Best Practice in Marketing – Management Focus Group “Big Data and the Digital Revolution – Integrating Clicks & Bricks”

7 strategic insights on how to actively deal with the Digital Revolution – based on insights of the Management Focus Group “Big Data and the Digital Revolution – Integrating Clicks & Bricks” (November 26th/27th, 2015 at Marbach Castle on Lake Constance)

 

Insight 1: Do A/B testing to improve and personalize your campaigns!

Sanitas (2015)
Sanitas (2015)

As advertising campaigns are usually a costly endeavor, you should invest your money purposefully. One strategy how to ensure this, is to do A/B testing on a regular basis. A/B testing can help to improve your campaigns. However, it is crucial that you do A/B testing on a regular basis because it differs from campaign to campaign which strategies work and which do not. But there are also critical aspects that have to be considered when doing A/B testing. By applying this method you can find out which one of two products was perceived better. Still, in most of the cases you do not know due to which reasons this is the case.

At Sanitas, a leading Swiss health insurance company, they apply A/B testing actively. For example, they adapt background pictures on the Sanitas website in accordance to age and sex of visitors. Like this, Sanitas tries to increase the conversion rate. Another measure of Sanitas is to provide non-binding offerings. With this strategy the health insurer also aims at getting more traffic on its homepage.

The goal of these actions is to finally create a personalized customer interaction. That is the foundation on which the Digital Business Model of Sanitas is based. In order to keep this customer interaction running, Sanitas puts the emphasis on data-driven management and integrated product offers, true to the maxim: “data beats opinion.”

However, data is only one element that needs to be aligned in the course of the digital transformation. At Sanitas, they identified several success factors that are key for a smooth change process. These are, amongst others, the allocation of the necessary resources, collaboration beyond silos and the establishment of a digital culture within the company.

Sanitas2
Sanitas (2015)

Insight 2: Combine digital and non-digital activities!

When companies react to the digital transformation, they should not exclusively focus on digital activities but combine the best of the online and the offline world. Furthermore, it is vitally important to integrate the online and offline channels. As shown by the example of Hilti, digital activities have to be much more than running online channels. Actively managing the digital transformation means to enable interactions and not only transactions with your clients.

However, when implementing digitally new solutions, one should avoid to simply focus on technical questions, even if this might be tempting to start with. Working on technical questions holds the danger of forgetting which digital myths and beliefs prevail in an organization.

Hilti
Hilti (2015)

The challenge when integrating clicks and bricks is to combine all online and offline activities so that you can address your customers at the right time in the buying cycle. This usually works best when you create awareness and point out possible solutions rather than when you try to sell your products or services directly.

One approach to bring digital solutions to life is to become active on the internet. One way to do this is in the form of webinars for your customers where you explain them how to get the best out of your product. Yet, do not forget that this content should look really professional. Cost for producing such webinars should thus be well calculated in advance in order to make sure that such a program really becomes a success.

A further possible step in digitalizing your activities might be by establishing online communities on platforms such as LinkedIn. The goal of such forums should be to keep the focus on content. This means that experts in the field moderate the exchange that is going on between members of the community.

 

Insight 3: Create a consistent digital consumer experience!

Creating new digital consumer experiences that hold the potential of acquiring new customers is a challenging task. Miele has developed a clear strategy how to accompany its customers on the different stages of their customer journey. The objective here is to meet the consumers’ needs at each step of the journey.

Miele (2015)
Miele (2015)

That is why Miele developed the so-called Kitchen Appliance Visualizer (KAV) which is available in a web application and at the point of sale. With the KAV, customers can visualize their imaginary dream kitchen and consider different designs. The various components of the kitchen can be virtually combined and diverse sets of kitchen appliances can be integrated in order to get an idea of how your kitchen will look like. This way, consumers get inspired already before they visit a Miele distributor.

At the point of sale, potential customers can benefit from further functions that are only available on the KAV at the Miele distributor. At this stage of the customer journey, the KAV helps the customer to find the perfect set of appliances and at the same time provides superior brand experience.

This integrated digital strategy of Miele shows how it is possible to protect the brand against an unstable distribution landscape and how to enable a seamless customer journey from the first contact to the purchase of the kitchen.

 

Insight 4: Focus on mobile applications to cope with the digital shift!

Mobile applications play a key role in the digital transformation. The time spent with apps already exceeds that of TV consumption. In general, people tend to spend more and more time with their smartphones.

Over the last years, the Swiss railway company, SBB, could substantially increase the number of tickets that have been bought via mobile phones. However, even if customer satisfaction is higher for mobile tickets than for those purchased at the ticket vendor machine, most tickets are still being sold at the ticket vendor machine.

Today, people that use apps spend 90% of their time with only five apps. This means that if you are amongst those five top apps like SBB is, you belong to the “winners that take it all”. The goal of SBB Mobile is to accompany the customer from door to door in a simple, personal way. That is one of the reasons why its app belongs to the most downloaded ones in Switzerland.

The question that occurs in this context is how to motivate customers to follow the digital shift and to use these new channels. The answer to this can be found in three main levers that help to push the digital shift. First, you can charge a fee to encourage customers to use the new channels. However, in the case of SBB, this is not possible because they are not allowed by legislation to charge an additional fee. Second, you should make sure that the new channels are better than the established ones. When customers recognize that, they really see an advantage in using the new digital channel. Third, communication measures play an important role as well. You have to actively communicate and promote your newly established channels.

Another trend that might gain further importance in the future is the customer co-development of software. However, new software doesn’t necessarily have to be developed in-house. That is why you should also be open to the startup scene. You as an established company can get a lot of value for money and the startups on the other hand can get an extensive reach for their products or applications when they are bought and scaled up by a bigger player.

 

Insight 5: Enable cross-channel experiences!

Today, customers often switch channels when they pass the customer journey. That is why cross-channel management becomes more important. Möbel Pfister, one of the leading Swiss furniture suppliers, shows how a successful cross-channel management can look like. In the furniture industry, many customers research online and purchase offline. Therefore, ensuring a smooth channel shift on the customer journey is crucial.

This also has to do with the fact that until today, most consumers prefer to buy long-living and valuable goods on-site than on the internet. Furthermore, haptics play a major role when it comes to the purchase of furniture. People want to touch and feel it before they buy. Investment goods often require professional sales advice and consumers tend to trust a salesperson more than an online shop.

Möbel Pfister follows a clear multi-channel strategy with consistent prices, delivery conditions and discounts. This is due to the goal of the company not to confuse customers that use both online and offline channels of the company. Cross-channel at Pfister means the linking of the stationary trading, the call center (telephone trade), the e-shop and the mobile applications.

Pfister
Möbel Pfister (2015)

With this strategy and a smart linking of the sales and communication channels before, during and after the purchase, Pfister follows the goal of reaching the appropriate target audience at the right time with the right message. Furthermore, Pfister tries to avoid that potential customers get contacted too frequently.

But the question remains how to enable a seamless cross-channel experience. In order to find an answer to this, one needs to analyze the purchase decision-making process of the consumers. Furthermore, the different channels and their interaction have to be clear and channel shifts have to be incentivized. Finally, cross-channel can only be established when certain approaches get implemented quickly and sometimes also with a certain risk. The motto here is: try and learn.

 

Insight 6: Establish structures within your company that enable smart data science!

Internal structures have a significant effect on how effectively data can be processed. Pascal Suter from Swiss Life notes that it can be difficult to convince supervisors of investing into thorough data analyses. However, in order to enable smart data science in a company, statistical know how has to be merged with business know how. Therefore, it is crucial that people from these usually separated departments work closely together. In this case, communication is key or to say it in other words: smart data science needs smart people, as Benjamin Seeber from Gotthardt Healthgroup points out.

Gotthardt Healthgroup (2015)
Gotthardt Healthgroup (2015)

Besides that, a cultural change within the firm is necessary to get the best out of your data. It is recommended to stimulate a culture of profit oriented innovations and to develop a technical environment that allows more flexibility. Only with adapted structures people will be able to collaborate effectively.

However, there is of course also the possibility of creating a new job position which is established between the business and the IT department. Ideally, this position takes the form of a staff position so that such a digital transformation manager disposes of a certain freedom and independence.

However, in many cases it is not even necessary to create new positions in the organigram but only to start smart data science with small and quick wins. Often, one can generate a substantial output with only little means. Especially for business cases it is usually sufficient to work with data sets that are not perfect. Too much big data analyses may even impede creativity of marketing managers, as Christoph Wortmann and Prof. Dr. Peter Mathias Fischer from the University of St. Gallen note. That is why business people should always have a look at the work of the data analyst who is used to run analyses that are a 100% correct.

 

Insight 7: Always adapt your decision strategies to the environment!

Decision strategies are never good or bad per se. Whether or not a certain strategy turns out to be a success also depends on how well you adapt your strategy to the environment, as Dr. Florian Artinger from the Max Planck Institute for Human Development explains.

Complex strategies are not necessarily better strategies than simple ones. This can be illustrated by the following example: Harry Markowitz developed a complex model that represents the optimal investment strategy for retirement funds. This optimal strategy takes the form of a fairly complex mean-variance model. However, although being Nobel laureate in Economics, not even Harry Markowitz himself did follow his own strategy but invested his savings for retirement according to the simple rule of 1/N. In the end, it turned out that this strategy was not worse than if he had followed the mean-variance model.

In this case, the simple solution was even the better one because predictability of how the funds will develop was low and because relatively little data about the funds were available. The mean-variance model though works best when there is a high predictability and when there is a lot of data available that can be processed. This is due to the finding that a dynamic environment causes more uncertainty than complexity.

Artinger (2015)
Artinger (2015)

This example illustrates that Big Data does not automatically imply that sophisticated algorithms and complex models are always the best managerial tool. In some cases it is better to rely on managerial heuristics as these can perform remarkably well. This is especially the case when the decision maker is an expert and when the environment is uncertain. Or to put it differently: Big Data is not good or bad per se but it always depends on the context whether it makes sense to rely on it or not.