Accenture Interactive. Turbulence for the CMO Charting a path for the seamless customer experience

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1 Accenture Interactive Turbulence for the CMO Charting a path for the seamless customer experience

2 The price sensitivity of clients is reducing marketing effectiveness. CMO, UK transport and travel company 2

3 Four Priorities for a Smoother Ride Turbulence is the new normal for chief marketing officers (CMOs). In the face of increasing complexity in the markets and customers they serve, CMOs are struggling to keep pace with competing business demands, proliferating channels and partners, and a disconnect between the talent they have and the capabilities they need. But that doesn t mean senior marketers can t improve performance despite this challenging environment. Based on the Accenture Interactive CMO Insights survey of more than 400 senior marketers from 10 countries, CMOs need to: Fundamentally change the marketing operating model. Build new skills internally. Get the right set of partners. Drive digital orientation throughout the enterprise. Their ability to restructure the organization and work horizontally to deliver seamless and relevant customer experiences across all touchpoints all day, every day, will be essential to business survival. 3

4 The Pressure s on As CMOs steer a course through the rough waters of today s global marketplace, one thing is certain: not enough feel prepared for the ride. Nearly four in 10 CMOs say they do not have the right people, tools and resources to meet their marketing objectives. Compared to responses from Accenture s study, this is a five-percentage point drop in preparedness (Figure 1). Without a doubt, the pressure s on. CMOs face wave after wave of competing business priorities, changing consumer behaviors and higher customer expectations. All these factors contribute to an environment made more and more complex by: 1. Relentless demands. In the three years since Accenture began surveying CMOs in global companies around the world, 1 none of the top business priorities have declined in importance. Profitable growth (87%) and operational efficiency (85%) remain in the top positions, followed closely by the need for organic and inorganic growth and the agility to capture opportunities quickly. So strong is the pressure for growth and efficiency today that marketers are being asked to support these objectives considerably more than they are being asked to cut marketing budgets (58%). 2. Higher stakes. Customer issues maintain their dominance. For the third year in a row, requirements to acquire and retain customers and increase sales are the most important. As in previous years, these customer challenges continue to increase in difficulty by five to six percentage points every year. Across 15 enablers often used to support customer centricity and sales, both importance and difficulty increased in. Among the new strategies on which marketers were surveyed in, seven out of 10 CMOs found these to be important: Synchronize the end-to-end customer experience, from marketing to sales to service. Enable agile, timely and relevant marketing. Use data and technology for real-time marketing impact. Importance levels also increased for efficiency-related factors, such as the need to cut costs for the marketing workforce and reduce non-payroll items. Six in 10 CMOs found these areas important. CMOs also found it much more difficult in to improve the efficiency of marketing operations (up eight percentage points over ) and improve their workforce s responsiveness to digital shifts and changing consumers (up 10 percentage points over ). 3. Smaller share of wallet. Although large majorities of CMOs saw higher revenues (69%) and budgets (83%), four out of 10 senior marketers also saw flat or declining market share in. This is consistent with CMOs belief that it will be harder to obtain and keep new customers and sell more to existing ones. 4. Higher customer expectations. Relevance is here to stay. According to survey respondents, consumers expectations for relevant experiences are having the longest-term impact on marketing strategy (65%). However, as in, consumers still expect value, trust, quality and better customer service, along with relevance (Figure 2). Despite the apparent threat of showrooming, a minority of CMOs (40%) expect it to have a long-term impact. Figure 1: More CMOs feel underprepared (%) 5 34 five-point decrease in preparedness 61% 48 66% 13 (Marketing) has to change to keep current customers and acquire more customers. Marketing director, US bank (not prepared) (very well prepared) 1 CMO Insights, Accenture,

5 Figure 2: Relevance means the most to consumers (%) Long Term Impact Expect offers and interactions that are relevant* Better customer service More innovative products or unique product features Value for their money Expectations for product quality Trustable company Convenience to do business Becoming price-sensitive Purchase via mobile device* Visit our stores but purchase online* Highest to lowest Long term Impact on marketing strategy Accuracy of the following statements in terms of customer expectations Accuracy Trustable company Value for their money Expectations for product quality Better customer service More innovative products or unique product features Becoming price-sensitive Convenience to do business Expect offers and interactions that are relevant* Purchase via mobile device* Visit our stores but purchase online* Accuracy of the following statements in terms of customer expectations Long term Impact on marketing strategy Very important (4) & extremely important (5) Very important (4) & extremely important (5) * New item for 5

6 The black hole of ROI CMOs find it difficult to quantify marketing return on investment (ROI). Nearly one in five score themselves as below average in multichannel attribution, correlating advertising to sales, and measuring media buying effectiveness. Despite these gaps, 26% of marketers say they are best at building long-lasting relationships with customers. How can CMOs succeed with customers if they can t measure the most effective strategies to use with customers who are changing their behaviors and interacting with brands differently? The digital disconnect In such a complex and unforgiving environment, CMOs capitalize on five capabilities to improve their company s performance: offering innovation, customer analytics, digital orientation, customer engagement and marketing operations. Of these five, digital orientation scores the weakest performance at the exact moment when it needs to be the strongest. Digital orientation which Accenture defines as working across the organization to infuse a digital focus in all business processes and functions is critical to achieving success across virtually any marketing strategy. However, digital orientation has the largest performance gap (the spread between performance and importance) among the five marketing capabilities (Figure 3). CMOs rate digital s importance in as the lowest (3.76) of any capability over the past three years, and they rate digital s performance even lower (3.33). Yet digital orientation can have a profound impact on sales. The performance of digital orientation in high-growth companies is 21% greater than in negative sales growth companies (3.4 versus 2.8), even when the degree of importance is fairly uniform (3.81 versus 3.57). CMOs in high-growth companies have found a less turbulent path by improving their digital focus. Two-thirds of CMOs recognize the need to work horizontally across the organization to infuse a digital focus, but only 7% say their efforts are leading edge. In fact, one in five believes their company s digital focus is the weakest in the industry due to inefficient business processes, proliferating channels and talent gaps. It s a similar story when trying to engage customers and create value through digital channels. Two-thirds of senior marketers feel it is an important capability to master. Only 13% believe their performance is leading edge, and 16% think it s weak. Figure 3: Digital orientation is weakest capability Weakest in Industry / Unimportant Leading edge / Essential Digital Orientation Marketing Operations Customer Analytics Customer Engagement Offering Innovation 6 Importance 2009 Importance Importance Performance 2009 Performance Performance Performance Gap

7 The biggest barriers: inefficiency and lack of funding Inefficient business practices together with lack of funding and other resources negatively affect all five marketing capabilities (Figure 4). Inefficient business practices hit digital orientation the hardest, cited by 22% of CMOs. Working across the organization to infuse digital awareness requires efficiency in the business, so it is not a surprise that CMOs face challenges in this area. Nor is it surprising that 19% of CMOs say that digital orientation suffers from a lack of integration across the business. Providing consumers with relevant experiences will take an investment of resources perhaps not incremental, just a realignment and marshaling of resources. While access to customer data is the lowest barrier, it is possible that CMOs do not have processes in place to identify the right data needed to drive customer engagement. Figure 4: The top two performance barriers (%) Digital Orientation Customer Analytics Offering Innovation Customer Engagement Marketing Operations Access to customer data Lack the required skills Lack of critical technology/tools Inefficient business practices Lack of funding/other resources Biggest barriers Lack of integration with other business functions Don t know/not sure 7

8 The channel explosion: importance up, effectiveness down As channels multiply, CMOs say they are unsure how to maximize ROI across channels. With a multitude of channels in play from face-to-face customer contact to paid search CMOs find it increasingly complex to get the channel mix right. For example, two-thirds of marketers realize that social media is an important channel, but less than half think they are using it effectively. Online and offline channels are mixed together in importance, reinforcing the complexity of charting a seamless customer experience in the multichannel environment. In addition to reviewing channel and investment effectiveness, CMOs need to use customer analytics to develop segmentation strategies so they can identify the channel mix most relevant for customers and prospects. Analytics are especially useful as the demand for multichannel marketing continues to increase. While the importance of the top five marketing channels has risen by at least 10 points over, effective usage has nearly plateaued, indicating a need to find better ways to use these channels. (The most fundamental change over the next five years will be) channel proliferation and the move away from traditional direct marketing to more effective ways of leveraging customer stories and referrals via interactive media. CMO, Financial Services, USA 8

9 The partner proliferation With the explosion of channels, CMOs have turned to a large mix of agencies and alliance partners and created a highly fragmented environment (Figure 5). Between 45% and 75% of marketing activities are managed by digital agencies, specialized agencies and marketing service providers. Also in the picture are traditional advertising agencies, management consultants, systems integrators and public relations firms. With no clear strategic leader among the outside resources, many CMOs default to ineffective internal processes to create the cross-agency view. However, highgrowth companies use marketing service providers and specialized agencies (both 19%) to a greater extent than other types of companies, indicating that selective types of outside partners may help chart a course to improved performance. Figure 5a: A proliferation of partners (%) Paid search Search engine optimization Media mix optimization Creative concept development Social media monitoring Media audits Media/advertising optimization Direct mail/marketing marketing Web analytics Brand strategy development Multichannel campaign management Marketing analytics Conversion and optimization Customer insights/analytics Attribution management/modeling User experience Marketing automation Content management Website management Managing customer data Managing ROI How is capability resourced? Don t currently resource/fund Manage internally Manage externally with an agency 9

10 The partner proliferation Figure 5b: A proliferation of partners (%) If managed externally, what type of agency? Paid search Search engine optimization Media mix optimization Creative concept development Social media monitoring Media audits Media/advertising optimization Direct mail/marketing marketing Web analytics Brand strategy development Multichannel campaign management Marketing analytics Conversion and optimization Customer insights/analytics Attribution management/modeling User experience Marketing automation Content management Website management Managing customer data Managing ROI Management Consultant (e.g. McKinsey) Ad Agency (e.g. Ogilvy, Y&R) Digital Agency (e.g. Digitas, R/GA) Specialized Agency (e.g. Exact Target, icrossing) Marketing Service Providers (e.g. SapientNitro, Accenture Interactive) Between 45% and 75% of marketing activities are managed by digital agencies, specialized agencies and marketing service providers Systems Integrator (e.g. Infosys, IBM)) PR Firm (e.g. Burson-Marsteller, Ketchum) 10

11 With no clear strategic leader among the outside resources, many CMOs default to ineffective internal processes to create the cross-agency view. 11

12 The satisfaction shortage CMOs are generally more satisfied with marketing areas managed by external resources than with their own people. In only six areas do internal resources show higher satisfaction scores than those for external partners: brand strategy development, direct mail and marketing, marketing automation, web analytics, social media monitoring and paid search. However, there s lots of room to improve CMO satisfaction across the board, especially in the areas of execution and delivery, where partners are seen as weakest by 64% of senior marketers (Figure 6). While one-third of CMOs say their partners have improved on execution, a like number have not seen any change in their partner relationships. Worse, CMOs say their partners are not doing a good job helping them transform the marketing organization. Figure 6: Partners weakest at execution and delivery (%) Collaborate with our agencies/partners Understand my brand Understand my business Can talk both technology and creative Support my marketing programs globally Support multi-channel marketing programs Are innovative and push great ideas Can help transform my marketing organization Bring the right talent Provide an integrated view of marketing effectiveness Efficiently manage my budget, maximizing ROI Lack of business processes, briefs, decision-making, etc Not able to deliver what they promise/sell Executes flawlessly Partners are seen as weakest by 64% of senior marketers 28 9 (1&2) Not at all satisfied Extremely satisfied 12

13 The bigger, better digital budget While marketing budgets are expected to show some growth next year, the allocation towards digital marketing is expected to jump significantly (Figure 7) a sign that CMOs understand their situation and believe digital is critical to their future. Some 28% of marketers an increase of five points over believe there will be significant growth in marketing budgets, but more than half the respondents expect flat or little growth. Meanwhile, CMOs are aggressively increasing their budget allocation towards digital marketing, with 66% assigning more than one-quarter of their budget to digital next year. The heaviest investments are in customer experience and data and analytics. These investments align with the priorities to acquire and retain customers and increase sales. Figure 7: Big jump in digital budgets (%) Marketing budget Expected change Negative growth Flat / Little growth Significant growth Marketing budget towards digital marketing More than 50% 25-49% % of CMOs allocating over one quarter of their marketing budget to digital Less than 25% Next year This year 13

14 The new CMO agenda Given the increase in customer expectations and channel preferences, it s not surprising that seven in 10 CMOs expect the marketing function to change fundamentally in the next five years (Figure 8). More than 70% of marketers in B2C, B2B2C and significant-growth companies feel this way. Marketers in APAC feel even stronger (85%), while those in EALA (58%) and B2B companies (62%) feel less strongly that transformation is on the way. Nonetheless, the current turbulent path is no place to linger. To achieve substantial change, CMOs need to do four things to transform marketing and streamline their agency mix so they can improve marketing performance: Fundamentally change the marketing operating model. Over the next five years the marketing function needs to undergo fundamental change to stay on top of changing consumer behavior and channel proliferation. CMOs are looking to improve innovation and internal capabilities. Transformation is also core to half of senior marketers, whether it be completing a transformation in progress or initiating an organizational transformation to become more digitally focused. Case in point: to create more relevant experiences at scale, organizations need to mend the seams that reveal themselves when customers move among touchpoints. CMOs must drive a significant shift in organizational culture so that consumer relevance at scale becomes a key operating principle shared by R&D, manufacturing, marketing, sales, supply chain management, services and other departments that affect the consumer experience. CMOs that have already begun transforming their operating model are seeing significant sales growth (Figure 9). In fact, more than half (53%) of high-growth companies are relying on 14

15 Figure 8: Fundamental changes in next 5 years (%) Overall Region More than 70% of marketers in B2B2C and significant growth companies feel that the marketing function will fundamentally change over the next 5 years. APAC EALA North America Marketers in APAC are more aggressive about this change (85%) with marketers in EALA (58%) and B2B marketers (62%) not feeling as strongly about such transformation. Company type B to B to C B to C B to B Sales growth Significant Flat/little Negative No Yes 15

16 organizational transformation to meet their marketing objectives. The new marketing organization, powered by analytics and technology and focused on business outcomes, will play a critical integration role across channels and business units. Build new skills internally. Marketers will need to hire, reskill and redeploy people to improve efficiency, agility and responsiveness. Marketers need talent that can create consistent, multichannel experiences that meet customers needs, expectations and demands for relevance. Innovative employees are high on the CMO agenda. An emerging priority for marketing executives is to hire and grow talent that is digitally experienced and can integrate well with the IT department. CMOs plan to have more employees focused on analytics and digital marketing in the year ahead (Figure 10). About onequarter of senior marketers are dedicating 41-60% of their employees to these areas. They recognize the importance of analytics in understanding how consumers desires for relevance drive marketing decisions. With the shift in budgets to digital, the number of employees focused on that area is expected to increase. In fact, employee headcount in digital marketing shows the biggest jump (eight points) across customer analytics, digital marketing, and marketing and media analytics. More traditional areas of marketing will see a smaller increase or even a decrease in employees in some cases. Get aligned with the right set of partners. Agencies and alliance partners must help CMOs make sense of complexity in the marketplace by improving their levels of execution and delivery and by providing a broader set of capabilities and deeper integration across the agency ecosystem. As CMOs consider whether to invest internally or externally, they may prioritize their decisions based on capabilities and satisfaction. For example, external providers receive satisfaction scores nine to 12 points higher than internal resources in the areas of customer insights and analytics, multichannel campaign management, content management, media mix optimization and media audits. Drive digital orientation throughout the enterprise. To improve marketing performance, prepare for the future and reduce complexity, digital orientation can no longer remain only a province of marketing. The entire organization needs to understand how digital is transforming the customer experience. While CMOs recognize the need to increase digital capabilities and budgets to meet consumer expectations and support profitable business growth, inefficient business practices hinder the development of a digital DNA across the organization. Some 16% of CMOs encounter performance barriers when trying to work horizontally. The C-suite needs to give digital orientation greater importance by embracing horizontal collaboration. (The marketing organization) has to change to stay up with current technology. Too much is the old way and not getting results. VP Marketing, Fortune 100 bank, USA 16

17 Figure 9: The impact of operating model transformation on sales Significant Sales Growth Will not rely at all (1&2) Will rely to a large extent % Flat / Little Sales Growth Will not rely at all (1&2) Will rely to a large extent % Negative Sales Growth Will not rely at all (1&2) Will rely to a large extent % Will not rely at all (1&2) 3 4 Will rely to a large extent 5 Figure 10: Employee growth in analytics, digital marketing (%) % of marketing Employees dedicated to: Customer Analytics 41-60% 21-40% Direct Marketing / Campaign Management 41-60% 21-40% Digital Marketing 41-60% 21-40% Marketing Operations 41-60% 21-40% Marketing & Media Analytics 41-60% 21-40% Mass Media / Advertising 41-60% 21-40% Next year This year 17

18 The marketing game changer Digital is the marketing game changer. In an information-overloaded world, the traditional brand-centric marketing approach has long lost the appeal it once had for attracting consumers and assuring a healthy rate of return from marketing investments. Today s consumer is more in control than ever and causing more turbulence for today s marketers. As consumers go digital and interact across multiple devices and channels (encouraged by their millennial offspring), they expect brands to fit their needs of the moment with relevant experiences. If the brand doesn t measure up, consumers move on. In the face of such a shift, the marketing function needs to undergo a fundamental change over the next five years to stay on top of changing consumer behavior and channel proliferation. Marketers will need to hire, reskill and redeploy people to improve efficiency, agility and responsiveness. They will need to stay relevant and engage with customers through the most convenient channel and the most relevant offer. Facing increasing complexity, CMOs who want their companies to achieve high performance are transforming their operating model, tuning up their business practices, carefully selecting their agencies and partners, and upskilling their talent. Their ability to restructure the organization and work horizontally to deliver seamless and relevant customer experiences across all touchpoints all day, every day, will be essential to survival in the global marketplace. 18

19 About the research The CMO Insights survey is the third in a series of studies sponsored by Accenture and aimed at understanding the opinions, challenges and points of view of senior marketing executives from around the world. Results are based on online surveys across 10 countries with 405 senior executives who are key marketing decision makers in their companies. Most companies have at least US$1 billion in annual revenues. Corporations in France, Australia, Singapore and Brazil have annual revenues of at least US$500 million. Nearly half (48%) the companies experienced flat or little growth in. Another 36% showed significant growth, while the remainder (16%) had negative growth. Business-to-consumer (B2C) and business-tobusiness-to-consumer (B2B2C) corporations represented the most prevalent business model (37% each). Business-to-business companies made up the remaining 26%. Financial services represented the biggest sector (34%), with products companies close behind at 30%. Communications, high-technology and media companies represented 16%. Resources companies made up 7%, while a variety of other companies represented 11%. Some 45% of respondents were based in Europe, Africa and Latin America (EALA). Another 40% were located in North America, while 15% were headquartered in Asia- Pacific (APAC). Authors Brian Whipple Brian Whipple is Managing Director of Accenture Interactive, a business of Accenture that helps companies develop industryleading digital marketing capabilities, including the development and management of websites and interactive marketing, as well as the optimization of online and offline marketing and merchandising investments. Brian leads all of Accenture Interactive s global consulting domains including Digital, Marketing Analytics, Media Management, Marketing Data Management and Marketing Transformation. Prior to Accenture, Brian was Chief Operating Officer of Hill Holliday, an advertising and marketing services firm headquartered in Boston. brian.whipple@accenture.com Baiju Shah Baiju Shah is Managing Director for Strategy & Innovation in Accenture Interactive. In this role, he oversees Accenture Interactive s business strategy and manages a portfolio of emerging business services. He is responsible for identifying and catalyzing new waves of growth by creating new business services that address unmet needs in the everevolving marketing landscape. He has worked closely with clients across industries including Verizon, Chrysler and P&G on strategies that take advantage of emerging technology and analytics as a competitive advantage in Digital. Baiju s expertise lies in digital marketing, advanced analytics, and technology market adoption. baiju.shah@accenture.com 19

20 About Accenture Interactive Accenture Interactive helps the world s leading brands drive superior marketing performance across the full multichannel customer experience. Working with over 4,000 Accenture professionals dedicated to serving the marketing function, Accenture Interactive offers integrated, industrialized and industry-driven marketing solutions and services across consulting, technology and outsourcing powered by analytics. or visit accenture.com/interactive. About Accenture Accenture is a global management consulting, technology services and outsourcing company, with approximately 261,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31,. Its home page is Copyright 2013 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. The views and opinions in this article should not be viewed as professional advice with respect to your business. Disclaimer: Accenture s CMO Insights survey uses the generic term partner to refer to entities such as digital agencies, specialized agencies, marketing service providers, advertising agencies, management consultants, systems integrators and public relations firms. The use of the term partner in the survey, the survey results, and in this edition of CMO Insights is not intended to, and does not, imply the existence of a legal partnership.

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