McKinsey: Digital brand capabilities eat the competition

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

Digitalisation continues to take wing as an ever increasing number of digital channels are populated by apps and mobile advertising, resulting in an annual increase of digital touch points of 20%. Of consumers that engage digital channels, 39% are engaged with the digital environment to make initial considerations of brands (‘experimenters’). An additional 42% use digital tools for both initial considerations and for a more rigorous evaluation of the quality of brands in their purchase journeys. A further fifth (20%) of users use digital tools ‘end-to-end’ as they complete their purchasing journey online (‘fully digital’).

Given the fickle online engagement of consumers, marketers have taken 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 to map out the Big Data created by 1,000 brands across a wide range of product categories, covering 20,000 consumers and 100,000 touch points. The aim of the study is to isolate the relationship between the levels of digitalisation in which consumers access products and services and the effect that branding efforts have.

Digital Darwinism
The effects 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 consulting firm. ‘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. The more touch points along the way, the higher the chance of ‘losing’ a branded customer. The digitally savvy consumers, the ‘online only’, have a considerably lower rate of conversion at 25%, making them more 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:

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

The consultancy added the scores across the above dimensions, compiling a digitisation index that represents the weight of satisfactory touch points 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 result in a disproportionate increase in brand-sales conversion. For these industries a 1% increase in digitalisation score will lead to a 1.5% increase in sales. The results suggest that the more digitally ‘savvy’ digital brands consolidate 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 means brand messages lose some of their impact and the possibility of conversion decreases. Brands that exist in a wide range of digital channels will be the most effective in converting consumers. The authors conclude: “Darwin understood that it’s not necessarily the strongest or most intelligent species that survive, but rather those best responsive to change.”