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This week, we ask Dr Dave Chaffey, author of the new E-consultancy Best Practice Guide to Managing Digital Channels (published today) to run us through the results and insights arising from the report.
Dave is director of Marketing Insights and author of several best-selling internet marketing and e-commerce books. He was recognised in 2004 by the Chartered Institute of Marketing as one of 50 marketing gurus who “helped shape the future of marketing”.
Dave is also author of three other practical E-consultancy Best Practice Guides, including those on search engine optimisation and website design.
We have just published our second in-depth study into how companies organise their e-commerce and digital marketing operations. For the benefit of our newer readers, can you explain a little bit about why they should be reading the research?
The challenge of integrating digital channels into their business strategy and marketing activities is common to all established businesses.
Our research was inspired by the need to understand common challenges and, more importantly, share best practice on how to overcome these challenges.
We also wanted to provide marketing and e-commerce managers with a way to audit and benchmark their current use of the internet, and related digital channels like email and mobile, for marketing and sales.
As with the first Digital Channels report, we have provided a framework for auditing capability in different areas of digital marketing, such as strategy, customer acquisition, conversion and retention, plus supporting resources and IT infrastructure.
The main purpose of this report is that if you are responsible for digital marketing management, you can use the diagnostics and recommendations to audit your current capabilities, and create a plan to make better use of the internet to support business goals.
It’s been great to hear from users of the previous report — from companies as diverse as Dell, Thomas Cook, O2, the Otto Group and Norwich Union — about how they have used it in a range of situations from annual planning and budgeting, to reviewing the potential of a new company they were considering joining, or a new role they had just accepted!
In the latest report, we have included a spreadsheet-based tool, which enables companies to assess their capability for different digital marketing competences. It then gives a score, which highlights strengths and weaknesses, and suggests areas to focus on to improve results from internet channels.
Other highlights of the new report are:
- Guidance on approaches to developing digital strategy.
- Briefing on the main trends in digital marketing innovation and governance for senior managers and other colleagues.
- Suggested processes for reviewing alternative digital investments.
- Explanation of using agile project management methodologies to reduce the lead-time on new site features.
- Around 50 strategic recommendations and 50 practical tips to help focus improvements on your digital channels.
How did you design the research to ensure it was representative of best practice in managing digital channels?
We designed the research in two phases, to help share experiences and assess the challenges and solutions of managing online channels. In each, we sought to make the research representative by including a range of markets.
First, I interviewed the main person responsible for digital channels at a range of different organisations, from markets including retail, not-for-profit, travel financial services and energy.
It was a privilege to gain insights we could share from companies leading the digital revolution, including the head of site management, Dell EMEA Consumer; head of customer acquisition (all channels) at EDF Energy; director of e-commerce at Thomas Cook; head of new media at BreastCancerCare; the head of e-business at Citi UK; the head of e-commerce at Bupa; head of digital, Mercedes-Benz UK Limited; and the publishing and managing editor of FT.com.
In the second phase of the research, we surveyed a wider set of companies from across Europe, the US, and other countries, to assess which were the most common challenges and methods of managing digital channels. We also shared initial results and validated the research through a roundtable of other companies.
So a lot of people gave a lot of their time to help shape this report, so I’d like to thank everyone for their input.
Before we dig into the detail, were there any specific results that surprised you (in a good or bad way)?
The standout figure for me was the proportion of digital marketing specialists that are needed in today’s organisation. The research showed that there is one specialist digital marketer for every three marketing team members.
Granted, our sample is based on digitally-savvy companies for whom digital channels are key, but I hope this figure will prompt others to review whether they are resourcing digital channels adequately.
The study found that companies are now spending twice as much on e-commerce as they were back in 2005, which sounds like a good thing to me. Do you expect this to double again over the next three years?
That’s right, the investment in digital media channels like search engine marketing, online advertising and affiliate marketing averaged nearly one quarter (23%) of the total marketing communications budget in the companies surveyed.
Looking forward, I don’t think this will double, since the headline figure reflects an average of companies at different stages of the adoption.
Early adopters have already optimised their budgets, balancing online and offline channels, and have reached the point at which incremental investment in digital media doesn’t give incremental benefits. Instead they know through techniques such as econometric modelling that above-the-line brand investments have to remain substantial.
They also know there is a limit to quality digital inventory you can buy; whether that’s keywords to trigger sponsored links or Google AdWords, or placements on relevant media sites.
For later adopters, their spend could and probably should double over the next three years, particularly with the economic climate encouraging investments into more accountable, direct-response digital media like paid search.
What are the main challenges in managing an e-commerce team, and how have these changed since we last conducted this kind of research?
These are remarkably similar to the previous research. In both cases, I asked a totally open question about the main challenges faced. The most common answer can be paraphrased as “Education, Education, Education”. That includes education of both directors and senior managers, as well as marketing, product and brand management team members, about the best way to develop strategies for digital channels and implement digital campaigns.
To help in managing these challenges, in the report, we have a lot of new content on best practice processes to develop internet marketing strategies and budgets.
The other main challenges include structuring teams, developing new site functionality and, of course, finding experienced digital staff. This had become a much greater problem since the previous research, with 75% agreeing this was a problem. So if you are one of the many facing this challenge, at least you can see you are not alone and we have ideas on how to manage this.
Is there a perfect model for team structure?
Team structure varies a lot according to the size of the business, degree of outsourcing of digital activities and the type of business — is the main goal of the site online sales, lead generation or ad revenue?
That said, we identified common approaches, and the report has diagrams showing typical structures for a large organisation with a transactional site and smaller companies. Many of the participants shared their current team structures with us as part of the research, and we have defined over 20 key roles and responsibilities in areas of customer acquisition, conversion and retention.
One notable change in the latest research was the creation of dedicated resources to extract value from the web analytics, and other customer insights from purchase history and customer profiling. Many companies I talk to feel they are under-using the data available to them, and in the report we discuss approaches for making best use of this data.
Thankfully, we’re seeing that more companies are undertaking strategic planning for their e-commerce operations, but it’s a real worry that almost a quarter don’t bother. Why the myopia?
In the first report, we asked how many companies had a distinct digital channel plan, either as a separate document or integrated into a marketing or communications plan. We were shocked that as many as a third of participants had no detailed plan for e-marketing at organisation or product group level. In 2008, this figure had fallen, but over a fifth (22%) of companies still had no plan. That’s myopia!
We still hear the comment that digital channels are “just another channel to market”, so they don’t need a separate plan. But the digitally-savvy realise that online channels work best if the channel is treated differently, which means differential propositions, differential targeting and differential communications, but all integrated to be consistent with existing brand values. The digital plan is all about agreeing and defining a plan to create these differentials.
Is customer engagement becoming a bigger priority for people these days?
Customer engagement wasn’t mentioned as a specific challenge in this research, I think because the top challenges at front-of-mind are about internal communications and resourcing issues.
What I do find though, from discussions with email marketers, is that engaging customers through email has become more of a challenge.
Some of your readers may have followed the discussion on the number of 'emotionally unsubscribed' email readers, who don’t engage with email over a six month period - research by RedEye puts this at 60% of list members.
For me, this is a much bigger issue than the hype about engaging with customers through social networks. What has surprised me for some time now is how difficult companies have found it to move from a campaign mindset to a customer lifecycle mindset; where relevant, contextual, automated emails are sent out during the customer lifecycle according to their behaviour.
So this might be a welcome, abandoned shopping cart or reactivation strategy, rather than a single registration auto-response that is all that many companies do.
So, we asked a question about this and found that only 10% strongly agreed with the statement that: "We have a unified customer contact strategy for welcoming and developing new customers using automated email marketing (and where appropriate integrating direct mail and voice communications)." So there’s certainly room for improvement there.
How agile is the average e-commerce team these days? What are the key advantages of being able to move quickly, and what kind of set-up do you need in order to do this?
One of the biggest frustrations voiced by the interviewees was ‘time-to-market’ for new applications. A common problem was that even after the business case had been made, the digital channel was often put down the priority order in comparison with other operational legacy systems.
In the report, we explain approaches to achieve two different types of agility. First; strategic agility, which describes how companies review the many changes in the marketplace, as well as emerging digital technology and marketing innovation.
Second; agility in systems development, where some companies described how they had successfully adopted agile methodologies like Scrum and Extreme Programming. The recommendations we give include timeboxing, rigorous prioritisation and sufficient investment in QA.
Surprisingly, only around a quarter of respondents agreed with the statement that: "Our development processes are effective in implementing required new functionality rapidly (for example, using techniques such as agile development and Scrum)."
Where do you think most companies are progressing well in managing digital channels?
The survey showed that most companies are getting on top of unified tracking of online customer acquisition, with over half agreeing that: "We have a unified measurement system (e.g. Doubleclick Dart, Atlas tagging) indicating how online leads and sales are influenced across different digital media channels and customer touch points (e.g. paid search, display ads, aggregators, etc)."
They are also building a better picture of multi-channel interactions, with over two thirds agreeing that: "We understand the influence of the website in delivering sales through other channels (for example,through tracking web-specific phone numbers or in-store sales)."
What do you think the future digital organisation will look like?
A glimpse of the future is provided by the approaches that set the leading organisations apart, the level 5 organisations in our capability maturity model. I would characterise these organisations as having these attributes:
- An agile response to marketplace developments, both in a strategic sense and in developing new propositions.
- A customer-driven approach to performance improvement, with analysis of the many sources of digital customer insights feeding through into improvements in the quality of web services.
- Continuous testing and improvement of targeting, offer, messaging and creative through techniques like multivariate testing.
But perhaps, most significantly, the leaders are using web channels to identify and test emerging customer needs, and then implement them as personalised propositions which integrate across channels. The way that travel companies like Tui and Thomas Cook integrate video content, personalised emails, direct mail and in-store contacts are great examples of this.
For companies in this category, digital channels are no longer a silo, but part of the DNA of the organisation.
Want to find out more? Then download the Managing Digital Channels research (subscriber access) to see the detail and our recommendations on how you can improve your online capability.