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Marketing is among those operations undergoing a fundamental change in the digital world. Today’s consumer has materially different expectations about how she wants to buy products and services and about how she expects companies to market them to her.
Adam Pressman
Todd Huseby
In such a dynamic environment, chain drug store executives need to make digital marketing a priority. While some have already done this, many have yet to pay sufficient attention to the change digital has brought to their customers’ shopping habits, experiences and expectations, or to its potential impact on their business. Indeed, many have a blind spot about the importance of putting digital marketing at the top of the list.
Understanding the customer
Chain drug store executives without a digital marketing strategy risk misunderstanding their customer. They risk viewing their customer as an inhabitant of a bygone era — someone who clips coupons from the weekly circular stuffed inside the Sunday newspaper. While many target consumers may still subscribe to a printed newspaper, the number has dropped drastically over the past few years and continues to decline.
Most people, including seniors and soccer moms, as well as Millennials and other young adults, have replaced print with digital devices, and they browse, learn and shop on those same devices. Correspondingly, they look to websites, apps and retailer social media to meet their expectations.
For those companies that misunderstand the customer, the executive team unintentionally reveals a lack of insight and respect for her. Inevitably, they will miss sales opportunities, and they will see their store traffic either dropping or falling short of its potential.
Until executives truly know their customer — how she behaves with digital devices, what’s important to her for digital content, how she is changing her expectations — they will continue to put at risk the essence of whom they professionally serve. Their stores will become increasingly irrelevant to her and will not earn her business.
New and evolving digital technologies provide the opportunity for brands to move well beyond the traditional model of offering non-tailored marketing messages and offers. Now more than ever, brands can share stories, offers and products that are tailored and personalized to a customer, rather than one-size-fits-all communications. Most importantly, brands have the opportunity to create advocates, not just customers.
Understanding developing technologies
More than two-thirds of all Americans use smartphones and other mobile devices regularly. On average, they spend more than three hours each day on these devices, often browsing, shopping and sharing information about their experiences. Meanwhile, our informal surveys of chain drug store executives find only 10% to 15% saying that they share information on social media and even fewer spend any time watching online videos. They are equally inexperienced with other digital channels.
The stark difference between customers’ and executives’ digital experience underscores the risk of executives’ lack of knowledge about the potential for using digital marketing to engage the customer, build a one-on-one relationship with her and market to her better. As the consumer continues to adopt new digital platforms quickly and raise the value she expects from companies on these platforms, this difference grows wider. Executives could easily remain stuck, becoming further out of touch with her. They could miss more and more opportunities to sell to her as she increasingly finds buying online more convenient than the time-consuming task of going to a brick-and mortar-location.
Assessing capabilities of digital marketing
Digital marketing is powerful. It costs less than print, direct mail advertising and other traditional marketing efforts. And it has the potential to be much more relevant in the moment when a customer needs it. So its ROI will be much higher.
Digital marketing’s potential was underscored by A.G. Lafley, executive chairman of the Procter & Gamble Co. (P&G) board, who recently described how the company is shifting increasingly to digital marketing and doing so with in-house resources. He added, “And we’re getting a heck of a lot more out of our digital, mobile, search and social programs.”
Unfortunately, P&G’s maturity is an exception among most companies in the chain drug sector. The results of the National Association of Chain Drug Stores–A.T. Kearney “2015 Winning With Digital” study show that when asked about strategy, processes, organization and capabilities, and the use of metrics, most respondents describe their digital marketing capabilities as being novice or emerging — and they know they have a long way to go to implement a successful digital marketing campaign.
One company with novice digital marketing capabilities offered, “Anything we’ve done or will do in the coming six to 12 months will be ‘firsts,’ and development of KPIs [key performance indicators] is necessary.”
His company’s cautious steps and uncertainty were shared by two executives of companies with emerging capabilities. The first said, “We don’t have an integrated strategy, nor do we have an integrated digital marketing team. It’s more piecemeal, and we’re trying to figure out how to fit it all together.” The second added, “There is a significant lack of clarity at the most senior levels on our company’s digital strategy and who ‘owns’ it.”
As these executives have done, other retail executive teams will want to take stock of their companies’ digital marketing capabilities. Being a company with novice or emerging digital marketing capability is not a good place to be when facing competition whose executives have already prioritized digital marketing. These competitors possess the digital tools to drive customers into their stores or onto their websites, apps and social media. They also have the ability to leave novice and emerging companies further behind and to put them more at risk of not being able to attract customers whose lives are digitally based.
Gaining a new mind-set
Most of the executive teams surveyed have a lack of clarity about many aspects of digital marketing. For example, even as they realize that their traditional marketing is no longer successful, they are reluctant to undertake digital marketing because they are afraid of failure.
In our legacy, nondigital world, success is expected from the beginning of a marketing campaign. Risk is not an option. Executives see failure as unacceptable. This mind-set does not work with digital marketing, which changes too quickly for risk aversion and fear of failure to be helpful.
In the digital world, the best practice is experimentation: Test and learn. When a company tries a new marketing approach, failure is acceptable so long as it is paired with a learning that can be applied. Most importantly, the company should have a clear understanding of what it is testing for and how it is going to measure whether or not it is working. Just spooling up tests is the easy part; making sure you are gaining meaningful and actionable learnings is the harder and more crucial part.
This executive mind-set frees the company to analyze what went wrong, learn from the mistakes and move on to another approach. In this way, the company constantly experiments, tests, learns and becomes more effective at marketing to the customer.
But before this best practice can be put in place, executives need to understand the customer better, become familiar with developing technologies, recognize where their company sits along the digital capabilities spectrum and gain a new mind-set about marketing.
Most of all, they need to place digital marketing at the top of their priority list — a necessary step for remaining competitive and for boosting sales and profitability in the digital world where the customer lives, works and shops.
Todd Huseby (todd.huseby@atkearney.com) is a partner with A.T. Kearney’s Health and Retail Practice, and leader of the firm’s digital business efforts in the Americas. Adam Pressman (adam.pressman@atkearney.com) is a partner with A.T. Kearney’s Strategic IT Practice.
