McKinsey: Digital capabilities boost sales conversion

Companies that fit a variety of digital channels into their marketing engagement are capturing large swaths of consumers, McKinsey & Company research shows. Companies with greater digital capabilities are able to convert sales at a rate 2.5 times greater than companies with lower capabilities.

Digitalisation continues to take wing, with an ever increasing number of digital channels opened by devices, that can be populated by apps and mobile advertising, which, in terms of numbers, means digital touchpoints are increasing 20% annually. Of consumers that engage digital channels, 39% are engaged with the digital environment to make initial considerations of brands (“experimenters”), while an additional 42% use digital tools for both initial considerations as well as more rigorous evaluation of the quality of brands in their purchase journeys. The remaining 19% uses digital tools “end-to-end” with the total purchasing journey happening online (“fully digital”).

Given the fickle online engagement of consumers, marketers too have taken to the internet to influence the journey towards their respective brands as far as possible. Yet, while various channels have been open for some time, the way in which marketers can take advantage of the channels are still less clear. To gain a grasp on the effect the internet has on branding, McKinsey & Company quantified the numbers out of the big data created by 1,000 brands across a wide range of product categories, covering 20,000 consumers and 100,000 touchpoints. The aim of the study was to isolate the relationship between the levels of digitalisation in which consumers access products and services and the effect that branding efforts have, looking particularly at the relationship between branding and brand conversion.

The effect of changes in consumer behaviour, especially the uptake of online research and comparison as well as social media, have a correlation to brand conversion, according to the research. “Experimenters” have a conversion rate of up to 40% as they are more likely to find new brands or be influenced through Facebook, Twitter, or product-evaluation platforms for conversations about the qualities of products or services. The more touchpoints along the way, the higher the change of ‘losing’ a branded customer. While the digitally savvy consumers, the “online only” have a considerably lower rate of conversion at 25%, making them difficult to reach.

To explore the landscape and develop a map of those whose digital marketing represents best practice, McKinsey analysed the data set by rating brands according four criteria:

1. the ability to create brand awareness among an unusually high share of digitally savvy consumers;
2. to serve customers digitally during the purchase processes;
3. to generate an online customer experience deemed at least as good as the offline one;
4. and to track the digital comments of customers about their experience and to use those comments to improve it.

The consultancy then added the scores across the above dimensions, compiling a digitisation index that represents the weight of satisfactory touchpoints leading to a purchase across decision journeys. The study results show that there is a wide variation between those in the top 10 percentile and those in the bottom 10, with the top 2.5 times more likely to convert brand awareness into sales. In certain industries – software, consumer electronics, electric appliances, and detergents – higher brand-digitisation scores resulted in a disproportionate increase in sales – with a 1% increase in digitalisation score leading to a 1.5% increase in sales.

The implications of the result for competition, suggesting that the more digitally “savvy” digital brands are consolidating their positions within their sectors – and, given their already powerful presence, will diminish the chances that laggards can catch up.

The internet has allowed consumers to become more empowered in their decision making process, which has meant brand messages lose some of their impact and the likelihood of conversion decreases. With the brands the most likely to still be effective in converting consumers being those that exist in a wide range of digital channels and come to have a word of mouth presence. The authors noting that, “Darwin understood that it’s not necessarily the strongest or most intelligent species that survive, but rather those best responsive to change.” Digital Darwinism is key.