Applying organisational capability models to assess the maturity of digital-marketing governance

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1 Journal of Marketing Management Vol. 26, Nos. 3-^, March 2010, I Taylor & Francis Taylor & Francis Croup Applying organisational capability models to assess the maturity of digital-marketing governance Dave Chaffey, Marketitig Insights Limited, UK Abstract The value of capability maturity fnodels for assessing nnanagement of digital channels v\/itbin an organisation is reviewed. Tbe capability maturity model described covers six key digital-marketing activities that need to be managed within an organisation. For each governance activity, key management challenges, which represent potential areas for research and exemplars of previous research, are summarised. The six areas of governance reviewed are: digital cbannel strategy development; online customer acquisition; on'line customer conversion and customer experience; customer development and growth; cross-channel integration and brand development; and overall digital channel governance, including change management. Keywords digital marketing; marketing strategy; innovation; change management; marketing analytics Introduction Managing change and innovation in technology and marketing tactics is a challenge for all marketers, but this is particularly true for digital marketers. Augmented reality applications, in-game adverts. Twitter, and branded mobile utilities are all recent examples of new communications approaches facilitated by technology that digital marketers have had to assess for relevance toj their organisation. More established digital-marketing approaches such as search engine and social media marketing are also subject to frequent change in the factors that make them successful. Eor example, Google have stated that, in 2008, they made over 400 changes to their algorithms, which affect the natural search-engine listings (Searcbenginewatch, 2009). Contrast this with traditional advertising, where the principles of effective communications have been established for many years. Another more fundamental form of change associated witb digital marketing relates to how organisational strategy and structure need to change to reflect new opportunities and threats to a business. For example, key strategy issues tbat should be reviewed are how digital channels can potentially target different markets or add value to existing brands. j This review will give an overview of the different digital-marketing activities that need to be managed to harness the opportunities of digital marketing. It is structured according to different elements of a capability maturity model created during research ISSN X print/issn U online 2010 Westburn Publishers Ltd. DOI: /

2 188 Journal of Marketing Management, Volume 26 completed by the author (Econsultancy, 2005, 2008). The six different capabilities reviewed are: 1. Digital channel strategy;.2. Online customer acquisition; 3. Online customer conversion and customer experience; 4. Customer development and growth; 5. Cross-channel Integration and brand development; 6. Digital channel governance, including change management. Eor each governance activity, current management challenges that are important to success and warrant further research are summarised. Capability maturity models for digital marketing Maturity or stage models of digital marketing are an established method for assessing the development of digital capabilities of an organisation. For example, Quelch and Klein (1996) and Levy and Powell (2003) noted the typical sequence of functionality development for which sites develop for different types of company. While useful, these stage models were narrow in scope (hmited to the website features), are externally focused, and do not address the broader development of Internet marketing capabilities within an organisation. My research into the organisational adoption of online marketing in the Econsultancy (2005) and Econsultancy (2008) reports extends these types of stage model to create a framework for assessing internal digital-marketing capabilities across a range of organisation types. In an online marketing context, 'capabilities' refers to the processes, structures, and skills adopted for planning and implementing digital marketing. Another form of capability maturity model that can be related to organisational transformation across business activities has been devised by Carnegie Mellon Software Engineering Institute (SEI; to help organisations improve their software-development practices. While the field of application is quite different, the concept is readily transferable to improving other aspects of business governance. The Carnegie Mellon SEI describes its role as to 'identify best practices useful in belping organisations increase the maturity of their processes' (SEI, 2009). The two separate pieces of Econsultancy (2005, 2008) research each involved two phases. Phase one involved an interview of around 15 practitioners who were e-commerce and digital-marketing managers. It was used to establisb cballenges involved with different stages of e-commerce adoption and to identify good practice for managing them. Phase two was a survey of practitioners designed to assess the prevalence of the challenges identified earlier in the study. It also aimed to establish capability maturity across different types of organisation. Capability maturity or stage-of-adoption models for digital are recommended to manage future transformation of businesses to embrace digital channels, since they can be used to: 1. Rew\ew current approaches to digital marketing to identify areas for improvement;

3 Chaffey Capability maturity models Benchmark against competitors who are in tbe same market sector/industry and in different sectors; 3. Identify good practice from more advanced adopters; 4. Set targets and develop strategies for innproving capabilities through assessing the quality of different resources and how they are deployed, and creating a roadmap' of future improvements. In the Econsultancy (2008) research, a capability assessment framework was produced where companies were able to rate the performance of their organisation on a scale of 0-5, where 0 represents very ppor performance and 5 optimal or best possible performance. Six questions (a) to (f) in each of six capability areas were assessed to give a total score out of 180. Detailed discussion of each area is not practical in this review, so in the next sections, some of the main issues to be addressed in each of the six capability areas are reviewed. Interested readers can read the full range of capability assessment criteria published outside the subscription paywall at 1. Digital channel strategy Reviewing the capacity of an organisation for developing a digital strategy is similar in terms of process to traditional strategy development, but focused on managing the specific issues of digital strategies. An effective digital strategy should: Provide a future direction to Internet marketing activities - a long-term roadmap of web services and functionality is needed; Involve ar)alysis of tbe organisation's external environment (specifically, a review of the online marketplace focusing on customer characteristics, preferences, and needs against competitor and intermediary offerings) and the internal resources and capabilities to implement the strategy; Articulate goals for digital channels that support marketing objectives; Involve selection of strategic options to achieve goals for digital channels and create sustainable differential competitive advantage; Include strategy formulation to include typical marketing strategy options such as target markets, positioning, and specification of tbe marketing mix; Define which strategies NOT to pursue and which functionality is not suitable to implement; Specify how resources will be deployed and tbe organisation will be structured to achieve the strategy. Within the Econsultancy benchmark, emphasis on capability ratings is placed on understanding customer behaviour within their customer journey within the online marketplace and interaction with other channels. Chaffey, Ellis-Chadwick, Johnston, and Mayer (2009) present an integrated marketplace review framework, which shows the importance of understanding different customer personas, the search engines, and search terms they use in the context of the influence of intermediaries such as aggregators, competitors, social networks, and other publishers from mainstream media sites to niche bloggers.

4 i 90 Journal of Marketing Management, Volume 26 Much research about digital marketing has rightly focused on identifying variations in customer characteristics and behaviour, which can then be used as the basis for a communications strategy. In Chaffey et al. (2009), different forms of research were grouped under these five main types of online customer-buyer behaviour models, which have been developed by researchers: 1. Information/experience-seeking behaviour models; 2. Hierarchy of response-buying process models; 3. Multi-channel buying models; 4. Trust-based models; 5. Community participation models. It is surprising that there have not been more research projects on customersearching behaviour through time using the search engines, given the dominance of search when audiences seek to find a product, supplier, or experience. There is also much primary information available in the form of different research tools such as the Google Keyword Tool, which Google freely makes available for agencies managing customer-search programmes (http://www.google.com/agencytoolkit). Destination sites also use web analytics software that can be used to assess the sequence of search terms involved in multiple visits before purchase, so could be used as a research tool. The next sections of this research cover the most important aspects of managing tactics within five other areas, which together form digital strategy. The next three sections on acquiring customers online, conversion and experience, and customer development and growth often form the core part of a digital strategy. In terms of governance and execution, these are distinct areas of the digital strategy, which are often managed by different internal teams in larger organisations or by different specialist external agencies in companies of all sizes (Econsultancy, 2008). 2. Online customer acquisition In a digital-marketing context, customer acquisition has several meanings. First, it may mean the use ofthe website to acquire netv customers for a company, as qualified leads that can be converted into sales. But it is also worth remembering that the investments in digital media such as paid search, affiliate marketing, and online advertising arc also needed in many markets to achieve repeat sales. That is why some companies refer to 'demand generation' rather than acquisition. Chaffey et al. (2009) recommend six main types of digital-communications tools or channels that are reviewed by marketers for suitability for customer acquisition: 1. Search-engine marketing (paid sponsored listings and the organic or natural results; 2. Online PR, including social media marketing; 3. Online partnerships. Including affiliate marketing and aggregators such as pricecomparison sites; à. Interactive advertising; 5. Opt-in marketing; and 6. Viral or word-of-mouth marketing in which social netv^orking acts as a facilitator.

5 Chaffey Capability maturity models 191 Of all aspects of digital-marketing strategy and execution, it is arguable that these digital media channels are the most dynamic! Gertainly, much attention in the online marketing trade press and blogosphere focuses on these tactics. Research attention has also focused on this area with the use of social network and the influence of word-ofmouth communications active research areas. For practitioners managing the change related to acquisition, channels represents a major challenge, since the rate of change in terms of new techniques and changes to existing techniques plus the measurement met:hods make it difficult to assess return on media investments. Practitioners such as Lovett (2009) and Petersen (2009) have reviewed options to best attribute value tc) complex, multi-step consumer-media interactions during the buying process. Valos, Ewing, and Powell (2010) in their work on practitioner challenges of online tharketing also identified measuring the value of digital interactions and getting I accurate return-on-investment (ROI) projections as major challenges. However, there is a dearth of research or frameworks for analytical approaches to assess and plan investment in digital media. Attribution of degree of engagement with' media to impact on branding measures such as brand awareness, familiarity, and purchase intent is also a challenge for individual media. For example, many companies are grappling with how much they should invest in display advertising or social niedia, since they are not direct-response media like sponsored search listings where ROI can be tracked more readily. 3. Online customer conversion and customer experience Greating a balanced experience for site visitors is a challenge in producing an effective website. There are many factors that must be (zonsidered, and often specialists who are involved with refining the site will have different views on what is effective. For example, strategists, business analysts, visual designers, developers, accessibility, usability and web analytics experts will all have different perspectives on appropriate content, layout, and visual design. To balance these different viewpoints, a jfocus on the customer is essential, and practitioners commonly use customer personas throughout the user-centred design process (see, for example. Manning, Temkin[ & Belanger, 2003, and Mulder & Yaar, 2006, for a review of the principles and challenges of personas). In my experience, academic research into visitor perceptions of site experiences is often insufficiently granular, for example, surveying diverse audiences for opinions about diverse sites rather than understanding the importance of factors for different customer segments. For example, the research by Rodgers, Ghen[ Wang, Rettie, and Alpert (2007) on the Web Motivation Inventory is useful for highlighting different aspects of concern to visitors such as community, exploration, and interaction, but it does not apply it to specific site or customer types. However, there has been research into perception for sites in vertical industries and across cultures such as that by Nitish et al. (2006). Likewise, there appears to be little research into the most effective communications for different types of page that can be important within the customer journey, such as search-landing pages, category or product jiages, and on-site search pages. Instead, much discussion research focuses on the site in aggregate or perhaps the home page or checkout experience. I have found the frameworks produced by de Ghernatony (2001) and Ghristodoulides, de Ghernatony, Furrer, Shiu, and Temi (2006) useful for reviewing the key issues of experiences that apply across sites. De Ghernatony (2001) suggested

6 192 Journal of Marketing Management, Volume 26 that delivering the online experience promised by a brand requires delivering rational values, emotional values, and promised experience (based on rational and emotional values). Christodoulidcs et al. (2006) extended this to consider different elements of online service highlighted by Trocchia and Janda (2003). More research based on observed rather than reported behaviour such as the clickstream analysis of Moc (2003) would be welcome, particular if this could be linked to different types of customer profiles. But unfortunately, the wealth of information collected by web analytics companies is often not available to researchers for reasons of commercial confidentiality or consumer privacy. This is understandable, but unfortunate; more collaboration in this area would yield useful insights. 4. Customer development and growth Attracting returning visitors to websites is of course vital to the long-term success of businesses today. As the models by Agrawal, Arjona, and Lemmens (2001) showed, encouraging returning visitors to e-commerce sites was the most important tactic to achieve when reviewing performance metrics. Their research showed that a 10% increase in the rate at which visitors are converted into repeat customers drives a 10% improvement in the net present value of a company's expected cash flows. At the time, they said there was 'much talk about customer loyalty but insufficient investment in promoting it: c-businesses typically spent three to five times less to retain their customers than did equivalent brick-and mortar businesses'. I believe this misplaced emphasis persists with strategic digital focus in many companies on customer acquisition, conversion, and experience. I also believe this emphasis exists within research of online consumer behaviour. There is relatively little research into the characteristics and offers of sites of different types that encourage loyalty. Research questions that would warrant investigation include: an understanding of the searching behaviours of existing customers (brand and navigational searches dominate); how their scarch-and-browse behaviours and interactions with different types of content and merchandising differ; and what the role of social networks is in promoting repeat sales. marketing and, increasingly, customer communities or social networks such as Facebook and Twitter are of growing importance to companies for customer retention and growth. An anecdotal example of the continued importance of marketing is the performance of online clothing retailer. ASOS. for whom, in November 2009, there was a ratio of one Twitter follower to eight Facebook fans to 100 active subscribers. Their 2008 annual report noted that nearly 10% of sales could be directly attributed to marketing. The UK Direct Marketing Association National Benchmarking project compiles reports of marketing completed by the major Service Providers for their UK clients. This shows a continued and increasing volume of marketing. Despite this, it seems that marketing is often not treated as a strategic communications medium; instead, it is a tactic often managed by junior staff and it is often under-resourced. Recent research (DMA, 2009) showed that less than half of marketers have a strategy concerning maximum contact frequency, only a quarter of marketers are able to calculate the value of an address, and 12% of respondents do not know how many s an address should receive each month. Econsultancy (2010) has analysed the capability of marketing among companies, and found that more sophisticated marketing techniques such as

7 Chaffey Capability maturity models 193 customer event-triggered s and dynamic content insertion to deliver more targeted s are still not widespread. I 5. Cross-channel integration and brand development The increase in importance of digital channels has often resulted in change within companies that has limited integration. In Econsultancy (2005), a typical structural change is from initial ad-hoc management of digital channels with tactical experimentation within different parts of the organisation to a more centralised approach intended to encourage a strategic; approach and economies of scale. The centralised approach naturally involves creation of a central team (Parsons, 1999), which, unless managed carefully, can reduce integration internally with other part of the organisation such as the product-marketing, direct-marketing, or brandmanagement teams. This lack of internal integration is then reflected in poor external integration in customer journeys. Communications in different channels should facilitate transfer between different cbannels. Eor example, the website can be used as a direct-response medium, enabling customers to respond to offers and promotions publicised in other media. The website can also have direct-response phone numbers, call-back, or live cbat facilities, which give customers the choice of human customer service. Cross-channel integration also applies to outbound campaigns, which may include e-communications like marketing and SMS messages. The effectiveness of these may be enhanced when they are combined witb traditional communications such as direct mail or phone. Outbound communications can also be made more effective through tailoring the message based on tracking customer interactions. Eor example, if a customer clicks on a particular link in an , then this can indicate interest in a particular product, which could be followed up by a phone call to discuss the options or a further followup . This 'sense and respond' or 'reverse marketing', as it has been called by Sharma and Sheth (2004), is certainly very po,werful, since tracking can also be used to judge consumer interest in new propositions.'however, it must be remembered tbat it bas implications for customer privacy so needs to be sensitively acknowledged in customer communications. 6. Digital-channel governance Digital-channel governance refers to the overall management of resources for digital marketing within an organisation. This includes both internal and external staff resources, financial resources, and infrastructure such as software tools and data sources. Governance also references the way these resources are structured as teams and individual skill sets within teams within the organisation. It can be seen that these structural challenges are likely to be more significant in larger organisations, but issues of budget are likely to be common to all. The influencing factors on a strategic approach to managing digital channels to success have been evaluated for retailers by Doberty, Ellis-Chadwick, and Hart (2003) and Lee and Grewal (2004). Their research suggested that companies were less successful online if there was insufficient management commitment to develop a

8 194 Journal of Marketing Management, Volume 26 strategy, resource digital marketing through website or external communications, or to form strategic alliances. Valos et al. (2010) identified finding and managing resources for digital marketing as a major challenge to marketers. In their interviews with practitioners, obtaining digital services from 'niche digital' or 'full-service' advertising agencies, evaluating quality of digital agencies and their services, and working with internal IT staff and internal IT or operational departments were all mentioned as significant challenges. Similarly, in the 2005 and 2008 Econsultancy research, challenges with managing internal resources were most often cited in interviews with e-commerce managers and digital-marketing directors when they were asked an open question about the most difficult challenges across the whole of digital marketing. Other issues such as agency management or determining ROI were not mentioned so frequently. In a follow-up survey, all the most significant challenges related to managing the interfaces with other parts of the organisation, rather than specific problems of implementing e-commerce within their groups. The four most significant challenges mentioned were: 1. Gaining senior management buy-in or resource (68% agreed that this was a challenge, compared to 68% in 2005); 2. Gaining buy-in/resource from traditional marketing functions/brands (68% agreed that this was a challenge, compared to 66% in 2005); 3. Gaining IT resource/technical support (68% agreed that this was a challenge, compared to 69% in 2005); 4. Finding suitable staff (this appeared to have become more challenging, with 75% agreeing that this was a challenge, compared to 60% in 2005). A relatively small proportion (54%) acknowledged that finding suitable agencies was a challenge. It is interesting to consider the evolution of digital governance within an organisation in the context of these challenges. A logical progression is from decentralised governance to a more centralised approach needed to help manage the business transformation to digital channels. Einally, there is a move to a more decentralised approach once digital marketing is treated as business as usual and digital marketing is sufficiently integrated into strategic and tactical plans with marketers with the skills to manage digital campaigns. The Econsultancy (2005, 2008) research presented five different maturity levels for governance consistent with this progression. These levels can be summarised as: 1. Unplanned - Uncontrolled experimentation with limited integration. Content focus. 2. Diffuse management - A more structured approach in some areas. Visitor acquisition focus. 3. Centralised management - Organisation Level objectives and control. Conversion focus. A. Decentralised operations - Execution integrated with marketing activities. Retention focus. 5. Integrated and optimised - A refined approach to improve digital marketing. Optimisation focus.

9 Chaffey Capability maturity models 195 Within the surveyed companies, a wide variation in maturity was found across these five stages, which is to be expected given the variation in the relative importance of digital channels to an organisations' competitiveness and the vision and commitment of senior managers within the organisation. These two main levers to progress transforrriation are consistent with those noted by Doherty et al. (2003) and Lee and Grewal (2004). ' Conclusion We can anticipate that the rate of change and innovation within digital marketing will continue in the future. Companies that can put in place appropriate governance to evaluate, select, and resource the most relevant approaches for their organisation will be the most likely to prosper. Econsultancyi (2008) noted that companies with the appropriate governance have developed strategic agility that enables a flexible response to planning, with operational reviews enabling reallocation of budget in line with prevailing market conditions. The frameworks presented have shown that a holistic approach to digital marketing requires balanced resources between activities for managing customer acquisition, proposition development/conversion, and re^tention. Less mature organisations tend to focus on online customer acquisition and conversion activities, so deferring the more profitable initiatives to drive retention and growth. Across all of these activities, it will be important to devote sufficient organisational resources for managing customer and market insight. A lack of structured planning for e-commerce is evident in relatively unsophisticated adopters of digital marketing. This reflects insufficient senior-level sponsorship and involvement in planning and review. As with other change-management initiatives, it is essential to have senior-level sponsorship of the project, and this should extend to active participation in planning and review. All advanced adopters of e-commerce interviewed in the research used this to align e-commerce objectives and resources with business objectives. References Agrawal, V, Arjona, V, & Lemmens, R. (2001). E-performance: The path to rational exuberance. McKinsey Quarterly, 1, j Ghaffey, D., Ellis-Ghadwick, E., Johnston, K., & Mayer, R. (2009). Internet marketing: Strategy, development and practice. Harlow, England: ET-Prentice-Hall. Ghristodoulides, G., de Ghernatony, L., Eurrer, O., Shiu, E., & Temi, A. (2006). Gonceptualising and measuring the equity of online brands, journal of Marketing Management, 22(7/8), de Ghernatony, L. (2001). Succeeding with brands on the Internet. Journal of Brand Management, 8(3), DMA (2009). marketing spend set to grotv in Summary of the Direct Marketing Association (DMA) National Client Survey report. Retrieved from .dma.org.uk/news/nws-article.asp?id=5177. Accessed January 15'*^ Doherty, N.E., Ellis-Ghadwick, E.E., &c Hart, G.A. (2003). An analysis ofthe factors affecting the adoption ofthe Internet in the UK retail sector. Journal of Business Research, 56(11), Econsultancy (2005). Managing an e-commerce team. Integrating digital marketing into your organization research report. Author: Dave Ghaffey. London: Econsultancy.com. Econsultancy (2008). Managing digital channels research report. Author: Dave Ghaffey. London: Econsultancy.com.

10 196 Journal of Marketing Management, Volume 26 Econsultancy (2010). marketing best practice research report. Author: Dave Chaffey. London: Econsultancy.com. Lee, R., & Grewal, R. (2004). Strategic responses to new technologies and their impact on firm performance. Journal of Marketing., 68, Levy, M., ôc Powell, P. (2003). Exploring SME Internet adoption: Towards a contingent model. Electronic Markets, 13{2), Lovett, J. (2009, February). A framework for multicampaign attribution measurement. Research report. Cambridge, MA: Forrester Research. Manning H., Temkin, B., 6c Belanger, N. (2003, December). The power of design personas. Strategy report. Cambridge, MA: Forrester Research. Moe, W. (2003). Buying, searching, or browsing: Differentiating between online shoppers using in-store navigational cwckstream. Journal of Consumer Psychology, 13(1/2), 29. Mulder, S., & Yaar, Z. (2006). The user is always right: A practical guide to creating personas for the web. Berkeley, CA: New Rider Publications. Nitish, S., Fassott, G., Zhao, H., ôc Boughton, P (2006). A cross-cultural analysis of German, Chinese and Indian consumers' perception of Web site adaptation. Journal of Consumer Behaviour, 5, Parsons, A.J. (1999). Organising for the interactive marketing of tomorrow. Interactive Marketing, 1(1), Petersen, E. (2009, April). Appropriate attribution: Addressing the dramatic inaccuracies associated with last-based campaign attribution in digital analytics. San Mateo, CA, Whitepaper. Coremetrics. Rodgers, S., Chen, Q., Wang, Y, Rettie, R., & Alpert, E. (2007). The Web motivation inventory. International Journal of Advertising, 26(4), Quelch, J., &c Klein, L. (1996). The Internet and international marketing. Sloan Management Review, 37, Searchenginewatch (2009, March 9). Matt Cutts clarifies Google's new preference of brands. Searchenginewatch. Retrieved from Accessed January 15* SEI (2009). Carnegie Mellon Software Engineering Institute (SEI) About us page sei.cmu.edu/about/. Accessed March 3'^'' Sharma, A., ôc Sheth, J. (2004). Web-based marketing: The coming revolution in marketing thought and strategy. Journal of Business Research, 57(7), Trocchia, P., 5c Janda, S. (2003). How do consumers evaluate Internet retail service quality? Journal of Services Marketing, 17(3), Valos, M.J., Ewing, M., ßc Powell, I. (2010). Practitioner prognostications on the future of online marketing [Special issue]. Journal of Marketing Management, 26(3-4), About the author Dave Chaffey is author of five best-selling textbooks, including Internet Marketing: Strategy, Implementation and Practice, E-business and E-commerce Management, emarketing excellence (with PR Smith), and Total Marketing. Dr Chaffey is a consultant and trainer specialising in digital marketing. Recent clients include 3M, AEGON, BP, Barclaycard, HSBC, Mercedes-Benz, and Smith and Nephew. Between 1995 and 2001, he was senior lecturer in the business school at the University of Derby where his research specialism was approaches to measuring and improving e-marketing performance. He developed the MSc in Electronic Commerce and also taught on the MBA and MA Marketing Management Programmes. He continues to lecture in digital marketing in business schools at UK universities, including Birmingham, Cranfield, Leeds, and Warwick. Corresponding author: Dr Dave Chaffey, Smart Insights (Marketing Intelligence) Limited T +44(0) E

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