The
surprising truth about which countries lead in digital
Which country leads the world in digital? Many might be tempted to
answer that the US does, but the answer actually depends on what aspect of
“digital” you’re looking at. When it comes to Internet penetration, the US has
much higher rates than in the EU, 88 percent compared with 71 percent. But dig
a little deeper and the picture changes.
Where
Europe has the edge
When it comes to customer preferences for
digital channels, Europe is way ahead. Recent McKinsey research examined the
digital customer experience in the mobile telecom sector and found that
European customers are more open to digital services than their US
counterparts. Almost half of them would be happy to manage their relationships
with providers entirely through digital channels, for instance, compared with
fewer than a third of customers in the US. In both sales and customer care,
levels of awareness and usage of self-serve digital channels (such as mobile
apps) and live digital channels (such as web chat) are already markedly higher
in Europe than in the US.
Similarly, European banking customers are
more likely than Americans to prefer digital to physical channels. Another
recent McKinsey survey found that 58 percent of Western Europeans (and a hefty
85 percent of Northern Europeans) prefer digital to branch-based transactions,
as against only 52 percent of US customers. That’s despite the fact that
digital banking has higher penetration in the US (at 73 percent) than in
Western Europe (60 percent).
The European digital edge seems to extend to
other categories too: 24 percent of car-insurance sales take place online in
Europe, for instance, compared with 17 percent in the US; similarly, for
personal loans, the shares are 27 percent and 16 percent respectively.
Customers in Europe are much more likely
to use digital channels than stores or call centers, whether they are adopting
a new service, reporting technical problems, querying bills, or making admin
changes, whereas US customers still prefer to use stores, and to a lesser
extent call centers, for some of these needs. What’s more, European customers
are more satisfied with “digital only” experiences than with wholly traditional
ones, which is not true of their US counterparts.
However, common ground emerged when we
asked users of traditional channels what was deterring them from using digital
services. Telecom customers in both regions expressed a preference for speaking
to someone in person, though this sentiment was more marked in the US (three
times higher than the second preferred option) than in the EU (twice as high).
Why the
difference?
Consumers tend to adjust their
expectations to the offer they receive, and in industries where companies have
heavily invested in digital—such as retail, with Amazon—Europe and the US both
show strong penetration. In the telecom market, the differences in the pace of
digital adoption can be explained by four structural differences in the
markets:
1. Fragmentation, competition, and cost
pressure. Europe has a more fragmented market
than the US, with many smaller players, including mobile-virtual-network
operators (MVNOs), engaging in fierce competition on price and costs. As price
levels were forced down, telecom providers used digital channels to find
savings. On the other side of the Atlantic, US companies operating on a greater
scale were able to spread their fixed costs over a bigger base and did not feel
the same pressure to reduce their operating costs.
2. Innovative business models. New entrants in Europe such as Free, Congstar, and
GiffGaff have sought to use distinctive digital elements in their business
models as a way to pull ahead of the pack. In turn, traditional operators in
the EU have been forced to adjust their customer- service models and make more
use of digital channels.
3. The US emphasis on physical presence. Traditional US telecom operators have focused on developing
their store networks and personal service, training their customers to go to
stores to buy handsets and get service. This makes it harder for them to push
digital channels and handle the resulting channel conflicts. Nevertheless,
omnichannel customer behavior—shifting seamlessly from one channel to
another—is slightly more common in the US than in Europe: 48 percent of
American customers looking for mobiles do their research online and then
purchase from a store, for instance, compared with 43 percent of Europeans.
4. Dependence on physical presence for
upselling and cross-selling in the US. US
companies generate significant revenue from traditional channels (stores and
call centers) and so are reluctant to introduce digital-only customer journeys.
Overall, the more competitive environment
in European markets has produced a stronger digital offer for consumers, who
are in turn more comfortable using mobile and online channels for most of their
needs.
Consumers
lead the way
Despite the current differences between US
and EU consumers and markets, we believe that the digital development
trajectory for each is likely to be much the same in the medium to long term,
which means that lessons from one region can be applied to another when market
forces are similar.
In the telecom industry, both EU and US
companies can strengthen their position by learning from pure or more mature
digital players. Almost half of European telecom customers, for example, are
open to interacting with them purely by digital means, yet few are able to do
so. By extending and enhancing their digital offers in e-sales and e-care,
these companies could reap significant rewards in lower costs and increased
customer loyalty across all segments. For US telecom companies, success will come
from tailoring offers more to customer segments. For low-value segments, the
prize lies in reducing cost to serve, cutting prices, and migrating customers
to the cheapest channel for most journeys, i.e. digital. For millennials,
moving quickly with an attractive digital offering could help telecom companies
capture market share from competitors, or at least not lose it. For other
segments, ensuring a seamless customer journey between channels is the key to
balancing the tradeoff between omnichannel behaviors, expectations of personal
interactions, and the cost advantages of digital channels.
Four
steps to start winning digital consumers
In developing a distinctive digital
offering, companies at almost any stage of their digital journey will find it
helpful to think about four key steps:
1. Discover: shaping their digital ambition, strategy, and
business case. To discover what customers really want, smart companies will
segment their customer base not only by value but also by behaviors and needs
across channels, thus creating a set of “personas” to which they then tailor
the digital experience and customer journey. For instance, a company can ask a
few questions about a particular customer’s needs before selecting which
products to show them on its website. Someone looking for the latest cool
product might see the three most-discussed models on social media, say, while a
decisive customer in a hurry to buy might see the three products best geared to
their immediate needs and price sensitivity.
2. Design: crafting a holistic digital and omnichannel
approach. Customers should be able to switch between online and offline
touchpoints easily and experience perfectly coordinated and rewarding
multichannel journeys, such as click and collect. This is particularly important
in the US, where customers prefer physical channels and personal interactions
and are less open to using digital-only channels. Another helpful strategy is
to embed improved live digital channels (online forums, web chat, social media)
into digital self-serve channels (websites, apps, automated text messaging,
virtual online agents). The option to speak to someone live if needed will
overcome what customers see as the biggest barrier to using digital channels.
Since most customer-care requests begin online, companies that offer customers
a simple way to contact them through a digital channel will minimize the
friction of changing channels, while both boosting customer satisfaction and
keeping operating costs low.
3. Deliver: creating a system to rapidly deliver at scale. The
key to encouraging customers to use digital channels is to adopt highly
differentiated migration tactics. The best companies deliver personalized and
consistent messages and offers, tailored to different customer segments at
different times, as part of a campaign. Many of these offers can be sent
automatically when triggered by a specific event. As an example, a customer who
has just purchased a new product could be sent a link to an FAQ session on how
to install it. Campaigns can also vary the messages they use according to the
behaviors of different customers. For example, a company wanting to increase
usage of an app might offer the same discount on the monthly subscription fee
to a customer for downloading the app and using it once in the first month, and
to a customer who has already downloaded the app for using it more than once
every month.
4. “De-risk”: structure the program to reduce operational and
financial risks. Undertaking a digital transition consumes a great deal of
time, energy, and resources, and any failure can have a devastating effect. To
minimize these risks, leaders develop clear and consistent governance and
communications, a well-designed road map for transformation, and new incentive
structures and performance metrics to facilitate cross-functional cooperation
and promote a culture of flexibility and innovation. Cutting costs early can
deliver quick wins and fund future changes.
While there are telling differences in consumers’
adoption of digital channels in the US and EU, it’s clear that consumer
companies everywhere will need to optimize their digital and omnichannel
presence. How quickly—and profitably—they do so will depend on competitive
intensity, the presence of digital attackers in their particular market, and
the readiness of customer segments to change their purchasing behavior.
By Jorge Amar, Raffaella Bianchi, and Daniel Svoboda
http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/the-surprising-truth-about-which-countries-lead-in-digital?cid=other-eml-alt-mip-mck-oth-1609
No comments:
Post a Comment