Insights for Driving Sales Productivity & Resilience
Digital has long been a key ingredient in sales teams’ success, even before disruptive technologies made digital transformation a business-wide imperative. Now, in the face of the COVID-19 pandemic, digital selling is more important than ever.
In our 2020 State of Digital Selling research, we sought to understand the capabilities and key success factors enabling the digital transformation of selling among B2B businesses.
Based on a survey of 506 sales professionals across North America, Europe, and China, this report offers a comprehensive view of how B2B sales teams are leveraging digital in their sales processes.
Key Learnings From the Report
Now, more than ever, selling is a team sport.
Sales teams need to make the digital mindset shift.
B2B organizations have made drastic changes in response to COVID-19 – shifting to remote work, digitizing customer offerings and moving commerce online. Digitization planned to take years happened in months.
Based on conversations with 170 senior B2B transformation leaders and C-suite executives, this report reveals the main drivers of digital transformation investments and initiatives for B2B companies in 2020.
Here’s what you can expect to learn:
Substantial Operational Shifts Due to COVID-19
COVID-19 Exposed Significant Gaps in Digital Selling Capabilities
Marketing Transformation Continues Despite and Because of the Pandemic
Five Stages of Digital Transformation Maturity
Most Companies Continue Transformation Initiatives – Digitally Mature Are Accelerating
Application of Digital Tools Varies by Maturity Stage
Technology Priorities Reflect Level of Digital Transformation Maturity
Digital Transformation Sponsored Primarily by CIO/CTOs and CEOs
Download the full study to explore additional findings and examine detailed charts for each of the headlines provided above.
About the Authors
Fred Geyer and Joerg Niessing are co-authors of The Definitive Guide to B2B Digital Transformation, curators of B2BDigitalTransformation.com – an online resource center for B2B transformation leaders and facilitators of a monthly webinar series featuring senior B2B executives discussing the challenges of B2B digital transformation. For more information about the guide, the webinar series or to gain access to the online resources go to B2BDT.com. Fred is a Senior Partner at Prophet, a leading growth and transformation consultancy and Joerg is Senior Affiliate Professor of Marketing at INSEAD and director of INSEAD’s “B2B Marketing Strategies” and “Leading Digital Marketing” programs.
Open Research
This independent research was fully funded by Altimeter, A Prophet Company. This report is published under the principle of Open Research and is intended to advance the industry at no cost. This report is intended for you to read, utilize, and share with others; if you do so, please provide attribution to Altimeter, a Prophet Company. This B2B report is part of a larger study by Altimeter, A Prophet Company: The 2020 State of Digital Transformation was authored by Charlene Li, Omar Akhtar, Susan Etlinger, Ed Terpening, Ted Moser, and Aubrey Littleton.
DTC Marketing: Benefits, Best Practices & Examples
This increasingly common sales model helps amass data for better insights and constant experimentation.
What is direct-to-consumer (DTC) marketing?
Direct-to-consumer (DTC) marketing is a business model defined by direct transaction channels and customer engagement that lead directly to the consumer or customer. Called DTC marketing or D2C for short, it’s become more important than ever due to the way it has fundamentally changed the customer experience and marketplace for brands.
As eMarketer forecasted, DTC sales are expected to reach $17.75 billion by the end of 2020.
Direct-to-consumer companies mainly distribute their products directly to buyers without relying on intermediaries like traditional stores or other distribution channels. This allows DTC companies to sell products and services at lower costs than traditional brands. And it also allows them to maintain end-to-end control over the making, marketing and distribution of products.
Unlike their more traditional competitors, these D2C brands can also experiment with distribution models, from shipping directly to consumers, offering subscriptions, partnerships with physical retailers and opening pop-up shops.
DTC marketing is usually associated with disruptive retail brands. But many brands in a growing number of industries, and even those with a business-to-business (B2B) model, are experimenting with DTC marketing channels to engage more directly with consumers and customers.
How does DTC marketing work?
DTC marketing encompasses many areas, including efforts to build brand awareness, content marketing, growth marketing and performance marketing. These are all enabled by direct customer channels and direct customer engagement.
Direct-to-consumer marketing heavily relies on digital platforms including social media and digital advertising, but may also use mediums outside of pure digital, including print, out-of-home, TV, radio, etc. to interact directly with the target consumer or customer. Sometimes, these messages offer relevant content. Other times, they are designed to trigger the consumer to make a purchase.
“DTC marketing priorities are based on performance and growth marketing tactics, including customer acquisition, customer retention, product merchandising, content marketing, social media, and paid/owned/earned media.”
DTC marketing priorities are based on performance and growth marketing tactics, including customer acquisition, customer retention, product merchandising, content marketing, social media, and paid/owned/earned media. Tracking and capturing data across these efforts are done digitally. Companies measure it by analyzing customer acquisition cost (CAC) and lifetime value (LTV / CLTV).
In the pharmaceutical industry, D2C marketing plays a very different role. There is no direct route between consumers and prescription medications, so doctors are intermediaries. Though controversial, ads that encourage consumers to “ask your doctor” have been proven to boost prescription drug sales. Pharma companies spend about $6 billion on such ads a year.
How does DTC marketing result in growth and digital transformation?
The DTC model has disrupted business by opening up direct-to-consumer channels for intrinsic customer engagement with brands. The best ones are powered not just by sales, but by growing commerce with meaningful content and a community of other users. These three come together to create a powerful flywheel effect.
This personalized relationship with people has shifted expectations about brands. They expect more in terms of products, customer service and brand purpose. The approach has also transformed businesses with growth opportunities by arming them with direct and immediate consumer data, communication and channels.
How brand plays a role in DTC
A company’s brand plays a unique role in direct-to-consumer companies and should guide marketing efforts. Depending on the relationship with the consumer or customer, multiple campaigns are sometimes necessary. For example, the types of marketing that will resonate with an intermediary, such as a retailer, may differ from what will resonate with the end-user or consumer. To drive growth, companies must align the brand positioning, DTC marketing and target consumer/customer, even among these individual efforts.
Benefits of a DTC marketing strategy
Companies with strong direct-to-consumer channels have some significant advantages over those that don’t. They typically have much more customer data and can mine it for insights. Because they are often digital by nature, DTC companies have testing agility that traditional companies don’t. They can apply growth marketing tactics of constant experimenting and testing to deliver refined results. Often, they experiment with many offers simultaneously. All this information, combined with constant conversations with customers, makes them more flexible. They can make decisions immediately, shifting direction and budgets quickly.
Common DTC marketing challenges
These companies also face unique challenges. Often, they struggle to acquire consumers/customers in a financially sustainable way, requiring outside funding to power growth efforts. And since many start with only a few products, such as mattresses, razors or shoes, they have difficulty positioning themselves against new entrants in the space. They often fail to optimize multi-channel marketing approaches or take advantage of the breadth of digital customer engagement approaches. And when there are significant shifts in customer expectations, it can be especially hard for D2C companies to remain relevant.
Redefining how B2B / B2B2C companies directly engage with customers
By optimizing direct channels, business-to-business companies can achieve many of the benefits of the DTC model while driving insights and exceptional growth.
There are two different approaches to DTC Innovation:
B2B/B2C Innovating in Full DTC Model:
Some companies have used this approach to increase revenues, grow market share and build a stronger relationship with business partners. To begin, start by asking:
How can we play to win with a DTC model?
How do we position ourselves for executive and board-level investment and buy-in?
What is our go-to-market strategy and plan?
How do we build an operational and organizational model to support the new business?
B2B/B2C Innovating with DTC Principles and Tactics
Other businesses do better by adopting a few approaches from DTC playbooks, adjusting them to suit specific market needs. Start by asking:
How do we experiment with DTC principles without transforming our business model?
How do we build a customer relationship and engage with customers on direct channels, without disrupting our existing sales channels?
How can we build a DTC offering in parallel with the legacy business?
Wondering whose lead to follow in the DTC space? Take a look at these apparel brands, all with a different approach to DTC marketing. Start with Adidas, Allbirds, Everlane, MeUndies, Nike and Stitch Fix
How Prophet’s DTC consulting services can support your strategy
Prophet’s strong DTC background can provide:
Experience, mindset and DTC tactics customized for our transforming clients
The CMO’s New Mission: Accelerating Digital Selling
As pressure builds on CMOs, it’s critical to become an indispensable ally to sales teams.
As chief marketing executives put the finishing touches on 2021 plans, it’s clear that marketing’s role in accelerating digital selling has become a top priority. And they know it’s the only way to achieve meaningful growth. The problem is that they are not sure they can pull it off. Only 5 percent of CMOs are highly confident in their ability to impact the direction of their business, influence strategic decision and get support for their initiatives, according to a study published recently in HBR. That’s the lowest self-ranking of any role in the C-Suite.
More evidence that pressure on CMOs is building? The Gartner’s 2020 CMO Annual Spend Survey finds that CMOs are holding increasing accountability for sales. Return on investment (ROI), marketing qualified leads (MQL) and sales qualified leads are the top three focused metrics. That compares to measures like brand health/brand tracker at No. 8.
“The Gartner’s 2020 CMO Annual Spend Survey finds that CMOs are holding increasing accountability for sales.”
And at the same time, CMOs must do more with less, with 44% of CMOs facing midyear budget cuts as a direct result of the COVID-19 pandemic. And 11% are chopping budgets by more than 15% according to Gartner.
All this shows in the increasingly short tenure of CMOs. The average CMO stayed in his or her position for just 41 months in 2019, down from 43 months in the prior year according to search firm Spencer Stuart.
There are plenty of underlying reasons for this pressure, including unhappy CEOs, impatient customers and a more urgent need for growth. But perhaps the best reason for CMOs to make this shift is that they finally can, leveraging the digital innovations they’ve been building over the last several years.
Many of the companies we work with say marketing is now responsible for bringing in the best potential customers and getting these eager buyers into the hands of sales at the right time. And they know they must do it cost-effectively.
Behind the Convergence of Marketing and Sales
In many ways, this isn’t new. CMOs have long tried to make it easier for sales teams to reach the right audience in the right ways. But there are several critical differences now, making digital sales acceleration an urgent mission, not just something nice to have in the marketing plan.
The first, of course, is COVID-19. It’s disrupted the selling process in many businesses, and in some industries, it’s been crippling. In organizations with high-touch, agent-assisted sales processes, personal sales calls became impossible. That’s forced a quick–and often flawed–transition to digitally powered solutions.
Second, many CMOs are aware that marketing needs to do more to spur sales growth. And armed with increasingly sophisticated digital marketing tools, they are aware they can enable sales as never before. They are targeting quick wins and longer-term payoffs through digital selling efforts, making them a primary focus in 2021.
They know returning to growth is essential, and many are aware they weren’t delivering, even before the pandemic. (Their bosses know it, too. A study from McKinsey finds that while 83% of CEOs say marketing can be a significant driver of growth, 23% don’t believe that their marketing organization delivers on that growth.)
Customers, with their continually rising expectations of digital experiences, are also driving the change. People no longer have the patience for the old-school approach to the sales funnel. In the digital age, they expect highly personalized transactions, offered in multiple channels. Forrester anticipates that more than 50% of B2B companies will realign the sales enablement function to marketing to serve these buyers better (currently at 23% as of Q3 2018), further highlighting the convergence.
Three Ways to Speed Up Digital Selling Efforts
Just because CMOs understand it’s time to shift their agenda to help with demand generation and digital selling doesn’t mean they’re clear on how. CMOs have to define new capability requirements, reconsider their organizational design and operating model, hire new skills while upskilling existing talent, and redesign customer sales and service experience.
The smartest companies start with fundamental questions about which 2021 marketing priorities are best accelerating digital selling. And they are often building initiatives in three key areas:
1. Nurture and Engagement: Moving from One-to-Many to One-to-One
These efforts prime the buying interaction through the successful deployment of relevant and personalized content. They are empowering sales with digital content that can be updated and customized with shorter lead times. And typically, they use advanced analytics and “next-best-action” logic.
2. Experience and Innovation: Bridging Journey Inconsistencies Toward a Smoother Purchase
CMOs are looking for ways to get rid of friction, framing the buying process around customer personas. They’re dissecting the buying journey to prioritize and address high-value digital pain points and opportunities. And they are investing–sometimes heavily–in service design that leverages supporting technology to improve the entire purchase experience.
3. Organization and Culture: Spanning Siloes in Integrating Workflows
These efforts focus on training specific skill development, such as social selling. Sometimes they require work on a company’s operating model and an organizational redesign, comparing the current model to new priorities and jobs to be done. They also include business-case development, pilots and reinforcing mechanisms that can transform culture and drive buy-in. And they include defining and implementing critical shared metrics, aligning the organization as a whole (and individual teams) around common goals.
CMOs should position themselves and their departments as indispensable allies to sales teams. With the goal of seamless collaboration between marketing and sales, progressive marketing organizations are deploying new capabilities for targeting, automation and intelligent lead-nurturing. And these digital tactics are creating a much greater (and measurable) impact on new business.
Prophet’s Marketing & Sales practice helps accelerate digital-selling efforts, finding quick wins and longer-term payoffs. Contact us to learn more.
Understanding your target and setting goals are important. So is clarifying what you need to get there.
Digital has become increasingly integrated into who an organization is, what it does and how it grows. As a result, a digital transformation strategy becomes more interwoven in a company’s marketing approach. However, even in these digital times, it would be a mistake to not also plan for digital as its own separate entity.
While all marketing has a digital layer, all-digital encompasses more than just what’s apparent in traditional marketing. For this reason, we’ve put together a complete guide to building a powerful digital marketing strategy in 2020. We’ll cover what digital marketing is, its key elements and how to get started.
What is Digital Marketing Strategy?
Digital marketing strategy defines how a company can achieve its business objectives using digital channels, platforms and thinking. It asserts clear targets, prioritizes audiences, recognizes customer needs and behaviors, and details channel use and platform requirements. Put simply, it sets out how you plan and use digital to remain relentlessly relevant.
“All-digital encompasses more than just what’s apparent in traditional marketing.”
Intersections of digital marketing exist not only within branding and CRM but also in user experience (UX), customer experience (CX) and customer care as well:
Artificial Intelligence (AI) and the Internet of Things (IoT) embed the brand into our product experience.
Content strategy includes not only traditional marketing assets, but all content that can be levers for growth.
Digital innovation is creating new services, products and experiences – things actually worth marketing.
How to Create an Effective Digital Marketing Strategy
In our work with clients across industries and markets, we’ve identified the seven steps needed to form a modern digital marketing strategy.
1. Determine the Potential
The status quo has changed and digital is imperative to be current, competitive and attractive in the market. On which channels are your customers engaging with you? What are your competitors doing to be transformative in digital? How discoverable is your brand and how many inbound leads have been converted to sales? If you don’t know, you’re probably already behind.
2. Define the Role of Digital Marketing
How does digital marketing contribute to the business? This shouldn’t be a laundry list of marketing objectives, but instead a deliberate vision and series of intentional choices that indicates what digital marketing can and should do for the organization.
Ensure that you recognize the relationship digital marketing has with related elements in your ecosystem, which often include: brand, data, marketing, content, CX, UX, CRM, support/customer care, product innovation and media. By simply writing out what is at stake and which opportunities are available, you can quickly clarify your focus. Based on this assessment, you can then develop key performance indicators (KPIs) that clearly communicate to your executive team how digital is impacting the business.
3. Understand Your Target Audiences
Create robust digital profiles (what they want, how they behave, how to engage with them and with whom else they interact), map the customer journey in detail and identify value exchanges all along with it. These profiles often start with traditional segmentation, but you need to go steps further to recognize behaviors, interactions and content, functionality and experience needs.
With many clients, especially in B2B, digital profiles aren’t necessarily built around precisely who the customers are, but rather which objectives the target audience is trying to solve. Goals versus roles. Doing this early on keeps you cognizant of customer needs and allows you to match your objectives to meet them.
4. Take a Multi-Channel Approach
Create a modern channel strategy by taking advantage of and activating key channels like search, web, social and email. Specific platforms and touchpoints may beg for unique ‘channel charters’, identify how to best use them for the brand and the business, and what’s needed internally to pull it off.
View social as a sales driver, not just a media or customer care channel. How can social be used to meet your business objectives?
Be clear about search. Can incorporating organic or paid search engine optimization (SEO) help build brand credibility, drive web traffic or fend off competitors?
Think fresh about web. Is your website positioned to attract, obtain and convert leads?
Do you nurture former, existing or potential clients effectively using email or marketing automation platforms.
5. Identify the Resources Needed
Use all of the information charted above to determine what you need to execute against this strategy – include headcount, budget and your marketing technology system (platforms, APIs, services and data integration points). As Mayur Gupta of Spotify said, “Technology is the interface of marketing” and “the pipes connecting the different pieces together.”
Governance is crucial – build guidelines and playbooks for people (roles, responsibilities and skills), processes and tools. Many companies don’t pay enough attention to governance, yet it’s needed so people know their role and how they contribute to the success of the program. Plus, if you’re a global or complex organization, you’ll need to establish “market types” to help local leaders see where they are and understand what’s needed to grow in a new direction.
6. Create a Roadmap for Execution
Organize and prioritize initiatives into a roadmap that takes you from strategy to execution, even if it’s paced and phased over six, twelve and 24 months. Don’t be too slow or too cautious, don’t wait for annual planning cycles; be ready and agile with alternative scenarios available. Organizational digital transformation may take time, but marketing should be the nimblest driver and ready to act on available opportunities.
7. Support Your Digital Transformation Strategy
Identify how digital marketing can go beyond doing its day job efficiently and act as a powerful lever in this new era of digital transformation. It could be by using creativity in storytelling, innovating digital services or allowing the customer voice to influence media spend, uncover engagement opportunities and discover new audiences. Embracing digital in your marketing function can serve as a catalyst internally, as your culture becomes more comfortable and emboldened by the opportunities of digital transformation.
Constructing a digital marketing strategy that includes all seven of these components will allow your digital team—and the executive suite—to have a clear understanding of how digital can impact your business, plans for how to best do so and appropriate measures in place to benchmark and assess the effectiveness of your efforts.
If digital is a priority in your organization, as it should be, you’re likely going to need some experts in strategy and execution to assist with creating your digital strategy, identifying opportunities for digital disruption or driving digital transformation in your organization.
Identifying Trends, Best Practices and Key Capabilities for Digital Marketing Excellence
Altimeter’s 2020 State of Digital Marketing report gives marketers the latest data on how companies are using digital marketing to drive business results. It identifies and quantifies the key practices being used by companies to achieve digital marketing excellence.
Based on a survey of 476 senior digital marketers across North America, Europe, and China, the report provides key insights into what strategies, channels, and practices perform best, including how these vary across industries and regions. It also identifies trends in innovation, current technology adoption, and key metrics for measuring digital marketing success.
Key Findings From the Report
The top objectives for digital marketers include acquiring new customers (40%) and increasing revenue from current customers (39%).
Digital marketers’ top priorities for improvement include more effective personalization (52%), better segmentation (42%) and optimized owned channel performance (37%).
Fifty-two percent of companies rated technology integration as their top digital marketing challenge. Hiring the right talent (51%) and scaling innovation across the organization (49%) were top challenges, too.
Despite the impact of the COVID-19 pandemic, most marketers (56%) are continuing transformation plans, with 22% even accelerating them in response to the crisis.
Ninety-five percent of companies are able to personalize messaging and experiences in some form based on customer data. Nearly a fifth are using AI-driven predictive analytics.
The most desired skills for new hires include data analysis (42%) and marketing automation expertise (39%).
Microsoft (26%) narrowly beat Salesforce (25%), Oracle (13%) and Adobe (10%) as the leading primary martech platform for most marketing teams.
Why it’s important to use this year’s planning to start a fresh agenda.
As challenging as 2020 has been for marketing executives, it’s also been an accelerator of change. Amid pandemic disruptions, many companies found ways to reset, making fundamental–and often overdue–changes in their marketing organizations.
Those resets have opened doors to opportunities. As we help our clients map out 2021 marketing plans, we see important new ways for marketing to continue to enhance and even transform its role in accelerating a company’s growth.
We see several shifts that present a rare opportunity to develop the kind of marketing organization many people have been aspiring to work in, and lead, for more than a decade. These changes are built into marketing plans now and will sharpen focus and create more impact in the year ahead, as well as serve as building blocks for long-term growth.
Important Focus Areas for CMOs Developing Their 2021 Marketing Plans
Blur the Lines of Marketing
The best CMOs understand that solutions lie beyond their own departments and functions. The first wave of alignment has traditionally been marketing and sales, and more recently, deeper coordination with corporate communications. Increasingly, we also see CMOs building into their marketing plans integration with experience, tech, digital and HR teams. That’s because a genuine cross-functional approach is no longer nice to have, it’s essential for growth. While marketing may have responsibility for its plan and budget, leaders must see how collaboration with other functions is critical to the company’s success.
Elevate the Insights Function to an Operating System
As adept as many companies have become with transactional customer analytics and data, CMOs are keenly aware that insights often lag behind the accelerated pace of change happening across industries. That means plans are always a few steps behind what’s going on with customers right now. The pandemic, especially, has triggered profound changes in people’s behavior, making the need for constant pulsing imperative. Marketing leaders need a system that combines transactional customer analytics with current insights on human, consumer and user attitudes and behaviors.
Develop New Digital-Selling Strategies
Marketers can add value in the long term through brand reputation building, but they also need to play the critical role of generating leads and demand. Luckily, sales teams aren’t just welcoming this change, they’re pleading for it. Unable to jump on planes or meet face-to-face, salespeople need new digital tools, content and tactics to nurture every step of the sale. While there has always been a desire to push marketing and sales together, the pandemic is realizing the true merge of these two functions.
“A genuine cross-functional approach is no longer nice to have, it’s essential for growth.”
And, while this is certainly true for direct-to-consumer sales, an even larger opportunity for marketing is in B2B transactions. These customers, who are also enthusiastic digital consumers, are hungry for seamless solutions to procurement problems. By helping sellers answer that call, marketing has a rare purview to transform the selling process.
Create a New Talent Strategy
Finding the right people to run these intensely cross-functional operations requires a new approach. CMOs need to hire people who can look inside marketing and beyond, quickly jumping into a sales or product or experience or a tech conversation. And it’s likely recruitment efforts won’t be enough, at least to answer 2021’s pressing needs. What gaps can be filled by hiring? Partnering with other organizations? Upskilling? Even an acquisition?
Build-in Quarterly True Ups
CMOs need to be lighter on their feet than ever. Plans must be dynamic, allowing companies to be more responsive to shifts in the market and adjust in real-time. And this flexibility needs to be embedded in the day-to-day fluctuations of the company’s core businesses. Thorough scenario and contingency planning are mandatory for each goal and objective to be ready and responsive, with closer tracking of brand and sales performance. Dynamic planning, responding and acting will now become the new normal for marketing. At the same time, making smarter tradeoffs in the near-term will be part of the secret sauce for reframing marketing’s role in driving a long-term growth agenda.
Marketing planning can traditionally be an optimization exercise. Improvements in last year’s plan, with tweaks and adjustments here and there. This coming year, especially now, it’s an opportunity to use the planning cycle as a moment in time to: set a fresh agenda, harness the digital acceleration already underway, reorganize around outcomes, re-energize your team and redefine what success can look like.
Digital Transformation for Financial Services: Three Reasons to Hit the Gas
Legacy companies are moving faster, keeping up with their fintech competitors.
While the financial services industry is undergoing almost constant transformation, fintech startups drive most of it. As these rising stars continuously find new ways to introduce customer-centric innovation, incumbent financial institutions are struggling to keep up. “The 2020 State of Digital Transformation,” a new report from Altimeter, a Prophet company, finds that even as these tech-savvy newcomers surge to record valuations, 68% of traditional financial services companies report that they are only in the early stages of digital transformation. And they say that COVID-19 has slowed their progress even further.
While validating the obstacles many legacy companies face as they navigate their way forward, this research makes clear that this is no time to slow down. The sooner companies lean in and accelerate digital efforts, the more revenue and market share they can reclaim from newcomers.
Fending off the fintech onslaught
There’s no doubt that capital markets are favoring these fintech startups. In 2019, KPMG reports that investment hit $135 billion. These companies are growing in scale and revenue, with 68 achieving “unicorns” status, a valuation of at least $1 billion, as of this past September, according to CB Insights. And while they span consumer banking, payment solutions, insurance technology and trading, they have plenty in common: They’re disruptive, customer-centric and digital to their core.
Chime, a neobank startup offering digital cash management services and debit cards, is one of our favorite examples. It has tripled its transaction volume and revenue this year, achieving a $14.5 billion valuation.
“The sooner companies lean in and accelerate digital efforts, the more revenue and market share they can reclaim from newcomers.”
And Robinhood, a commission-free brokerage platform, saw daily average trades skyrocket to 4.3 million in June, surpassing all traditional brokerage firms. Among the household names left in the dust: TD Ameritrade, with 3.84 million, Charles Schwab at 1.8 million and E-Trade at 1.1 million.
But some traditional banking institutions, such as Marcus, Goldman Sachs’ consumer banking platform, have also seen rapid growth during the pandemic. It’s grown to more than $27 billion in savings from 500,000 customers, indicating that even legacy companies can successfully transform into digitally-powered institutions.
How legacy companies can catch up on digital transformation for financial services
Altimeter’s report delves into how incumbents are trying to catch up. Based on an in-depth survey of 600 executives, including 137 in financial services, three clear imperatives emerge.
1) Move faster. The majority of financial services firms are still early in their digital transformation journey.
Altimeter’s research measures digital transformation through a five-stage model. First, companies make their case for investing in digital. Next, they develop foundations for more comprehensive investment, seeking to understand customer journeys and improve employees’ digital skills. From there, they build operations, digitizing them at scale. Fourth, they integrate these platforms to use data more strategically, and finally, optimize for growth, leveraging data and AI for great customer experiences.
Only 25% of the companies in our study have moved beyond this to the final two phases. Financial-services execs say they are moving even more slowly. Some 68% say their companies are still in the first two years of their transformation journey, and only 38% say they’ve reached the third phase (building operations). That compares to more than 50% of healthcare, tech and retail companies.
And that’s far too slow for consumers. The latest banking satisfaction research from J.D. Power, for example, shows that the more digital the customer, the more significant the satisfaction gap. And dissatisfaction is highest among Gen Z customers, a fast-growing demographic.
2) Make new ways to reach customers a higher priority
Optimizing internal processes is a compelling reason to pursue digital transformation, named by 40% of respondents and 33% name responding to COVID-19. And to create the resilience to navigate the current economic and health crisis, financial service executives recognize that their digital transformation should focus on improving operations and enable them to operate in a more agile and flexible way.
But our data suggest that these companies should give more weight to the many ways digital transformation could provide firms with opportunities to reach customers through new digital channels, particularly as more consumers look to engage primarily online.
As the market continues to change, and consumer preferences and tendencies evolve significantly due to COVID-19, financial services brands are picking up on the need to leverage advanced technology and data to become more flexible and agile.
Transformation has not been easy, given legal hurdles and inherent resistance to change. And COVID-19 is creating new challenges. With urgent demands for supporting remote work and developing digital marketing and selling tools, the pandemic has hijacked many corporate priorities. In fact, 45% of our respondents say pandemic response and related budget considerations are the most significant challenge they face. And of course, traditional obstacles like risk management, resistance to change or rigid structures haven’t gone away.
The global economic and health crisis has impacted the way we think about digital transformation. This research underscores questions leaders within these companies should ask, to accelerate the transformation and achieve growth.
How has your organization accelerated or reprioritized its digital transformation initiatives in response to the current environment?
What obstacles are you encountering as part of that acceleration?
Is your agenda building greater operational resilience for your business?
Prophet’s financial services practice has been partnering with many clients in accelerating their digital transformation journey. Please contact us to learn more.
Five DTC Growth Moves to Optimize Your Investments
These 10 real-world examples will show you how to optimize your investments in the rapidly shifting direct-to-consumer landscape.
For the right investors, the rapidly shifting direct-to-consumer (DTC) landscape presents plenty of possibilities. Many of these digital natives are just one cash infusion away from dominating their category–as long as they make the right strategic DTC growth moves.
“We find companies that have the potential for market disruptive growth and profitability, and the positioning to generate the most likely–and fastest–returns on investment.”
The pandemic-fueled surge in all things e-commerce is pushing many to record sales, with business booming at companies like Peloton, Quip and HelloFresh. But not all DTC companies have the same growth potential, and there have been plenty of notable flame-outs. In our work for funds looking to make DTC investments, whether it’s in due diligence or consulting on the use of funds post-transaction, we’re intent on optimizing investment. We find companies that have the potential for market disruptive growth and profitability, and the positioning to generate the most likely–and fastest–returns on investment.
Beyond assessing fundamentals, including how well possible targets have penetrated their customer base, brand staying power and competitive moats, we zero in on potential, based on specific growth moves. We’ve seen that companies with the ability to lean into these five strategies have the best chance to achieve uncommon growth.
We look for companies that are ….
1. Continually Tapping Unmet Needs
The most successful DTC brands started with an unmet need, filling some area of behavioral white space. Millennials, for example, wanted to start investing but felt ignored. Companies like E-Trade and Charles Schwab seemed like their parents’ tools. Robinhood, with its “investing for everyone” credo, stepped in to draw millions of new stock-market investors, with impressive (and occasionally controversial) results.
Lemonade
Our favorite example is Lemonade, which has used behavioral nudges and machine thinking to become the most disruptive force in homeowners, renters, condo and now pet insurance. In return for signing the honesty pledge, customers get transparent prices and lightning-fast service. While many Gen X and older customers may not have heard of it, young people love it. “I just bought insurance on Lemonade,” one of my young associates told me the other day. “And the user experience was freaking awesome.” Has anyone ever said that about insurance until Lemonade came along?
2. Ending Churn Through Customer Obsession
Given the massive spending needed to acquire customers, the strongest brands are those that maximize that investment. Strong retention requires a shift in focus from product obsession (the natural starting point for so many DTC companies) to true customer obsession.
Stitch Fix
Stitch Fix is continually updating its offer, finding new ways to please existing customers and new customers to please. Its core offer is a fashion fix with five carefully curated choices, and millions love how the personalization gets more accurate over time. But many don’t want to shop this way. So it recently introduced Direct Buy, enabling old and new customers to dive deep into single categories, boosting incremental sales.
3. Uncovering Value Through Deep Customer Analytics
The fastest-growing companies are those that do the most with their data.
Looking closely at questions of price elasticity, for example, can make all the difference in expansion, particularly in new territories. And while this has long been the promise of DTC companies, the reality is that the more data they collect, the less likely they are to use it. IDC estimates that about 90% of what businesses collect is “dark data,” and never used at all–let alone effectively.
Canoo
So we pay close attention to those that dig into data in every channel. Canoo, for example, is so expert at harnessing tech and innovation insights that it’s poised to launch its electric vehicles after 19 months, not five years. And based on analytics, it’s confident that higher-end consumers will love its subscription-only model, with as little as a one-month commitment.
MeUndies
Another data-savvy company is MeUndies, which has used what it’s learned from social media to sell more than 10 million pairs of underpants. Even rarer for DTC companies, it’s been profitable for three years.
4. Finding New Adjacencies
While many DTC brands build their business on a single product, they eventually need to expand to keep growing, either geographically or by adding new categories. This is a moment when many need more cash, new investors or the ability to acquire or partner with other companies.
Casper
Broadening offers while maintaining category credibility often comes down to the right messaging and positioning. Casper, for example, launched in 2014 and quickly became successful. But as competitors piled on, it’s needed to find new ways to expand. With a promise to become “the Nike of sleep,” it now sells pillows, sheets and weighted blankets. But more importantly, it positions itself as the expert on sleep wellness.
Airbnb
Similarly, Airbnb recognized that it could find growth by moving beyond lodging and selling experiences that make people want to travel. From sushi tours of downtown Tokyo to paddleboarding with sea lions, these adventures are adding millions in revenue. (When COVID-19 struck, they also provided a quick pivot to virtual experiences.)
5. Partnering Strategically to Scale the Ecosystem
Headspace and Spotify
Finding partners is a way to access new customers and stay relevant. Headspace, the popular meditation app, has increased its influence exponentially by partnering with Nike, Spotify and the NBA.
Everlane and Nordstrom
Retail is an obvious choice and can be a game-changer. Even non-digital consumers can discover brands like Native, Harry’s, Barkbox and Quip at Target, for instance, or find Everlane and Birdies at Nordstrom.
Alo and Animal Crossing
Others leverage pop culture. Alo, a yoga company, and Tatcha Beauty teamed up with Animal Crossing for product launches within the popular video game.
Allbirds and Adidas
The partnerships that we believe spark the most growth are those that combine scale and purpose. Allbirds, which has built its impressive valuation on sustainable fashion sneakers, recently partnered with Adidas, which has been trying to increase visibility for sustainability efforts. Interestingly, this unlikely partnership with competitive brands introduced a collaboration that pairs Allbirds’ innovative approach to materials with Adidas’ marketing and manufacturing might, and is set to produce the world’s first carbon-neutral performance shoe next year.
As they sift through DTC companies, investors should look for potential targets that can make some (or all) of these five growth moves. These are the nimble brands that can unlock the fastest returns for investors and find exceptional growth for themselves.
Prophet is obsessed with helping clients win with their customers and unlock uncommon growth in this digital age. Contact us to learn more about what we are doing in all things direct-to-consumer.
Webinar Replay: How to Take Your Brand DTC in 2021 feat. Canoo
In the wildly disruptive electric vehicle market, Canoo is pushing boundaries. Take a peek under the hood.
56 min
In this webinar, we hear from Prophet’s client Canoo, an award-winning electric vehicle subscription service. Bob Wolfley (Marketing), Lucy Ross (Subscription & Pricing) and Veronica Shea (Content & Communication) share how the brand redefined urban mobility and navigated the COVID crisis with a refreshed DTC approach.
Prophet is obsessed with helping our clients win with their customers. We are a global consulting firm, helping our clients unlock uncommon growth in this digital age. Contact us to learn more about what we are doing in all things direct-to-consumer.
How Internal Podcasts Can Liberate Your Employees with Prophet’s Mat Zucker
Mat Zucker inspired the idea for this mini-series when he interviewed Lindsay from Casted for an article he wrote for Forbes about internal podcasting. He has been a fan of podcasts for years. In fact, he’s been creating brand podcasts since the ’90s. This mix of passion and experience gives him a unique perspective when it comes to use cases for podcasts in the world of brands. In his experience, most use cases are usually for external brand podcasts. But with the rise in training and communication within organizations, Mat saw the opportunity to explore how internal podcasts can be a valuable asset to businesses.
In this episode, Mat dives into trends that he has seen in using podcasts internally to build a stronger community and connection inside the business.
Webinar Replay: B2B Leaders Series feat. Zurich & Maersk
Digital transformation offer special challenges for B2B companies. But there are more opportunities, too.
56 min
Watch the webinar replay in which you’ll learn the challenges and opportunities that B2B organizations face in undertaking transformation on a large scale. The discussion features Lindy Hood, SVP, Chief Customer Officer at Zurich North America, Sonny Dahl, Global Head of Customer Experience at Maersk and Fred Geyer, Senior Partner at Prophet and will include lessons learned in accelerating forward momentum as well as how COVID has impacted their transformation plans.
Two of the featured speakers, Fred Geyer and Joerg Niessing, co-authored ‘The Definitive Guide to B2B Digital Transformation’. Get your copy of the book here.
If you have any questions or would like to learn how our Marketing & Sales practice helps clients identify a clearer path to a digital transformation that powers growth with real and measurable results, contact us today.
