Which company executes its online channel more effectively to deliver better results – a $1 Billion manufacturer or $100 Million manufacturer? Let’s assume the objectives are essentially the same – drive revenue, lower cost to serve by some percentage.
Obviously, it depends. Most of you probably assume the $1B manufacturer or distributor has the potential to run circles around a company 1/10th of it size. Let’s assume both invest 1% of their top line revenue into digital commerce every year. That’s $10M vs $1M to invest. No contest right? All things being equal, you can do drive more traffic, deliver a superior customer experience, and drive more revenue with a $10M budget right? Probably, but I guarantee you that things are not all equal and there is a tremendous opportunity for the smaller guy to compete and even run circles around the big guys.
Why? The amount of money you are spending on digital marketing and ecommerce matter a lot. But without a digital strategy, experienced leadership, and the right platforms, you may be throwing money away. The most important success measurement is your Digital Maturity. A manufacturing company with five years of experience and 30-40% of its revenue from an online channel likely has a mature technology platform, a highly functional customer experience, a staff of experienced digital merchandising and marketing experts, highly sophisticated analytics and KPIs that drive continuous performance, rich product information, and much more.
Their revenue growth, cost to serve and customer satisfaction are also likely to be higher than a less digitally mature competitor. Contrast that with a company venturing into eCommerce for the first time is worried about whether customers will order online, which products will actually sell, channel conflict, who will be creating and managing content, and how to integrate their ecommerce system with their back-office systems. For the first two years, they will be focused more on channel shift than acquiring new customers, improving their average order value, and increasing their conversion rate.
If you are not investing in digital already, this is a path you will need to follow and there is really no short cut. Looking at another common scenario, you may be the $1 Billion company with a custom ecommerce platform that was developed ten years ago and is still run by the same team using the same content and processes. If so, you are likely struggling with managing content, product information, and adapting to mobile customers today. Why? You did not keep up with the changes in digital technologies, customer’s buying habits, and onslaught of new competitors for your customer’s. You may have developers that are not familiar with responsive design, HTML5 or angular directives, limiting reach into millennial buyers using smartphones as their device of preference. You may be an in the middle of the pack in your digital capabilities, but there is no fast path to the advanced level of maturity. It’s likely your online revenues are fairly flat, and constrained to a limited market of customers.
How to Measure Digital Maturity
There are many ways to evaluate digital maturity. I’ll keep it simple here and break things into Beginner, Intermediate and Advanced levels. The bullets below include some common characteristics present at various stages of maturity for key components of your ecommerce success including objectives, content, customer experience, marketing, technologies and people. (there are many, many more)
Key Objectives – Customer retention, operating efficiencies, increased digital engagement with customers, test and learn
- Content – Partial product catalog, limited enriched content, contract pricing
- Customer Experience – Basic navigation and search, limited imagery, basic responsive site, basic customer portal
- Customers – Targeting most online friendly segment first – early adopters. Migrate customers slowly
- Marketing– Focus on SEO, basic promotions, drive initial traffic, encourage first sale
- Technologies – Basic ecommerce platform and integrations to back office systems, Google analytics
- People – Outsource design & development, bring a few digital resources in house
Key Objectives – Increase revenues from existing customers, lower cost to serve, reach new markets, improved customer satisfaction, protecting brand, expand digital presence
- Content – Add more products, enrich product content, branded sites by customer
- Customer Experience – Improved search, introduce A/B testing, mobile first responsive design, more advanced customer portal
- Customers – Secondary customers segments, target new customer acquisition aggressively, drive repeat business and loyalty
- Marketing– Add company and persona based personalization, more promotions to drive conversion and revenue, up sells, cross sells
- Technologies – Add more integrations to CRM and marketing automation, tag management, advanced analytic
- People – Recruit experienced digital leaders for marketing, merchandising, product management, content oversight
Key Objectives – Dramatic increase in revenue from existing and new customers, new channel development, leverage digital competitive advantage to achieve market leadership
- Content – Add video content, user generate content, Q&A, online chat
- Customer Experience – Improve performance, simplify checkout, enhance customer self service capabilities
- Customers – Expand messaging to new channels and target customer, end consumers. Global focus. B2B2C, B2C
- Marketing– Increase AOV through aggressive outbound marketing, online merchandising, increase share of wallet, acquire recurring revenue, data driven recommendations, social engagement with and between customers
- Technologies – More sophisticated ecommerce platform, content and commerce integrations, data driven recommendation engines
- People – Self sufficient for all basic digital activities other than brand, strategy, have strong digital center of excellence
The end result is that if you have a $1M budget and are in the advanced category, your ecommerce results are going to dramatically outperform the beginner with the same budget. In many cases, the $1M budget can also outperform a larger company with a significantly higher budget with a lower level of maturity. Why? Agility and execution.Better people, processes, technology.
Digitally mature companies have all the resources and tools in house to be very agile. If you want to spin up a personalized site for a large customer that includes a custom catalog and pricing, personalized content and merchandising, and highly automated marketing automation, you will be able to do so in days, not months. Promotions can be created and executed virtually on the fly. Mature companies will have the required technologies and integrations, analytics, processes, and people to move very quickly. Additionally, they will be used to new projects and experiments so the entire project will move more quickly and efficiently with very little risk.
Contrast that to a less mature company with few resources or digital tools. They may need to outsource graphic design and website development. They may have to produce new content from scratch with limited resources. That may require new contract negotiations and POs with service providers, go through multiple levels of approval, and be dependent on the availability of outside resources to perform work.
Many large manufactures today with huge marketing and IT budgets are running on antiquated or custom ecommerce platforms with very little flexibility. They are stuck at the “beginner” or “intermediate” level of maturity because few experienced digital professionals want to work in a place where creating a new landing page or implementing personalized content may take weeks or even months. Most likely, there is a heavy dependence on IT involvement which limits agility. Talented people are hard to recruit. Hence, they cannot move forward in their digital maturity. How do you move from one level of digital maturity to the next?
- Have current generation technology that is flexible and up to date for developers, marketers, merchandisers, and designers.
- Constantly survey and research your customer journey and their path to purchase. The most important digital capability you can offer is a superior customer experience to that offered by competitors.
- Aggressively hire experienced digital leaders and professionals across your organization from the very beginning. Train, cultivate and develop from within with an eye to the future. Challenge the old way of doing business – it is completely disrupted as you grow in maturity.
- Promote continuous improvement based on measurable business objectives and KPIs. Launch, learn, and improve your site and business processes every day. Fail fast. If something is not working, try something else.
- Have a digital strategy for success. Align the strategy closely to your overall business objectives. Centralize your digital team to provide services across business units or consolidate your brands to be more efficient online. This ensure quality, protects your brand, and facilitates scalability.
- Promote cross functional digital leadership. What you do in digital marketing affects sales, fulfillment, supply chain, IT and so forth.
- Bring in outside resources to encourage growth and development. It’s hard to know what state of the art and best practices are from within a larger enterprise. Look for outside input from agencies, research analysts, industry experts to bring best practices and challenge your organization to improve.
I’ll take a mature digital organization over a big budget organization if I want to move my company forward in today’s competitive markets. If you are behind, start working on digital transformation today while you still can because at least one of your competitors is investing with an eye of stealing your customers.