A Forrester Consulting Thought Leadership Paper Commissioned By Webtrends The Implications Of The Splinternet And Future Of Web Analytics

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1 A Forrester Consulting Thought Leadership Paper Commissioned By Webtrends The Implications Of The Splinternet And Future Of Web Analytics September 2011

2 Table Of Contents Executive Summary... 2 The Current State Of Digital Marketing... 2 The Splinternet Is An Equal Opportunity Disruptor... 3 The Solution... 7 Key Recommendations Appendix A: Methodology Appendix B: Demographics/Data , Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to 1-IQATKP About Forrester Consulting Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit Page 1

3 Executive Summary In May 2011, Webtrends commissioned Forrester Consulting to study the phenomenon frequently referred to as the Splinternet. In conducting in-depth surveys with 210 global, senior-level digital marketers across industries, Forrester found that many marketers are struggling with the fragmentation of technology standards and customer touchpoints across proprietary digital platforms and devices. Key Findings Forrester s study yielded three key findings: The Splinternet disrupts the marketing landscape. Technology and channel fragmentation are a very real phenomenon; marketers know that adapting to a multichannel environment is critical and are racing to understand the effect of the Splinternet. Marketing strategies need a reboot. Firms must take a fresh look at their foundational strategies to evaluate how they will create mutually beneficial relationships with customers in light of new channels, technologies, and the expectations of sophisticated consumers. Multichannel success requires mastery of multiple disciplines. Firms must take a multidisciplinary approach to harnessing the opportunities that the Splinternet presents. Technology, organization, process, and measurement are all interrelated contributors to a marketing organization s effectiveness. The Current State Of Digital Marketing Marketing is going through a period of rapid and significant evolution. The era of an easily compartmentalized Internet comprising the web browser, well-defined touchpoints, and open technology architectures has been usurped by the Splinternet, a large-scale fragmentation of devices, data access, and technology standards. The Splinternet has an expansive effect because it breaks many of the foundational assumptions upon which digital marketing is based: Connected devices go beyond the PC. Smartphones, Internet-connected devices, and new devices such as tablet computers create a diverse world of connected, overlapping devices. Customers are now capable of being online 24 hours a day, raising the bar for original and creative marketing content, but also providing firms with ample opportunities to establish a relationship. Social media inverts data ownership. Consumers generate more data than ever, but they are retaining control of that information. Social networks retain control of data based on personal networks and password-protected sites, ultimately withholding massive sources of insight from digital marketers. This changes the balance of power for the control of data. Marketing standards shift. As touchpoints diversify and platform vendors assert control over access and technical standards, marketers must adapt to a strategy of marketing in a world of walled gardens. Each touchpoint requires its own technology, processes, and measurement strategy. Page 2

4 Everyone is an analyst. As channels and customer touchpoints increase, marketing has become a highly collaborative environment. More stakeholders in the business need access to marketing insight than ever before. Firms need to provide marketing stakeholders with relevant and timely reports and analysis to support decision-making. The Splinternet Is An Equal Opportunity Disruptor The survey findings make it abundantly clear that the Splinternet is a real and pervasive phenomenon that affects firms of all sizes, geographies, and industries. As a result of this great equalizer, nearly all firms are affected by technology and touchpoint fragmentation, and they face a marketing landscape of remarkably similar challenges and opportunities: Multichannel marketing is critical. Firms reported a high-level understanding that multichannel holds value. This recognition extends to both benefits for companies in terms of sales and profits as well as satisfying customer expectations (see Figure 1). Figure 1 Firms Grasp The Importance Of Multichannel Marketing, But Big Changes Are A Bit Harder To Make To what extent do you agree or disagree with the following statements about multichannel marketing? Completely agree Completely disagree - 1 To serve today s customers, we have to improve our multichannel capabilities We will drive more sales and profit by becoming a multichannel company Customer expectations for cross-channel or multichannel relationships with companies and brands have changed dramatically Being an effective multichannel company will be critical to our longterm success In the future, our multichannel strategy will be a key factor in how we invest in technology to support our channels In the future, our multichannel strategy will be a key factor in how we develop products and services Our company must rethink how it services customers to become a true multichannel company A multichannel customer is worth substantially more to us than a single channel customer Our organization must change dramatically to enable becoming a multichannel company 3 37% 31% 37% 27% 2 30% 23% % 11% 4% 13% 3% 50% 1 1% 42% 1 3% 4 22% 3% % 2% 37% 27% 11% 1% 33% 33% 14% 2% 0% 2 50% 7 100% Page 3

5 Customers want everything to be the same across all touchpoints and devices. Customers also expect everything to be available instantly. They send an and expect a response within hours not days. (Marketing Executive, Retail) It is starting to get to the stage where we offer promos and marketing campaigns to individual people in organizations. That segmentation becomes incredibly complicated. Some want an , some want text, some want to do collaboration sessions online. Channels have become incredibly complicated. If you connect to people through the wrong channel, it can be a relationship breaker. (Marketing Manager, High Tech) Social media dominates share of mind and wallet. Emerging channels are a major fixture and cause of fragmentation driving the Splinternet, most notably social and mobile. Firms reported that they are most active in social networks when expanding beyond traditional interactive channels, often at the expense of other channels such as mobile (see Figure 2). Figure 2 Social Is Soaking Up Marketers Attention Beyond traditional interactive channels such as search and website marketing, in which emerging channels is your company currently conducting marketing activities? Company presence in social networks 7 Company advertising in social networks User generated content such as blogs, reviews, ratings, etc. Mobile applications 5 54% 52% Mobile web browsing Mobile messaging such as SMS 2d barcodes Tablet computing 41% 34% 30% 2 Games Kiosks 13% 12% Other 2% As far as digital marketing, generally I direct digital marketing that supports our stores from [microblogging sites], [social media sites], , and website enhancements. We do not do mobile at all currently. It s beyond our current capacity. We don t have the staffing for it. It is literally beyond our capacity. (Marketing Manager, Retail) Measurement issues create a self-defeating cycle. Firms reported that measurement is a top challenge for adapting to fragmentation. The failure of measurement to keep pace creates significant barriers to adoption for Page 4

6 marketers because respondents simultaneously indicated that uncertain ROI is the top barrier to adopting new channels in their organizations (see Figure 3). The source of this issue lies in the fact that most firms only measure basic metrics rather than deep, business-oriented key performance indicators (KPIs) (see Figure 4). Figure 3 Proving ROI And Lack Of Budget Create A Vicious Cycle Of Barriers "Please indicate the barriers, if any, that prevent your marketing organization from adopting new channels?" Uncertain ROI No budget allocation Company bureaucracy Cost is too high Unfamiliarity with appropriate technologies and vendors Data security risks Lack of skills and resources Difficulty working with IT or external partners for Legal issues Lack of executive support/sponsor Concern about negative feedback from customers None. There are no barriers. Negative feedback from within the company Other 4% 3% 1% 13% 12% 12% 11% 23% 22% 21% 1 31% 31% 4 (multiple responses accepted) Page 5

7 Figure 4 Firms Are Measuring But Long-Range Key Performance Indicators Lag "What metrics does your organization currently use to measure the success of emerging channels?" Click-through rate Conversion rate (orders, leads, applications, etc) Lift in brand awareness or affinity Sales or revenue Overall return on marketing investment (program dollars) Customer satisfaction Customer retention Return on ad spend Cost per Sale/Customer/Order Share of customer wallet Cost per lead Customer life time value (LTV) Average order value Improved internal efficiency/productivity We do not have specific metrics in place Don't know 1% 20% % 41% 37% % 30% 2 57% 52% 50% (multiple responses accepted) We don t have specific metrics at this point. The driver to our social work is that you know you need to be in certain places, targeting certain group of consumers, just haven t figured out if we re reaching them thoroughly and measuring if impact is turning into sale or brand awareness. We re seeing where our brand awareness is, but it is hard to break out which part of our marketing dollars are pushing those levers. (Marketing Executive, Manufacturing) I don t think we know what constitutes success with our social programs. We don t have any traditional measurement tools beyond measuring activity on pages. We have not been able to link activity to sales in any way. (Marketing Director, Consumer Packaged Goods) Online marketing is being used more and more to justify offline marketing. This is a resource drain to the digital marketing team, and it isn t an exact science, also it creates more arguments over attribution. Brand marketers see their budgets dropping and are desperate to justify their activities. (Marketing Executive, Retail) It is easier to buy technology than to develop organization and processes. The survey found that firms are most likely to invest in technology and third-party services to support emerging channels, above skills and staff, and far above creative development (see Figure 5). This data suggests that firms are pushing to enter emerging channels as quickly as possible, potentially at the expense of long-term success built through the development of in-house intellectual property and holistic programs. Page 6

8 Figure 5 Firms Will Spread The Money Around To Fill Numerous Holes In Their Emerging Channel Capabilities "Where will your firm invest to support emerging channels? Technology to execute activities in emerging channels Third party services such as agencies and consultancies Technology to track and measure activities in emerging channels Skills and staff to develop and manage activities in emerging channels Creative development to support activities in emerging channels Technology to manage processes for marketing in emerging channels Media placement or messaging Technology to manage data from emerging channels 2 27% 37% 3 53% 51% 47% 47% Other 1% (multiple responses accepted) Our company struggles to recruit the right people who can manage marketing in a fragmented environment. Traditional marketers lack the skills to succeed. We also need the right data analysts. Our teams need to cope with a rapidly changing environment. (Marketing Executive, Retail) The Solution By universally disrupting nearly all markets, the Splinternet creates a tremendous opportunity for those organizations that learn to transform the challenges of fragmentation into productive customer engagement capabilities. Channels and technology are finally able to support truly mutually beneficial relationships between firms and customers. Marketers agree that fragmentation presents significant opportunities to firms, spanning the customer life cycle and providing increased communication relevance (see Figure 6). Page 7

9 Figure 6 Fragmentation Is An Opportunity For Segmentation And Targeting To Drive A Variety Of Objectives "What opportunities does media fragmentation present to your organization? Ability to deliver more targeted or relevant communications Increased customer engagement New customer acquisition Increased customer loyalty Ability to meet customer preferences Market research and/or customer intelligence Brand building Increased revenue Customer service Reduced reliance on mass media to drive business Increased market share Supporting other channels Product innovation Driving traffic to stores Supporting partners To maintained parity with competitors 14% 62% 61% 57% 5 50% 50% 47% 42% 40% 40% 34% 31% 2 24% 7 (multiple responses accepted) Rather than ignore or resist fragmentation, firms must take advantage of this opportunity by embracing and aligning the following components: Use strategy as a foundation. First and foremost, firms must develop an overarching strategy from which to direct the tools, organization, processes, and measurement capabilities that are necessary to succeed in a fragmented marketing ecosystem. Survey respondents indicated that strategy is the number one skill they need in the next five years as media fragmentation occurs (see Figure 7). Page 8

10 Figure 7 Strategy And Campaign Process Skills Top The Wish List As media fragmentation occurs, what skills do you predict will be most critical to your marketing organization over the next five years? Rank up to 5 in order of importance Ranked 1 Ranked 2 Ranked 3 Ranked 4 Ranked 5 Strategy 50% 7% Campaign planning 13% 1 14% Technology integration 11% 13% Campaign analysis 4% 13% 13% 11% Skill with online applications 12% 12% Data management and segmentation 7% 14% Communications 3% 12% Budget management 3% 3% 7% 14% Cross functional coordination 1 Creative design 2% 11% 7% Agency management 1% 4% 3% 7% With these emerging channels you can focus so much better. You can get down to the micro level. You can talk to consumers at a level you can t engage in when doing mass media. You can send them content or make them aware of content that is of interest to them. You can segment them. You can find folks that are passionate and followers and support you along the way. Grassroots campaigns. Question is you have to find it and how to use it, it s powerful. (Marketing Executive, Manufacturing) Expand your toolkit. Successful adaptation to the Splinternet requires a range of technical capabilities. Firms should aim to create a well-balanced, holistic technology portfolio addressing analytics, execution, content, and optimization. To streamline processes and resources, technology assets must be integrated into a unified solution where possible. For example, when considering social engagement solutions, marketers should ensure that their solution of choice combines app creation, content management, and tracking capabilities. Survey respondents indicated that execution technologies such as content management and campaign management will be the most critical to their marketing organization over the next five years, followed by analytics technology such as web analytics, targeting, and mobile analytics (see Figure 8). Page 9

11 Figure 8 Execution And Analytics Capabilities Are Key To Coping With Fragmentation As media fragmentation occurs, what technologies do you predict will be the most critical to your marketing organization over the next five years? Rank up to 5 in order of importance. Note: Top 10 technologies shown. Ranked 1 Ranked 2 Ranked 3 Ranked 4 Ranked 5 Web content management 2 Multichannel campaign management 7% 4% Social media analytics 4% 3% Mobile content management 11% 3% 3% Web analytics 3% 7% Social media/online community management 3% 4% Data management and integration 4% Targeting and personalization Visitor/Customer database Data mining or predictive modeling 3% 4% 3% 7% 2% 4% 3% 7% 3% 2% Build for scale. Marketers are not strangers to substantial amounts of data, but the Splinternet s diversity of devices, touchpoints, and technologies drives massive growth in data volumes and the number of data streams. As data output continues to grow at an exponential rate, it is vital that firms focus on managing data macroscopically. Organizations must adapt their infrastructure and data management strategies to ensure a holistic approach to collecting, processing, and storing data as well as making that information available efficiently for marketing analytics and operations. Develop the organization. Adapting to the Splinternet requires a concerted effort to build up organizations with the skills, structure, and bandwidth to operate in a high-speed, fragmented environment. Along with focusing efforts internally, firms should consider leveraging the operational and strategic expertise of external agencies and consultancies. Firms reported that they are developing centralized marketing teams to consolidate capabilities across channels, lines of business, and products to facilitate multichannel marketing (see Figure 9). Organizations also extend beyond in-house capabilities, as many firms reported that they employ third parties to support emerging channels and adopting technology for multichannel marketing (see Figure 10). Page 10

12 Figure 9 Multichannel Marketing Requires A Focused Organizational Approach "Please describe your firm s organizational approach to support marketing across multiple channels. Centralized marketing team, consolidating all technology and services across channels, products, and corporate groups Decentralized marketing team, brands, product teams, corporate groups have independent marketing capabilities Hub and Spoke certain capabilities are centrally supported but product teams or corporate groups have some autonomy Marketing is organized by channel Figure 10 Firms Rely Heavily On Services To Support Technology "Please describe your firm s technology approach to support marketing across multiple channels. We have a hybrid approach of working with technology internally and external providers We have a primary technology platform that supports most functions We have an agency or service provider that provides a managed service for technology We have built our own technology to support marketing 17% % We use best-of-breed technology for most functions We have a hybrid approach of working with third-party software providers and internally developed technology Other 1% 3% 14% The days when marketers could sit in their own little silo are over. These new touchpoints aren t just a marketing activity, they involve IT and many parts of the organization. (Marketing Executive, Retail ) Because of technology changing so fast, having 1-2 people who are familiar with it is not possible. It s better to rely on outside resources. (Marketing Executive, Manufacturing) Page 11

13 Measure the right things, not everything. Fragmentation is a double-edged sword in terms of measurement: It generates massive amounts of data from which to perform measurement, but the sheer volume of potential metrics can cause paralysis or misdirect unsuspecting marketers. Fortunately, firms do not need to measure all the data, they just need to measure the right data, shifting from breadth-based approaches to focus on depth in measurement strategy. This entails defining KPIs at multiple levels: first for channel-specific activities to determine tactical success, and second, a set of global KPIs to support standardized measurement and attribution across channels. Success is really hard to measure. One of the biggest challenges. The vast majority of our measurement is in terms of inquiries, leads, pipeline driven and it s really difficult to measure a social network in that way. How do you measure? Numbers of members in the community? Or getting the CIO of the biggest company in the country rather than 15 smaller CIOs? It s about quality and quantity of people in the community. (Marketing Director, Consumer Packaged Goods) It s being able to attribute all pieces of marketing and sales engagement in one inquiry that leads to opportunity. (Marketing Manager, High Tech) Page 12

14 KEY RECOMMENDATIONS Without a doubt, the fragmentation that is central to the Splinternet creates challenges to marketing organizations. But more than disruption, fragmentation embodies a once-in-a-generation opportunity for marketers to engage with customers in more ways, and more productively, than ever before. To make the most of this opportunity, organizations must take a holistic approach to addressing the Splinternet starting with a cohesive strategy, and then addressing subsequent technology, organizational, and measurement components. To put a comprehensive approach to harnessing the benefits of fragmentation into effect, proactive organizations should take the following steps: Experiment then operationalize. Take a structured, experiment-oriented approach to adopting new channels. Fund a formal test program or support low-cost, minimal resource, informal participation to evaluate new channels and determine whether to proceed with a full-scale rollout and allocate significant budget and resources. This approach permits organizations to explore channels while limiting risk. Don t go it alone. Based on an inventory of your current capabilities, prioritize initiatives to fill in gaps based on your short- and long term goals and determine if additional skills or bandwidth from third parties is needed. Leverage agencies, consultancies, and vendor professional services to complement internal core competencies where needed. When considering external support, always ensure that potential partners have a perspective on multichannel marketing that is consistent with that of your organization. Prioritize measurement. To avoid uncertain ROI and to develop performance benchmarks, no activity should be executed without a measurement plan in place. In addition to channel specific metrics, utilize business-oriented KPIs across all channels to ensure that tactics are delivering suitable performance within the context of the entire marketing plan and support the firm s strategic goals. Make analytics actionable. To take full advantage of the data generated by interacting with customers across channels and devices, take analysis beyond static reporting and translate insights into actionable strategies. Feeding the output of marketing analytics back into content and execution strategy allows firms to proactively drive the customer experience with tactics based on user behavior and preferences. Leverage data-driven techniques such as online targeting, triggering, and segmentation to optimize marketing activities. Democratize data insights. Beyond the expansion and fragmentation of channels, the Splinternet also reduces dependence on discrete channels in favor of multichannel marketing. To excel in this environment, marketers need visibility to the entire engagement funnel. When developing the measurement strategy, consider how analysis will be distributed to marketing and business stakeholders beyond channel owners and analysts to ensure that they have a comprehensive view of customers and prospects. Get ready for mobile now. Social is very popular with consumers and marketers today, but the mobile revolution is under way. Begin evaluating mobile channels and establishing benchmarks to ensure that your organization is ready to expand into mobile once it hits the tipping point with your target customers. Market your presence in emerging channels. The social and mobile ecosystems may be emerging but they are rapidly getting crowded. Simply creating a presence in these channels is no longer enough to ensure adoption. Firms need to market their emerging channel presence to create awareness. Promoting participation in digital channels via the website is an obvious tactic but also consider referring to social and mobile capabilities in print, additional interactive media, and via customer-facing staff. Successful firms must also undertake specific promotional campaigns to notify customers and prospects about online channels and emerging media. Page 13

15 Appendix A: Methodology In this study, Forrester conducted interviews with five marketing decision-makers along with an online survey of 210 North American and European marketers to evaluate the industry pain points, trends of the Splinternet, the future of web analytics, and recommend strategies for optimizing marketing within this rapidly evolving environment. Survey participants included decision-makers in marketing and management-level practitioner and managers and above. Questions provided to the participants asked about the benefits, trends, and opportunities that face marketers today around the fragmentation of the internet and best practices on what marketers are doing today to measure and analyze their consumers and brands. The study was completed in July Appendix B: Demographics/Data Figure B1 Revenue And Company Size "What is the total annual revenue of your company? "Using your best estimate, how many employees work for your company worldwide? $10 billion or more 2 1,000 to 4,999 employees 3 $2 billion to $4.9 billion 21% 20,000 employees or more 3 Less than $1 billion 20% 5,000 to 9,999 employees 14% $1 billion to $1.9 billion 1 10,000 to 19,999 employees $5 billion to $ 9.9 billion 14% Less than 1,000 employees 3% Page 14

16 Figure B2 Region "Where is the primary market you are targeting with your marketing efforts? Germany, 20% France, United States, 50% United Kingdom, 2 Figure B3 Job Level And Decision-Marking "Which of the following best describes your job level at your firm? "Which of the following most closely describes your role in your organization s interactive and multichannel marketing? " Manager 51% I m directly involved in my organization s interactive and multichannel marketing strategy 41% Director 34% I m the key decision-maker in my organization s interactive and multichannel marketing strategy 24% C- level or senior-most executive Vice president, senior vice president, or executive vice president 7% I manage a team that is directly involved in my organization s interactive and multichannel marketing strategy I m indirectly, but significantly involved in decisions around my organization s interactive and multichannel marketing strategy 1 1 Page 15