By Gareth Davies, Nimal Manuel, Dilip Mistry and Andrew Roth, McKinsey & Company
How Companies Can Bolster Their Digital-Marketing Strategy
Formulating and executing a successful strategy requires concerted action across the five elements of modern digital marketing outlined below.
Double down on performance marketing with a goal to enhance customer experience
At its core, performance marketing focuses on continually optimising performance metrics, such as activation, churn, and upsell, along the customer-journey funnel, leveraging actionable and quick-impact levers (Exhibit 3). Performance marketing plays a vital role in driving customer experience, especially at the lower-funnel interventions, such as digitising interactions and offering a customer-service response team that responds within an hour.
This can be immensely powerful when implemented correctly and at scale. An ASEAN telco recently launched a digital-attacker offering, which involved a campaign for social media that persuaded target customers to sign up for a beta program that was then used to validate go-to-market preferences and product features. The campaign yielded substantial results: 28,000 customers signed up in advance of the beta program, and the year-one customer-acquisition target was hit within six months.
Here, focusing on the most valuable customer metrics in performance marketing is also key. Too often, however, companies get excited about vanity metrics, such as share of voice or traffic, or they pour substantial money into marketing to, in effect, “buy” customers. High performers often identify a “star metric” that is most indicative of success for their businesses.
A telco in Indonesia launching a new business discovered that the daily number of new customers from referrals was the key metric. Focusing on that metric, it prioritised its customer-referral program, and within one month, customer referrals comprised more than 20 percent of all new daily customers. Success against this metric drastically reduced the average cost of acquisition per customer and has helped the business reach its 12-month customer goal in just seven months.
Move pragmatically to a modern martech stack
The marketing-tech (martech) landscape can be confusing to navigate, in part because the number of solutions has grown so rapidly—we calculate that there are more than 7,040 solutions in the market as of late 2019. As such, many organizations have fallen into the trap of investing in martech solutions before carefully thinking through how to use them, resulting in disappointingly low ROI.
A modern martech stack and data setup needs to cover three essential capabilities (Exhibit 4):
- Campaign execution. Automate and personalise campaigns and communications across owned- and paid-media channels.
- Audience management. Segment customers based on both their offline data (such as customer relationship management) and online data (such as digital-asset behavior), and share this segmentation with different marketing channels.
- Data analytics and performance. Collect and register customer behavior for audience-creation and campaign-performance tracking and provide a platform for analytics.
Within the martech stack, the role of the customer data platform (CDP) is increasingly critical. A CDP unifies data from disparate sources to create a single, holistic view of each customer. But it’s much more than just a data aggregator; it also allocates customers into segments (which, in turn, determines which offers and content the customers see) and presents results in an easily digestible, visual manner.
Deploying a martech stack is often less intimidating than it may seem. Many components already exist and often can be repurposed. And many components can be sourced through an on-demand, scalable, cloud model. An ASEAN telco, for example, used existing components to launch its martech stack in less than four weeks. The key is to take a pragmatic and outcome-focused approach to standing up a first version of a workable martech stack. The “bells and whistles” can come later.
Enable an agile operating model for marketing and technology teams
For a digital-marketing strategy to succeed, the marketing and technology teams need to work in lockstep to continuously optimise the customer journey. Leaders need to elevate digital marketing to the CEO agenda to get the necessary executive buy-in and generate momentum. They also need to establish transparency of existing marketing-activity ROI and cease efforts that fall below a certain ROI threshold (the lowest hanging fruit within performance marketing).
In our experience, one of the best ways to do this is to use high-performing existing talent (or initiate hiring processes, where necessary) to form two to three agile-marketing and tech squads to target key performance levers. These talents should include expertise in growth marketing, search-engine optimisation, user-experience design, HTML development, attribution analytics, broader campaign management, and copy writing. They also work together to define, prioritise, and execute against research, product, marketing, data, and technology backlogs.
In one successful example of this model, a Hong Kong–based retail bank that was struggling with flattened growth for credit card sales mobilised an agile squad to develop a digital-sales-acceleration playbook to support the scaling of the credit card program. It also worked closely with advertising partners including Google and Facebook, resulting in a 23 percent increase in card applications and a 22 percent reduction in cost per acquisition over a 20-week period.
Balance spend allocation between channels
Organisations continue to struggle with how much to spend online versus offline. Spend allocation should occur at the individual micromarket level and be guided by characteristics of the micromarket. Geospatial analysis can help inform these decisions, as it combines granular geographical data with other forms of demographic, connectivity, behavioral, and income data to create micromarket archetypes.
Companies may also grapple with how much to spend in each subchannel. Organisations often display a “last click wins” bias in digital-ROI assessment, which can lead to an excessive focus on some channels. It’s important to remember that multitouch attribution, which looks at the full customer journey to understand the impact and ROI for each channel, is a useful—and underutilised—approach that explicitly aims to counteract this bias.
Ensure responsible first-party data management
While personalisation in digital marketing is here to stay, the increased scrutiny against third-party cookies and new privacy regulations (such as those announced by Mozilla and Chrome in 20194 and Apple in 2020) is an impetus for organisations to be responsible holders of first-party data.
Privacy issues lie at the heart of the trust between the customer and the brand. A key question, therefore, is how first-party data can be scaled while maintaining customer confidence and protecting privacy. As regulations evolve, organisations will need to be proactive and clear that they take data privacy seriously. Transparency on how data will be used is critical, as is staff training, implementing measures to prevent data theft, and continually increasing the opt-in base with accountability as a guiding principle.