Digital State of the Nation Candid Conversations with Marketers regarding Digital Strategy

Digital State of the Nation Report Candid Conversations with Marketers regarding Digital Strategy November 2010

Digital State of the Nation Report Candid Conversations with Marketers regarding Digital Strategy

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Welcome

Welcome to the Nucleus Digital Strategy Digital State of the Nation Report. A series of candid interviews and conversations that explore commercial digital issues affecting senior decisions markers of Australian brands.

Digital: moving to the mainstream, yet still an afterthought

Over the past decade in Australia, we’ve seen digital firsthand grow to become digital primacy for many consumers. According to Morgan Stanley and Yahoo1, consumers today spend 28% of their time online. This is an amount that is increasing daily and even surpasses the time some consumers spend watching television.

In many markets, the buying cycle begins online. PriceWaterhouseCoopers2 in fact predicts that online will become the largest media sector in terms of ad spend by 2014. In almost all sectors, a significant proportion of brand advocacy happens via digital channels. In the majority of verticals plenty of transactions happen online too.

However, digital is still treated an afterthought when it comes to integration. The ongoing disintegrated mismanagement and pure tactical approach, which continues to be the case for many brands, is a serious mistake.

1 Morgan Stanley Yahoo presentation ‘Internet Trends 2010’2 PricewaterhouseCoopers ‘Global entertainment and media outlook 2010–2014’ Viewpoint

Digital The management and execution of marketing using electronic media such as the web, email, interactive TV, IPTV and wireless media in conjunction with digital data about customers’ characteristics and behaviour.


Digital ‘factions’ in conflict

We believe senior decisions makers – marketers, CEO’s, IT departments and even digital marketing suppliers are feeling pain due from this. Familiar and recurring stories of unrealistic demands, territorial ownership, scope creep, budget blowouts and no return on investment – all in conflict.

These factions all function differently, have differing priorities, viewpoints and even understandings of digital. Ultimately they should all be focused on the same core objectives – increasing profitability and driving growth. But are they?

Over the next 12 months we’ll continue our candid conversations with these warring decision makers. Discussing the real digital state of their nations and learning how to work better together in the struggle to commercialise and ensure digital is profitable for brands.

In many ways, the Digital State of Nation Report embodies the values Nucleus was founded on – candid uncompromised advice. It marks a significant shift in focus for digital research in Australia exploring real issues with real stakeholders.

Candid conversations with marketers regarding digital strategy

In our first report, we’ve spoken with marketers; to understand their pains within marketing departments and how they deal with digital. What we found was a worrying lack of preparedness. 77% of marketers don’t have anything that could


be called a digital marketing strategy. 68% feel inadequately prepared, and 59% are unhappy with their current suppliers of digital marketing services.

The problem is not that marketers are ignoring digital. As our findings reveals, they know only too well that it is breathing down their necks. What they don’t know is how to use it, how to incorporate it into their plans, and how to make it happen commercially for their brands.

We believe that our ongoing findings will provide a new perspective on how senior decision makers manage digital and hopefully evolve the partnership model.

We hope you’ll all agree.

Anthony Baker CEO and Founder Nucleus Digital Strategy


Foreword

I am not a digital marketing specialist but I recognise digital is another extremely important marketing channel.

As the CEO of a start-up business, one of the first things we had to consider was how we could tap into digital marketing with all of its strengths and weaknesses. Even as a baby boomer brought up in the less daunting world of traditional marketing I knew that to ignore digital would be short sighted.

The Digital State of the Nation Report shows that Australian marketers are fully aware of the potential value of digital as a marketing channel. But the dilemma is more than just budget spend and how to get the most from the marketing dollar. Its one of ignorance and being easily seduced by so called experts who seem to know it all!

The report also highlights the importance for marketers to consider the most appropriate way to capitalise on the channel within their own markets. Before spending time tweeting, posting status updates on Facebook or being linked in, be clear about what you want to achieve. Most importantly develop the right plan and make sure the outcomes from your spend can be measured.

As for my own advice, be humble enough to ask for help. Digital is a specialist area and continues to mature rapidly. Traditional agencies may not have the answers, so beware of their claims. Ask for referrals and evidence of their expertise and keep asking questions.


This report is a great place for marketers to start. It’s a testament to our needs, and recognises the value of specialists such as Nucleus Digital Strategy and their singular focus on developing digital marketing strategy. Well done!

Marcia Griffin Director Griffin and Row

Marcia is one of the few Caucasian women to have ever headed up a Japanese company. She has been a board member for Tourism Victoria and PMP, won Telstra Victorian Business Woman of the Year and is a published author.

http://www.griffinandrow.com.au


Executive summary

We conducted 82 candid interviews with senior Australian marketers. Under the assurance of anonymity they willingly discussed their views, experiences, successes and failures with digital, and the development of digital marketing strategy for their brand.

The key findings of this report include:

• Australian marketers are under pressure to ‘tackle digital’.

• 68% of Australian marketers feel inadequately prepared for digital.

• 77% of Australian marketers don’t have a digital marketing strategy.

• Australian marketers have difficulty in finding a trusted digital strategist.

• Marketing is most comfortable placing digital marketing in the context of communications.

• Digital is usually tackled internally - badly.

• External agencies fail to understand digital in the context of their clients’ business.


• 59% of marketers are unhappy with their current suppliers of digital marketing services.

• The lucky few have digital marketing plans but almost none have true strategies with measurable objectives.

• There is a similar crisis of commitment to digital marketing strategy in the UK, US and Europe.


Methodology

From December 2009 and through to June 2010 consultants from Nucleus Digital Strategy interviewed 82 senior marketers across Australia. Interviews were conducted either in person or by phone and often extended beyond the intended 60 minutes.

These senior marketers undertake roles that include marketing director, marketing manager, digital marketing manager and managing director (in small businesses where their role encompasses the business’ marketing function). Criteria for inclusion of this survey is that they do not work for a marketing services organisation such as advertising agency, brand consultancy or the like.

They conduct their business within both small and large organisations across an array of sectors. These sectors include: retail, not-for-profit, government, automotive, sport and entertainment, transport, energy, finance and banking, telecommunications, construction and property, FMCG, travel and tourism, information technology and education.


Australian marketers under pressure to ‘tackle digital’

Australian senior marketers recognise that ‘digital’ marketing plays an increasingly important role in the marketing mix. For many, its emergence into their own marketing plans has often been slow. They are feeling pressure to ‘tackle’ digital from their industry peers and the enterprise itself, while trying to remain relevant and meet the demands of consumers.

“Today, you cannot pick up a marketing or business publication that does not tout the benefits of the ‘digital age’. We cannot avoid questions from our own marketing staff and senior executives querying why we are not doing more within the channel,” said one Marketing Manager.

The smarter of these senior marketers, however, recognise that whilst on one hand, ‘digital’ offers massive opportunities for them to contribute to increased sales and brand equity, on the other, it also presents the risk of spent budgets without return. Senior marketers, post the Global Financial Crisis, face even greater demands from the business to demonstrate ROI from their marketing budgets and

“Today, you cannot pick up a marketing or business publication that does not tout the benefits of the ‘digital age’. We cannot avoid questions from our own marketing staff and senior executives querying why we are not doing more within the channel.”

Marketing Manager Retail sector

Are marketers adequately prepared for digital?

32%Yes

68%No


most recognise they do not have the necessary experience and skills to ‘tackle’ digital head on.

For these senior marketers, “it’s not a case of whether we ‘tackle’ digital, it’s more a case of ‘doing it right’ - not just ‘digital for digital’s- sake’”. Whilst their teams may be performing some low-level digital activity they admit they are “...closer to being R&D” activities rather then strategic marketing moves.

“It’s not a case of whether we ‘tackle’ digital, it’s more a case of ‘doing it right’ - not just ‘digital for digital’s-sake’.”

Marketing Director Finance sector


Most Australian marketers don’t have a digital marketing strategy

Senior marketers were asked a fundamental question of their current digital activities – “Do you have a digital channel marketing strategy?” The majority do not. Perpetuating the obviously painful disintegrated approach, that naturally affects return on investment.

For those that do, however, most admit that theirs was not particularly sophisticated. For some, there are no clear objectives and most, no specific measures. While for others they are in fact campaign strategies, that is, tactical plans that ideally should dovetail into a greater digital channel marketing strategy.

What’s particularly interesting is the interpretation (or misinterpretation) of what strategy actually is and then what in fact is it in the context of ‘digital’. Few senior marketers we spoke to could articulate what it in fact is.

What is digital marketing strategy?

UK digital marketing authority Dr Dave Chaffey describes it this way; “Digital marketing strategy is a channel marketing strategy which defines how a company should set channel-specific objectives and develop a differential channel-proposition and channel-specific communications consistent with the characteristics of the channel and consumer usage of it.”

Do marketers have a digital marketing strategy?

22%Yes

77%No


And for all those that don’t have a digital channel marketing strategy, why not? Well, whilst some believe that they don’t have a need or don’t’ see the value, others know they are “not ready” or cannot acquire the budgets to do so.

But overwhelmingly senior marketers have ‘digital marketing strategy’ on their agenda for this financial year (2010-11).

On the2010/11agenda67%

Don’t seethe value10%

Notready10%

Don’t have the need6%

Nobudget6%

Other2%

Why marketers are without digital marketing strategy?


Australian marketers have difficulty in finding a trusted digital strategist

And for those senior marketers who have ‘digital marketing strategy’ on the agenda many are struggling to determine who is best suited for the job. In their eyes they are faced with two options – conduct it internally or outsource it to one of their agencies. In either case issues of trust and confidence are common.

So we asked those senior marketers that had tackled the digital strategy beast who they turned to? The vast majority tackled it internally – within their own marketing departments. Perhaps unsurprisingly, marketing departments appear to be at their most comfortable placing digital in the context of communications – in doing so they miss the opportunity entirely.

Digital is usually tackled internally – badly

It’s not a particularly strong case. Most of these senior marketers acknowledge that they don’t have the necessarily skilled staff to perform this work at the optimum level but their own internal team, in their eyes, is a safer bet in comparison to their agencies. Whilst some senior marketers undertook the task themselves, most turned to their team.

Do marketers prefer to use internal marketing departments over external agencies for digital strategy development?

68%Yes

32%No


“Our digital providers don’t use a methodology we understand, we’re marketers not developers,” said one Marketing Manager.

And although there are often members within their teams that have the appetite and desire to tackle the digital strategy beast they are generally the more junior marketers. They are generally more tactically focussed, caught up in the excitement and enthusiasm associated with the countless burgeoning digital and social media tools and trends. Their managers recognise that many operate without exposure to the ‘truth’ of the effectiveness of these types of activities and lack the commercial experience to contextualise their role as part of the bigger digital strategic picture.

However, for senior marketers, the case for the internal marketing team is one of control. Senior marketers can manage their own staff and whilst they may not have the digital experience themselves they can direct their staff to take a commercial approach to digital marketing strategy – that is, to apply the same fundamental principles they use across all marketing planning.

“Our digital providers don’t use a methodology we understand, we’re marketers not developers.”

Marketing Manager Education Sector


External agencies fail to understand digital in the context of their clients’ business

Marketers that choose to outsource their digital marketing strategy report mixed results. Those that engaged agencies reported that the major benefit for engaging them was the agency’s depth of exposure to what was “going on out there”.

“Agencies work with lots of different companies, they are a lot closer to the action than we are,” said one Web Marketing Manager.

Senior marketers recognise that they and their teams cannot easily be across the breadth of digital activity taking place outside their own insular marketing environments. They rely on their agencies to keep them informed and to bring new and diverse thinking ‘to the table’.

All report that external digital services come from one of two sources: ad agencies or digital agencies.

Web design/development agencies are the ‘digital agency of choice’, serving outsourced digital marketing support for 86% of respondents. The majority of those respondents perceived these agencies as having broader knowledge of the digital channel. These digital web agencies tend to lead with creative and technology – and many do this

Advertising14%

Digital86%

What type of external agency do marketers engage?

“Agencies work with lots of different companies, they are a lot closer to the action than we are.”

Web Marketing Manager Entertainment sector


well. But there is a perception that digital agencies are failing to deliver strategies that effectively guide how the enterprise will deploy the digital channel.

The marketers we interviewed spoke of web agencies’ work meeting with “varying degrees of success”. As with all agencies, but particularly these, it was felt that while having a better knowledge of the channel, they often lacked the commercial discipline or willingness to understand their clients’ business.

“We work in a low involvement commodity category. Our agency was trying to get us to blog. If they understood our business and our customers they would understand that we don’t have a lot to tell them that is worth hearing about!” Marketing manager, utilities industry

The remaining source of digital marketing expertise at 14% share is advertising agencies. Our survey indicates that marketers are sceptical about advertising agencies’ ability in this area. Many find it difficult to believe that advertising agencies have, in fact, ‘changed their spots’.

“Despite the promise of integration, digital is still a ‘tack-on’,” said one Marketing Manager. Supporting the 41% satisfaction level marketers believed they were receiving from their current digital services suppliers.

Are marketers satisfied with their current digital services supplier?

41%Yes

59%No


“Providers skip responsibility and ownership as much as possible, especially when success criteria is involved – it’s bad when you challenge a supplier in a meeting about their commitment to return, and they state that’s not their responsibility,” another said.

The more critical senior marketers accused some agencies of biased advice that lead to more revenue for the agency or work that was more in the interest of the agency (e.g. winning awards) rather than working it the client’s interests. More than one respondent expressed their frustration with agency creatives masquerading as digital marketers.

“Providers skip responsibility and ownership as much as possible, especially when success criteria is involved – it’s bad when you challenge a supplier in a meeting about their commitment to return on spend, and they state that’s not their responsibility.”

Director of Marketing Retail sector


The changing agency ecology

The rise and rise of digital has for several years been a force for change amongst the world of marketing agencies. A decade ago, ad agencies and design firms bring their creative and visual skills to the medium. Next, direct marketers brought the skills of targeted communications to the digital world. And in today’s post-Web 2.0 era, PR firms have begun to deploy their proficiency in influence and media management.

Then there are ‘web’ or digital specialists. These agencies have become the fastest-growing group of marketing agencies for a reason: the traditional firms have struggled to adequately master the medium. Of these, many are web design firms, which have evolved out of the 2-D graphic design discipline. Others are technically led firms, which are typically built on a base of programming and project management expertise. A third category focuses on particular products: search engine marketing, e-mail management, and (today’s hot topic): social media expertise.

From the marketer’s perspective, digital should be firmly integrated with other initiatives to engage and pursue markets. Digital strategy should be joined at the hip with other aspects of growth and commercial strategy. But as brand owners increasingly realise, the practice of digital is frequently a world away from the practice of offline communications. So where should the marketer turn for expert guidance?


It’s something of a free-for-all, with every type of agency claiming their divine right to dispense strategic advice. The trouble is, each approaches digital with baggage: Crudely speaking (and this is something of a simplification, I admit), ad agencies bring a campaign mentality, designers are focused on usability and highly-polished aesthetics, PR agencies attend to the message at the exclusion of all else. And web specialists tend to be geared to keeping their in-house designers or programmers busy with the business of creating stuff. In the absence of an overarching strategy, hiring a bunch of delivery specialists – however good at their particular skills – doesn’t fill the gap.

Clearly digital marketing needs a better model. So what form might it take?

The offline world has experienced a growing schism between strategy (which in this context includes ‘creative’), and production. For the former, the marketer is outsourcing problem solving, innovation and expertise; for the latter, headcount, buying power and project management. There’s every reason to think that over time strategy and execution will break into distinct parts within the online world just as they have offline.

Chris Grannell Consulting Director Ellis Foster McVeigh

Chris has written extensively on marketing matters in Australia and internationally. As well as heading brand, marketing and business development projects in Australia, he has advised clients in the UK, Germany and Central Europe.

http://www.efm.com.au


A marketers view of the digital marketing ecology

The diagram below illustrates how most marketers viewed the current digital marketing ecology and how relevant agencies are in contributing to digital marketing strategy.

First generation digital service agencies

Traditional marketing services agencies

Second generation digital specialist agencies

Digital marketing strategy

Size of circle represents market share

Dec

linin

g r

elev

ance

Advertising

Direct Marketing

PR

Graphic Design

Web Design

Web Development

Email & SMS

Analytic

Search Engine

Marketing

MobileBrand

Social Media

Media


The lucky few have digital marketing plans. Almost none have true strategies

Have digital marketing strategies been successful for those that have in fact tackled them? For many, it’s either too hard to tell or too early.

In discussing the construct of those digital marketing strategies conducted we found that many lacked specific measures, in fact only 11% has measurable objectives to benchmark successes and failures or extract, at least, learnings. Objectives were often broad with many organisations still taking a ‘learn and see’ approach. It seems that for many, digital strategy still remains in the realm of tactics more so than strategy.

One Global Marketing Director described her agency’s approach to more of an “esoteric approach than one based on a clear methodology with insight derived from real data and research”. Two others were placed in the unenviable position of having invested significant budgets into strategies that were found to be of such poor quality that those senior marketers felt they had no option but to ‘bury’ the documents. “It just got to a point where we were telling them how to write the document and what to put into it. It wasn’t worth the effort.” one said.

“It just got to a point where we were telling them (the agency) how to write the document and what to put into it. It wasn’t worth the effort.”

Digital Marketing Manager Government sector

Do marketers have measureable digital marketing objectives?

11%Yes

89%No


And ‘social media gurus’ received their fair share of criticism for their lack of marketing expertise and commercial experience.

Despite some horror stories, however, many of those senior marketers that did embark on the development of digital marketing strategies conveyed the benefits of having gone through the process of its development. And while some acknowledge that they may not possess the most sophisticated of digital marketing strategies the fact that they have one at all, in their eyes, is a significant step forward for their digital marketing activities.

One senior marketer commented “My team now takes a more disciplined approach to their digital marketing. They have to ask themselves how what they are considering doing ties back into our digital objectives and how they will measure these. We have also started to ask that same question from our web agency,” she smiled.


A global perspective

The Digital State of the Nation Report shows that in Australia, in common with elsewhere, businesses understand the importance of digital marketing, but are failing to approach it in a structured way. The most telling statistic for me is the proportion of companies that lack a strategy.

I have found there is a similar crisis of commitment in the UK, US and Europe. Without a digital strategy, major opportunities may be missed and almost certainly more “digital savvy competitors will be eating your lunch”. But this is just one of 10 major challenges that I see when a strategy hasn’t be developed.

10 reasons why you may need a digital channel strategy

1. You’re directionless and without clear strategic goals and outcomes

2. You won’t know your online market share

3. Existing and start-up competitors will gain market share

4. You don’t have a powerful online value proposition

5. You don’t know your online customer well enough

6. You’re not integrated (“disintegrated”)


7. Digital doesn’t have enough people or budget given it’s importance

8. You’re wasting money and time through duplication

9. You’re not agile enough to catch or stay ahead

10. You’re not optimising through continuous improvement

I think the major missed opportunity is treating online like other channels - sure, there are similarities, but to be successful taking advantages of the differences is vital. Your customer profile and behaviour may be different online, your competitors different and there are completely different ways to engage prospects through the fantastic digital tactics like search, social and email marketing which need to be harnessed in an integrated strategy.

Dr. Dave Chaffey CEO and Co-founder Smart Insights

Dave is an international bestselling author (of 5 acclaimed books on Digital Marketing), consultant and speaker who has been recognised by the Chartered Institute of Marketing as one of 50 marketing “gurus” worldwide who “have shaped the future of Marketing”.

http://www.smartinsights.com/


The good news

It would be easy to look at this report as all doom and gloom. I don’t look at it this way. I think there’s some really good news.

That is, smarter senior marketers are taking a step back from their often misguided tactical actions (or complete inaction) and have recognised that digital marketing, like broader marketing and business activities, requires a strategic approach to it.

Even better news, for those marketers, is that there are existing strategic marketing frameworks and methodologies that can be applied to digital marketing.

One enlightened senior marketer has already subscribed to this way of thinking. She summaries the strategic opportunity quite appropriately. “I don’t think they [marketers] are realising it’s happened - implementation versus strategy. Businesses think they need implementrs, it’s only when they experience a strategist do they realise what they are missing. A true strategist is your secret weapon, not only do they help educate from within, but they help you sell to the rest of the business.”

“I don’t think they (marketers) are realising it’s happened - implementation versus strategy. Businesses think they need implementers, it’s only when they experience a strategist do they realise what they are missing. A true strategist is your secret weapon, not only do they help educate from within, but they help you sell to the rest of the business.”

Marketing Director Finance sector


Sure it requires channel expertise, but just like all marketing, it requires an understanding of environmental factors, the discipline to set measurable objectives and the development of a strategy that defines target market, proposition and the communications and interaction mix based on an understanding and recognition of the budgetary and organisational implications.

Chris Fiteni Director of Strategy Nucleus Digital Strategy


Thank You

This report would not have been possible without the support of the 82 marketers we spoke to over the past year. They have our gratitude for helping us develop the first Digital State of the Nation Report.

To the group of contributors and collaborators - thank you once again. It’s an amazing privilege to have a network of some of the best minds in business, marketing, digital and PR to collaborate with.

Contributors

Dr. Dave Chaffey Chris Grannell Marcia Griffin

Collaborators

Jon Hoel


Nucleus Digital Strategy

As experienced marketers, Nucleus Digital Strategy does not focus on creative and technology like most digital agencies. You’ll find our approach candid and uncompromised as we collaborate with you on your digital marketing goals.

From insights into your customers’ behaviour, competitive environment and our leading knowledge of digital trends, we’ll focus purely on developing digital marketing strategy that will steer your brand towards improved profitability.

Contact

Phone: +61 3 9999 1133 Email: [email protected] Website: www.nucleusdigitalstrategy.com Twitter: @nucleusdigital

http://twitter.com/nucleusdigital

Digital State of the Nation Candid Conversations with Marketers regarding Digital Strategy

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Transcript of Digital State of the Nation Candid Conversations with Marketers regarding Digital Strategy