FOREWORD

 

The Covid-19 pandemic is forcing manufacturers to confront some of the biggest challenges that they have faced in generations.  We are also seeing how Covid-19 is acting as an accelerant in the manufacturing sector – dramatically compressing timelines and adding urgency to the shift to digital. At Sitecore and Coveo, we see first-hand how the manufacturing leaders we work with are navigating these business challenges. Perhaps in no other arena are the stakes higher than in digital customer experience and commerce. In fact, the pandemic is acting as the Great Sorter – separating leading experience-centric manufacturing companies that have invested early in digital experience transformation from lagging manufacturers that have ignored these trends.

Manufacturers who could adapt their models and pivot rapidly into the D2C space saw tremendous gains, while others stumbled. Simply put, the pandemic has created winners and losers with digital experience emerging as a critical battleground.

How are these winners navigating such challenging times, transforming their businesses into experience-centric organisations that prioritise customer needs? How are they relying on data and agile systems to provide an accurate and real-time understanding of their customers?  How are they unlocking value by launching innovative initiatives such as personalised direct-to-consumer business models?

 

To answer these questions and more, we set out with Econsultancy to conduct a comprehensive study of 467 manufacturing executives across the UK and Europe.
OUR FINDINGS ARE CLEAR:

• Covid-19 has accelerated a re-evaluation of ways of doing business, with two-thirds (63%) of executives agreeing that their organisation’s business model has changed.
• It has also led to increasing usage of digital customer engagement channels, particularly in the case of websites/digital portals (rising 38 percentage points compared to 12 months ago).
• Data complexity prevents true personalisation; half of the respondents agreeing that they have ‘low’ (9%) to moderate (i.e. ‘some’, 41%) trust in the reliability of their organisation’s data to optimise the CX.
• Also, tellingly, only 4% claim their digital experience is dynamically tailored for each customer using machine learning where appropriate.
• The fundamental role of technology in the equation, with ‘implementing new technology platforms’ the top plan to overcome barriers to improving the digital experience (39%).

In short, successful manufacturers transform themselves by embracing digital experiences that connect with and delight customers

in bold new ways.  With the correct data, integrated experiences, and commerce technologies, even lagging manufacturers can rapidly innovate.

We hope this research can begin conversations within your teams as you chart the path to become an experience-centric manufacturer.  We look forward to seeing how we can help you navigate this journey and help you deliver human connections in a digital world.

EXECUTIVE SUMMARY

The manufacturing sector is not immune to the galloping pace of change propelled by advancements in digital technology and accelerated by Covid-19. There is a keen understanding of the transformation taking place, most notably an acknowledgement of the swift move from face-to-face to online experiences and the growing role of mobile technology. In the B2B sector, there is also increasing demand for experiences that replicate those delivered in B2C, including personalisation. This is putting greater pressure on organisations to support customers in re-engineering their ways of working.

Most companies are re-evaluating how they work to harness digital, not least to develop value-added services that complement their products and generate ongoing revenue. This is believed to be a long-term shift. At the same time, a standard short-term change is a foray into direct-to-consumer (D2C) selling, which has offered necessary breathing space in a time of uncertainty, yet which presents long-term challenges due to the complexity of the business model.

While most businesses surveyed have embraced digital channels, one challenge lies in confusion caused by the complexity and volume of data sources, which is breeding mistrust of data among many. Yet data is critical to achieving the personalisation adopted in B2C.

The inability to fully harness the power of data contributes to a lack of insight into the customer journey, undermines manufacturers’ ability to forge an emotional connection with customers and frustrates efforts to turn buyers into loyal advocates.

Another challenge, also fundamental to customer-centricity, is the lack of martech integration. Unification of these technologies is key to the personalisation increasingly expected within the B2B sector. Encouragingly, there is widespread recognition of the need to integrate new technologies – chiefly customer data platforms and ecommerce platforms – and implement new technologies.

At the same time, the Internet of Things (IoT) ranks highly as a means of supporting the pivot into value-added services. Correspondingly, there is an acknowledgement of the need to retrain existing employees and hire new talent.

This report reflects the manufacturing industry’s awareness of the many opportunities digital transformation presents and its appetite to evolve, yet clearly highlights the challenges still to be overcome.

ABOUT SITECORE

Sitecore is the global leader in digital experience management software that combines content management, commerce, and customer insights.

The Sitecore Experience Cloud™ empowers marketers to deliver personalized content in real time and at scale across every channel—before, during, and after a sale. More than 5,200 brands—including American Express, Carnival Cruise Lines, Kimberly-Clark, and L’Oréal—have trusted Sitecore to deliver the personalized interactions that delight audiences, build loyalty, and drive revenue.

For more information visit sitecore.com

ABOUT COVEO

Coveo is a market-leading AI-powered relevance platform. We aim to enable our customers to deliver the relevant experiences that we believe people expect in the new digital economy. Our SaaS-native, multi-tenant platform injects search, recommendations, and personalisation solutions into digital experiences.

We provide solutions for Ecommerce, service, website, and workplace applications. Our solutions are designed to provide tangible value to our customers by helping drive revenue growth, reduce customer support costs, increase customer satisfaction and website engagement, and improve employee proficiency and satisfaction.

For more information visit www.coveo.com

KEY FINDINGS

The importance of digital channel and D2C

The global pandemic hit the manufacturing sector particularly hard, exposing massive pain points within the global supply chain. While the industry has long been taking gradual steps to digitise its processes, Covid-19 has forced it to accelerate its digital transformation and adapt to a ‘new normal’.

A cross-sector survey into Industry 4.0 – broadly speaking, the integration of interconnectivity, automation, machine learning, and real-time data – by McKinsey in January 2021 revealed three outcomes following the advent of the pandemic (manufacturing being no exception):

1. A win for companies that had already scaled digital technologies

2. A reality check for those that were still scaling

3. A wake-up call for those that hadn’t started on their Industry 4.0 journeys. ^[1]

Covid-19 has also paved the way for manufacturing businesses to accelerate a shift to a D2C (direct to consumer) model. The Office of National Statistics (ONS) reported that the proportion of retail sales in the UK via online channels pre-Covid was 22%. This rose by 50% to 32% at the height of the national lockdown.^[2] Manufacturers who could adapt their models pivoted into the D2C space, with many now operating in conventional retail areas and online via branded ecommerce sites.

The resulting access to new customer data has presented new opportunities to manufacturers. The possibilities are evident, from empowering organisations to better personalise and customise physical products to diversifying into value-added services (an area of focus we discuss later in the report) and beyond.

Indeed, when analysing differences between ‘top performers’ and the ‘mainstream’ in our survey, the former are 19 percentage points more likely to describe their business as having ‘ecommerce for consumers’ (32% versus 13%).^[3]

Of course, digitisation has continued to play a more significant role for B2B audiences. For several years, much of the B2B purchase process has happened online before decision-makers even contacted a sales rep. This saw a tipping point in 2020, with the usage of suppliers’ mobile apps more than doubling in importance compared to the previous year, for example.^[4]

This shift is consistent with the trend towards a preference for self-service channels across every stage of the customer decision journey. Indeed, 50% of the executives surveyed for this report expect digital channels to drive 50% or more of their organisation’s sales in the next two years, up from 30% of the executives today. Therefore, it is paramount that organisations have the correct setup and technology to fully capitalise on growth opportunities.

Digital presents opportunities… And complexities

Positively, executives understand the changing competitive landscape. When asked about the most significant changes in the way they engage customers today, top responses include meeting ‘the rapid shift from in-person to digital experiences’, the ‘ever-increasing role of mobile devices’, and ‘raised expectations for more personalised B2C-like experiences’ (See Figure 1 below).

This customer mindset is crucial.

Manufacturers need to keep up with expectations set by the rich digital experiences customers have become accustomed to in other sectors, such as retail.

But at the same time, it goes deeper – B2B buyers have also been impacted by recent trends and are relying on sellers to help them to support new business models.

By shifting its business model from in-person to digital, Acura minimised the possible losses that might have occurred had it failed to meet the needs of a growing digital audience.”

As the pandemic has forced manufacturing and production processes to change, impacting organisations’ sales strategies and lead generation, the adoption of digital channels has been critical. Positively, our survey indicates that manufacturers have responded rapidly to the opportunity. For example, compared to 12 months ago, the use of social media and websites to engage with customers has increased by 44 and 28 percentage points, respectively (Figure 2).

But the addition of social channels has also injected more complexity into a scenario that was not simple, to begin with. Typical buying groups for complex B2B solutions involve six to 10 decision-makers, with journeys rarely playing out in a predictable, linear order.6 The challenge of meeting customers’ expectations for joined-up, personalised experiences has never been more significant.

Tellingly, executives feel their organisation may not be up to the task. Half agree they have ‘low’ (9%) to moderate (i.e. ‘some’, 41%) trust in their available data to direct and optimise marketing and customer experience.

When asked why, this particular group are most likely to regard the ‘sheer complexity and number of data sources’ (45%), followed by ‘unreliable data sets’ (37%) as factors contributing to their less than high level of trust in the data available to them.

While digital offers organisations multiple opportunities to get closer to the customer and create new revenue streams, capitalising on these relies on integrated supply chains, close collaboration between sales, engineering and manufacturing, and the ability to analyse the correct data.

Forging an emotional connection

This data challenge is felt elsewhere. As illustrated in Figure 3, only 39% agreed their organisation has ‘significant insight’ into ‘friction points in the customer journey’. Similarly, 43% of the respondents indicate they have ‘significant insight’ regarding ‘the mindsets of customers throughout the journey’.  These limitations in fully understanding the customers’ mindsets limit manufacturers’ ability to forge long-term emotional connections.

Indeed, it’s a common myth that B2B buyers make purely rational rather than emotional decisions. In fact, B2B buying is driven not just by pricing, testing, and hard facts but also by human connections. For example, historical research from Google shows that B2B customers are, on average, significantly more emotionally connected to their vendors and service providers than consumers. ^[7]

Such insight can also enable manufacturers to motivate buyers, encourage them to consider new suggestions or ideas, and turn the average buyer into an evangelist. This conversion would be highly beneficial, given the findings of one recent survey of global decision-makers and B2B buyers, which revealed 40% trust professional peer reviews for increased awareness of new products. ^[8]

Covid-19 has accelerated a re-evaluation of business models

While embracing digital is critical to today’s manufacturers, the digital transformation must be considered and planned, with company-wide buy-in, not simply tacked on or spearheaded by the marketing or IT department. This requires significant investment and wholesale cultural change – from rethinking the core business and delivery channels to the way teams collaborate, creating a more dynamic, agile and innovative culture.

It is encouraging that two-thirds (63%) of executives say that Covid-19 has changed their organisation’s business model.

Of this group, when asked how it has changed, 65% agreed that their organisation has made a long-term change towards moving from products to services (Figure 4). This is seeing companies designing and selling more personalised solutions to deliver ongoing value and revenues rather than one-off sales. Manufacturers are combining physical products with added value services such as services contracts, subscription contracts and even digital services.

One example is John Deere, which has evolved from being solely a manufacturer of equipment to a services and data company. It advises farmers on numerous areas, including improving productivity, reducing costs, and developing new business models and revenue streams.^[9]

Another example is Siemens’ development of performance advisory services that use data and insight to enable customers to gain more value from their products. For example, it collects predictive data for its baggage handling systems, allowing customers to plan and execute maintenance and repair work. ^[10]

These examples show a growing willingness to invest in the technologies and capabilities necessary to compete in customer experience, indicating a shift away from simply pushing standalone products towards providing a holistic solution to customers’ needs. This has been a long-term trend accelerated by the pandemic as firms have sought to overcome disrupted supply chains and sales channels for physical products.^[11]

The importance of solid tech foundations

To adapt to such change, manufacturers need solid tech foundations. It’s positive that Figure 4 also illustrates that 65% of respondents agree that IT and tech teams have taken a more significant role in leading growth efforts. At the same time, 63% say there’s greater willingness to invest in new tech and capabilities, both of which are perceived to be long-term changes.

While most changes are perceived as enduring, it’s notable that ‘we started to sell directly to the customer’ is the only exception (55% stating it as a short-term change and only 45% seeing it as a long-term change). This perhaps attests to the complexity and disruption caused by a more permanent shift towards such a business model, given its impact on the entire manufacturing ecosystem.

At the same time, manufacturers’ core skills also lie in designing and making products, and many lack both the resources and skills to market and sell. D2C demands an in-depth understanding of the buyer’s customer journey, including how they research, discover and purchase a product, and consider the numerous digital touchpoints along the way.

It is a challenge compounded by — in many cases — a lack of customer insight. As we explored in Figure 3, less than half of executives have significant insight into the complete interaction journeys of their customers. This is why manufacturers must overcome the obstacles to integrating their martech stack, as we’ll find in the next section.

The power of an integrated martech stack

Any digital transformation requires overcoming significant complexity to meet B2B CX experiences or move into entirely new markets through D2C strategies. For many, the solution is to invest in technology. Indeed, Gartner estimates manufacturers will spend $625.8bn on IT by 2025 to prioritise a shift towards meeting changing CX expectations. ^[12] But while the right technologies can ensure competitiveness, drive better ROI and deliver engaging CX, effective integration is also critical. Worryingly, only 20% of respondents agree that their current martech stack integration level is ‘excellent’ and fully integrated with all necessary platforms (Figure 5). Yet organisations that get this right can ensure proper customer focus.

For example, having more centralised platforms can empower marketing teams to better understand customer interactions across every touchpoint. Failure here risks the ability to generate insights that would have otherwise enabled marketers to act in more agile ways, such as, for example, pivoting to new strategies to better engage customers in real-time.

This is underlined by Figure 6, which illustrates the link between levels of martech stack integration and the ability to personalise the digital experience today. Of those that describe their level of integration as ‘fair’, only 4% claim their digital experience is dynamically tailored for each customer using machine learning where appropriate.

By contrast, two-thirds (67%) of those describing their level of martech stack integration as ‘excellent’ rate the level of their digital experience as expert level.

Our survey also indicates that higher martech stack integration levels enable the right structures to gather and analyse data to create relevant content, offers, and campaigns. Indeed, 73% of this group agree that they have ‘high levels of trust/reliability across many key metrics’ to direct and optimise the overall customer experience.

The way forward: The importance of investing and integrating new tech

It is clear that for manufacturers to move into new markets, drive new revenue streams and, critically, evolve into customer-centric organisations, having the right technology in place is fundamental.  Unsurprisingly, therefore, our research reveals that when asked about their plans to overcome barriers to improving the digital experience, ‘implementing new technology platforms’ came out as the top response (39%) (Figure 7).

But while investment in the right technology has the potential to massively accelerate organisations’ ability to deliver a sophisticated UX, technology is not a strategy in itself. The introduction of new technologies will demand an equal investment in talent and resources, underlining a need for upskilling, re-skilling and recruiting new, digitally experienced talent.

On top of a broader skills shortage within manufacturing and engineering both in the UK ^[13] and in Germany^[14], the Industry 4.0 revolution is driving specific demand for data science and software engineering skills.  It is, therefore, positive that 37% of executives are focussing on ‘retraining / re-skilling existing workers’ and ‘hiring talent to develop our capabilities’ (33%). Significantly, 82% are either ‘highly’ (40%) or ‘somewhat’ confident (42%) that their organisation will invest in this area.

The technologies shifting the needle on experience

The importance of making the right technology investment is evident, and some technologies have more potential to shift the CX needle than others. According to our survey (Figure 8), the technologies likely to have the most significant impact on organisations’ CX are: ‘Customer data platforms to optimise data management’ (37%) and ‘New or upgraded digital experience/ecommerce platform’ (37%).

Given our findings indicate that executives have some way to go regarding digital maturity and levels of tech integration, it’s unsurprising that customer data platforms (37%) are the most popular top-three technology. Clearly, respondents are focussing on delving deeper into systems to gain a more joined-up customer view.

Other leading technologies that are expected to have a positive impact on CX, such as ‘systems enabling personalised search and recommendations’ (35%) are also understandable (Figure 8). According to recent McKinsey research, more than three-quarters of B2B buyers say that they now prefer digital self-serve and remote human engagement over face-to-face interactions. This sentiment has steadily intensified even after the lockdowns have ended.^[15]

At the same time, given earlier findings indicating a shift in business model from products to services, it’s unsurprising that the ‘Internet of Things (IoT) to create new product and service offerings’ is highly ranked (34%). IoT plays a crucial role in enabling firms to add intelligent services to complement products and improve the customer experience.^[16]

RECOMMENDATIONS

The majority of executives are at a relatively early stage along the path to digital maturity. Still, there is a clear understanding of the need for investment in new technologies, specifically those that will enable the consolidation, analysis and intelligent application of data.

HERE ARE OUR RECOMMENDATIONS:

1.  DEVELOP A STRATEGY BEFORE INVESTING IN NEW TECHNOLOGY

Successfully investing in and implementing new technologies requires a strategy. Leaders should start by analysing which areas of the company could be enhanced by technology — for example, centralising customer data or customising products. Companies need to then identify which technologies and tools can best achieve these goals and find the best partner to implement them.

2. DOES YOUR TECHNOLOGY ADDRESS TODAY’S NEEDS? TIME FOR AN AUDIT

According to Gartner, only 33% of marketers feel their existing tech is useful, while over 80% are sitting on a short-sighted or outdated martech roadmap.^[17] Manufacturers should audit their current martech stack and roadmap to ensure they have the right technologies, vendor partners and integrated solutions.

An audit can identify priorities for adopting new martech and for retiring outdated systems. With approximately 8,000 martech solutions available, and almost as many vendors^[18], it is paramount to be vigilant about which solutions (and partners) deliver what the company needs.

3. DEPLOY AI, BUT BE SURE TO PROVIDE IT WITH LOTS OF ACCURATE DATA

The deployment of Artificial Intelligence (AI) technologies, namely advanced Machine Learning (ML) techniques for analysing data, enables manufacturers to better understand and respond to their customers’ needs. A global MIT Technology Review Insights report in 2020 revealed that 29% of manufacturing respondents said they expected 31-40% of their processes to use AI in three years. Nearly a third of manufacturing respondents use AI for customer care and just over a fifth for personalising products and services.^[19]

AI is continuously learning and improving, but it relies heavily on data quantity and quality. The more data AI can draw on, the more accurate its analysis is. Manufacturers need to prioritise gathering and integrating data from multiple sources and formats.

4. CONDUCT DUE DILIGENCE BEFORE CHOOSING A CUSTOMER DATA PLATFORM (CDP)

Customer Data Platforms (CDPs) are hugely powerful because they consolidate multiple data sources into a single customer database. But manufacturers need to carry out due diligence before choosing a CDP, starting with gathering input from all the internal stakeholders who need data access, clarifying the purpose of the CDP, and some ideal use cases (for example, enhanced customer insight or greater personalisation).

It is essential to identify the tools needed to carry out such use cases and any customer-facing tools and ensure that any potential CDP has the relevant integrations. Companies should also list other requirements, such as presenting a full view of the customer journey before comparing vendors and their reputations. Finally, it is imperative to calculate the costs and consider ROI.

APPENDIX – AREAS WHERE UK AND GERMAN MANUFACTURERS DIFFER FROM THE AVERAGE

The following highlights particular questions that German and UK respondents differed from the overall average.

UK Manufacturers

Regarding perceived changes in how they engage customers today, respondents are five percentage points more likely to agree to the ‘integration of digital experiences with in-person experiences’ (38% vs 33% average).

Positively, respondents are marginally more likely to agree that the level of martech integration with other systems in the stack is ‘excellent’ (27% vs 20%). It’s perhaps unsurprising, then, that they are less likely to agree that they have ‘fair’ integration levels (23% vs 29%).

In line with the slightly raised level of martech stack integration, our survey indicates that UK respondents are marginally more likely to agree that they have ‘high levels of trust/reliability’ regarding data available to direct and optimise marketing and CX (52% vs 46%).

When it comes to planning to overcome barriers to improving the digital experience, executives in the UK are more likely to opt to ‘change budgeting approach’ compared to the average (37% vs 30%) and focus on ‘securing buy-in from senior stakeholders’ (30% vs 24%).

In terms of the top three technologies believed to have the most significant impact on their organisation’s customer experience moving forward, UK respondents are more likely to state ‘augmented/virtual/mixed reality to enhance the customer/employee experience’ (33% vs 27%).

German Manufacturers

In terms of perceived changes in the way they engage customers today, compared to the average, they are less likely to agree to the ‘integration of digital experiences with in-person experiences’ (26% vs 33%).

It’s notable that, when asked about the channels that they engage customers today, German executives are more likely ‘than average’ to agree that they don’t engage through social media (24% vs 18%).

Regarding martech stack integration levels, respondents are significantly less likely to agree that it is ‘excellent’ (12% vs 20%). At the same time, they are eight percentage points more likely to agree that the level of integration is ‘fair’ (37% vs 29%).

Perhaps unsurprisingly then, our survey indicates that German executives are eight percentage points less likely to agree that they have a ‘high level of trust’ regarding data available to direct and optimise marketing and CX (38% vs 46%).

When it comes to overcoming barriers to improving the digital CX, German executives are significantly less likely to ‘change budget approach’ (21% vs 30%), ‘integrate sales and marketing teams’ (21% vs 29%) and ‘secure buy-in from senior stakeholders’ (21% vs 29%).

German respondents are also less likely to regard ‘augmented/virtual/mixed reality’ (20% vs 27%) and ‘customer data platforms’ (32% vs 37%) as a top-three technology that will have the most significant positive impact on their organisation’s customer experience moving forward.

METHODOLOGY

In Q3 2021, Econsultancy, in collaboration with Sitecore and Coveo, fielded a survey to 467 manufacturing executives who either make or influence decisions regarding their organisations’ digital experience, customer experience, or digital marketing initiatives. By region, respondents were based in either the United Kingdom (263) or Germany (204).

Please note, figures in some charts may not add up to 100% due to rounding.

If you have any questions about the research, please email Econsultancy’s Research Director, Jim.Clark@xeim.com