptional returns: greater brand equity, increased sales, better customer service, lower costs, product innovation, more loyalty and advocacy, and higher consumer awareness overall. This means rethinking traditional approaches to marketing. The specific challenges and opportunities vary from industry to industry, and companies must understand those differences as they craft their strategies and restructure their organizations.

This article was provided by The Boston Consulting Group.