Breakthrough levers toembark on digital marketing
How companies should transform themselves to attractand engage customers with real, omnichannel journeys

January, 2018

Content
Executive summary3

1. The evolution from paid to earned media

4

2. A new customer engagement model7

3. The digitally transformed marketing organization

11

4. Open-data platforms – the next digital breakthrough?

13

Authors:

Francesco Marsella

Palmo Antonio Cavallo

Partner, Strategy & Organization,
Romemarsella.francesco@adlittle.com

Manager, Strategy & Organization,
Milan
cavallo.palmo-antonio@adlittle.com

Andrea Visentin

Clemens Schwaiger

Principal, Strategy & Organization,
Romevisentin.andrea@adlittle.com

Principal, Telecom, Information, Media &Electronics, Vienna
schwaiger.clemens@adlittle.com

Acknowledgement for their support and valuable input: Aurelia Bettati, Johan Treutiger

Executive summary
At the dawn of internet, content publishers started generating revenues by advertising products
and services of the real world on their websites. Today the advertising industry is a blend of digitaland physical media, and companies need to stay on top of its fast evolution. Following the original
path, but years later, marketing and sales practices are relying more and more on digital channels.
However, companies do not take most of the potential opportunities, because they are still tied toconventional customer engagement models and operate through traditional organizational
structures.
Digital advertising investments are growing at a fast pace, with over 17 percent CAGR since 2011
and reaching 42 percent of total global ad spending. The forecasts see this shift continuing up to 50
percent in 2020, and in some markets, the share will be even larger. Here the key issue seems tobe how to optimize ad spending, balancing the media mix between online and offline and earned
and paid media, in order to maximize advertising effectiveness. In this regard, new trends arecoming up, showing increasing integration between physical and digital channels: audiencetargeting, mobile and apps, social media, hot spots and IoT devices must be properly leveraged tounleash the full potential of future advertising campaigns.
As sales and advertising evolve online, customers are also increasingly using digital channels toshop, compare, interact and communicate, generating a huge amount of information about theirneeds and expectations. The potential behind this data is driving investments in big data softwareand tools, which globally accounted for over $22 bn in 2015 and is expected to grow at a 47 percent
CAGR in the next four years. However, investing in sophisticated technologies does not create
value if marketing fails to create a comprehensive model to turn data into sales opportunities.
Nowadays, companies are struggling to deal with a more and more sophisticated customer. Online
and offline touch points are generally unbound, failing to create the unique and continuous journeycustomers expect. The main challenge for digital marketing is to rule the omnichannel customer
experience by embracing a vision to integrate marketing and sales processes aimed at increasing
lead generation and conversion. Therefore, a new engagement model is key to interacting with thecustomer on the journey, which takes place in both the digital and physical worlds.
According to a 2017 survey of US senior executives about big data business impact, 85 percent ofrespondents said their companies had started programs to create data-driven cultures, but only 37
percent reported success so far. The issues are associated with management understanding,organizational alignment and organizational resistance.
Marketers are facing the above-mentioned challenges, which demand a redesign of processes,
tools and competencies to cope with the new paradigm of the digital era. We envision themarketing department of the future as a function that (i) generates fast and continuous data-driven
market insight, (ii) directly governs and influences the sales channels and (iii) integrates its
operations with the sales department to guarantee a seamless experience for the potential
customer.
3

1. The evolution from paid to earned media
In 2016, the global advertising spend amounted to EUR 470 bn,
with TV advertising and online advertising as the two largest
segments. However, online advertising has rapidly grown inimportance over the past 10 years, and by 2020, it will represent
more than half of total advertising spend. In some leading
countries, online advertising was already by far the largest
advertising segment in 2016 (e.g., UK 58 percent of total ad
spend, France 49 percent, Germany 43 percent, South Korea
42 percent).

Figure 2: Online advertising by type of advertising, 2011–2020
Bn EUR

CAGR
11–20

289
268
+14%

Figure 1: Global advertising spend by type, 2011–2020
Bn EUR

CAGR
11–20

5.7%

353

370

389

416
145

441

171

470

497

196
(42%)

221

525

245

552

122
104
13
11
89
12
8
12
46
6
39
32
39

580

45

52

145
16
14

54

61

245
221

22

196

21

36

171

20

30

18
19

24

64

70

73

79

82

87

91

96

23

24

Classified

+8%

49

Video (incl. video
game advertising)

+25%

43

99

104

105 Search111

Display(incl. digital OOH)

+14%

+12%

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

268

89

104

122

21
26

26

21

21
27

28

22

22
22
29
29

22
30

22
30

22
31

89

86

82

79

75

71

68

64

127

133

136

143

145

151

157

2011

2012 201320142015 2016

289
Online
(50%)

14.0%

Out-of-home

0.5%

Radio

2.1%

61

58 31
Print

4.7%

164

170

179

3.9%

2017 2018

2019

2020

22

TV

Source: Arthur D. Little “Media flow of funds database”, 2017

The range of online advertising types is rapidly expanding, andso far more than 20 sub-segments exist. For simplicity, they
can be clustered into four main segments: online classifieds,
video, paid search and display advertising. All main segments
show strong growth until 2020, although classifieds and display
advertising will prove somewhat less dynamic in comparison tovideo and search advertising.

Source: Arthur D. Little “Media flow of funds database”, 2017

Along the advertising value chain, different players are leveraging
their data and capabilities in different ways to take advantageof the growth opportunity given by targeting online advertisingaudiences.
One of the most interesting trends is the creation of large
advertising marketplaces at national level. These platforms
add to the efficiency of programmatic advertising in a large
and complete nationwide ad inventory. A recent example isthe foundation in 2016 of Admeira in Switzerland. Swisscom,
Ringier and SRG created a cross-media targeted advertising
joint venture, thereby regrouping Switzerland’s most desirable
ad inventory with a potential net reach of 80 percent. Admeira
includes:nn All titles and online property of the leading newspaper& magazine group
nn Audience share leading free-to-air TV and radio

The main advantages of online advertising over other media
is the opportunity to efficiently address specific groups ofcustomers. In order to serve targeted advertising, a number of
elements need to be in place:nn The ability to identify a given recipient of an advertisement
nn The knowledge of relevant targeting information for that
individual
nn The ability to distribute the targeted advertisement

4

broadcasting (public)nn Largest pay-TV platform & mobile operator(for targeting purposes)
To avoid regulatory remedies, the JV is open to all otherinterested media companies in TV, radio and print and online thatwant to market their inventory through the marketplace. As the
JV is committed to developing an independent, total-audience
advertising currency, this will ultimately result in a quasirequirement for all ad inventory owners to join.

1Figure 3: Players in the advertising value chain and their opportunities in the digital channel

Mobile operators
Try to exploit/monetize
their subscriber data

Print players

Free TV broadcasters

Try to build up a repositoryof user and usage behavior

Try to enter into digital businessmodels (video ads or verticals)

Pay-TV operators

National admarketplaces
Try to build competitive advantages
against global OTT players

Try to monetize theirplatform and viewing data

Tech companies
Try to extend performancetools to traditional advertising

Source: Arthur D. Little

As large advertisers shift more and more of their budgets online,
their online advertising operations become more sophisticated,too. Organizations are discovering a new purpose for using
digital channels: collecting data and insight from customers.
FMCG players such as Nestlé and Henkel have built up
dedicated teams and invested in software solutions that allow
them to steer and measure (ROI) their online advertising spend
across segments and match this to their customers’ behavior.
Conversely, offline media typically face hard challenges whenit comes to measuring the ROI of advertising investment. In
the age of advanced data analytics, the low measurability ofoffline media spend becomes increasingly untenable. Thus,
a considerable number of start-ups are currently working
on making traditional advertising spend as measurable as
online ad spend. Telecom operator Telefonica O2 in the
Czech Republic has developed a tool that allows for accurate
footfall measurements of out-of-home advertising, based onanonymized mobile-subscriber location data. Another such
example is the real-time TV advertising measurement company
AdScanner. Its video recognition algorithm and analytics process
automatically recognize, track and catalog TV advertisements
in real time. Its searchable database can visualize broadcast
reports for each industry, category, company, brand, product,
campaign or individual ad. In addition, advertisers are informed
via automated, customizable notifications (API) whenever apredefined scenario has occurred with their or their competitors’presence on TV. AdScanner has also developed real-timeaudience measurement technology to evaluate the performanceof TV content and ad campaigns by integrating the viewer
behavior of hundreds of thousands of IPTV households.
The involvement of social media in marketing products isevolving so fast that the lines that separate social media fromsales are blurring. Major brands are facing key challenges
as their digital communication channels get more and more
important in marketing communication. Typically, digitalchannel operations are outsourced to local/regional social
media agencies. Furthermore, marketing budgets are coming
under pressure. Consistent communication of brand values isthus more difficult than ever, as digital channels are becoming
increasingly global. At the same time, entry barriers into
publishing and broadcasting are decreasing fast. This has led tolarge, in-house digital media operations at some brands.
The most aggressive move into digital marketing wasundertaken by Red Bull. With Red Bull Media House, theenergy-drink company created a dedicated media unit withthe clear goal of communicating and shaping the brand values
through high-quality “earned media”, i.e., advertising messages
packed into editorial content. The company was launched in2007 in Salzburg, Austria as a multi-platform media company
with a focus on sports, culture, and lifestyle. Since then, a
network of correspondents in more than 160 countries has been
established, along with a subsidiary in Los Angeles, California
in 2011 for digital and film productions. The company can rely

51

Figure 4: Red Bull Media HouseThe Red Bulletin
A global magazine about
sports, culture and lifestyle.
A magazine with a difference.
Servus in Stadt & Land
Natural, down-to-earth,authentic, and grounded in theregion – that's the mindset
behind this magazine.
Terra Mater
Nature, science and oldfashioned journalism: theperfect read for anyone looking
to enjoy their sense of wonder.
Bergwelten
An alpine adventure magazine
for everyone who likes gettingout into the mountains or
dreams of doing so.

Red Bull TV
Programming offer for sports,
culture, and lifestyle content,
available globally and in avariety of forms and broad-casts
through different channels.
ServusTV
TV broadcast for Germany,
Austria and Switzerland –premium content, focusing
on stories of human history,
cultures and technologies.
Terra Mater Factual Studios
Production unit specialized in
top-end documentary and nonfiction production, featuring
genres like wildlife, science,and history.

#ICH
The new fashion magazine –surprisingly different.

Red Bull Air Race The Game
Gaming motorsports series
The fastest motorsports gamein the world.

Seitenbllcke
An entertainment and musthave magazine for anyone
interested in the world ofshowbiz and celebrities.

Gran Turismo 6
Console game integration
Exclusive Red Bull race cars inthis awesome racing game
series.
Red Bull Reality Check
Gaming reality series
Reality series building bridges
from the real to the virtual world.

RedBull.com
The Redbull.com network is
the main entry point to a worldof content, games, social
tools, and applications.
RedBull.TV
Platform for live programmingand on-demand video content
from Red Bull Media Houseand its partners.
RedBulletin.com
RedBulletin.com is based on
the idea of visual storytelling
and translates The Red
Bulletin magazine's content
into the digital world.
Social Media
Our social channels are highly
frequented and liked by millions
of followers, friends and fans.

Red Bull Music Publishing
Professional development forupcoming artists and business
entity for partnerships withestablished artists and brands.
Red Bull Records
Full-service independent recordlabel dedicated to long-term
artist development and music
synch opportunities forpartners.
Red Bull Music AcademyRadio
One of the most listened online
radio stations in the world, ondemand music programmingwith thousands of exclusive
shows.

Speedweek
Cars, motorbikes and thesound of engines. Every issue
brings all the latest
information on global
motorsports events.
Red Bull MOBILE
The ultimate mobile experience:apps and games and exclusive
content, paired with
uncompetitive tariffs.
Mobile applications
Our unique universe of apps
contains more than 25 appsfor diverse fields of interest.

Source: Arthur D. Little1

on extensive global logistics through the energy-drink business,thereby covering major events across the globe efficiently.
Red Bull Media House has also built a fully integrated digitalproduction environment for all media channels.
In the long-term, the increasing prevalence of targeted
advertising will result in a rise in online advertising prices, i.e.,targeting effectively is “gold-plating” for online advertising. At
the same time, the emergence of real-time and data-heavy
performance measurement capabilities for traditional advertisinginventory and the continuous decline of their reach will exertpressure on traditional ad inventory prices (print, TV, radio).
At this stage it also appears that media agencies will find it
increasingly difficult to justify their dominant demand-and-supply
aggregation role.

6

The crisis of traditional ad marketplaces will arise fast, as they
will fail to provide transparency, increase efficiency of demandand-supply matching, and lower fees and commissions.
Companies should foresee this scenario and act in orderto advance their communication practices. The growth ofcompanies’ earned media gives them the chance to evolve
traditional communication functions into internal media
agencies. In line with this vision, the communication manager
will supervise content production, which will benefit frommessages more coherent to internal brand culture than thosecreated by external agencies.

2. A new customer engagement model
If the valorization of earned media can transform the way
companies reach customers, a new customer engagement
model can be created by digitally disrupting the traditional
marketing practice. The existing model must be rethought in a
logic that takes advantage of new, digital customer interactions.
Through the customization of these interactions and finally theidentification of online users, the virtual and real worlds can belinked, thus enabling companies to offer customers seamlessexperiences with their brands.
The consequent knowledge transfer between the two worlds
will become the most precious asset to decoding customers’
behavior and comprehending how, where and when to interact
with them. This is even more relevant for non-digital-borncompanies, most of which still rely on large, physical networks
for customer interaction. These companies must define newroles for their physical networks before they become obsolete.
The generation of continuous and fresh market insight andbroadened knowledge of new and potential customers are
key levers to determining higher sales results.

We have demonstrated that the growth of customer proximity
increases the generation and improves the conversion of sales
opportunities.
Digital channels have posed serious challenges to the ways
customers are engaged. A look at these challenges for some of
the major industries is convenient before further examining theabove-mentioned topics.

A comprehensive vision for digital marketing
Companies must embrace a new approach in order to give
strategic relevance and a clear purpose to the digital marketing
practice. This approach is based on seven major activities
grouped into three areas, which recur iteratively to achieve
progressively more accuracy and commercial success:

Data management
nn Data collection activities must be systematic and regard
structured processes implemented both online and offline.
Because they will find value in the interaction, customers

Future challenges

Omni-channel gaps

Figure 5: Gaps and challenges from digital disruption in different industries
Durable goods

FMCG

Services

Automotive

Fashion & apparel

Financial services

 Physical stores do not have availability of Information asymmetry between website, 74% of online test drive requests aremanaged after more than 4 days
(51% after more than 10 days)

 Salesmen do not leverage insight anddata gathered online

full product lines like customers
experience online

 Price asymmetry online-offline

call centers and branch visits Only 40% of customers who requested

an offer proposal received it in the end Only 20% of US users frequently use

 Leads generated are not fully exploited

coupons collected offline for online
fashion purchases

 Retention and conversion rate is high for How to improve connection between

 How to create the expected seamless How to maintain strong reputation and How to leverage complementarity of How to reach the high conversion rate of How to leverage digital tools to enhance How to create and implement

online and offline touch points?
 How to create actionable insight from big

data?

 How to enhance targeting and sales fromleads generated online?

experience in the online and offline
channels?
online and offline retail channels?
physical customer experience?

branch visits only

trust with reduced human contact
impact?
physical network with online channel?
omnichannel synergies?

Source: Arthur D. Little project experience

7

will agree to provide the information required. Mandatory,easy-to-fill-in contact forms should be located at all touchpoints, while new physical formats can enrich the journey forcustomers, prompting them to release more information.
nn Data collection from multiple sources, structured or
unstructured and with different format or size, can beuseless if not properly managed. The purpose of Data
integration is to merge available data into a single datalake, where it is cleansed, transformed and linked, ready foradvanced analysis and visualization.

nn A group of customers must be targeted through specificactions in accordance with their characteristics. Choosing
the right cluster through the right channel, with the rightcontent at the right time can maximize the effectiveness oftargeting and the returns for each action.

Actions versus users
nn Dynamic offering must be adopted in order to display
personalized offers that meet customers’ preferences interms of models, price and ancillary services.
nn Gamification techniques must be employed to engage

Data intelligence
nn Data analysis has to rise to a superior level to create insightrelevant to business. Predictive models can predict resultsof digital actions. Reverse engineering of purchases canidentify common paths from customers that successfullycomplete the sales funnel. Finally, machine-learningalgorithms can support marketing automation by adapting
analysis outcomes in real time to better match customer
preferences and attributes.
nn Advanced clustering must be executed through combining
multiple dimensions (purchase intention, demographic,
personal interests, competitors’ awareness, social media
behaviors, etc.) to recognize profiles of customers andusers with similar characteristics. Homogenous groups
are adjusted dynamically to raise the accuracy of the most
relevant customer behaviors.

customers/users with rewards, collect their contact
information and keep them connected for longer times.
Marketing automation must increase the speed of
response to customers’ inquiries. Every online interaction
must aim to identify the user, linking the user ID to thephysical identity, in order to create a seamless experience forthe customer in a truly omnichannel relationship.

A new role for the physical network
A physical network of stores or branches has, for a long time,
been the most effective way for retailers to get in contact withcustomers. The rise of the digital channel started threatening therole of the physical channel, with most businesses considering
one a substitute for the other. This idea is fallacious. In fact,
it is more likely that the two will coexist in a complementary,synergic relationship.

Figure 6: New digital marketing approach

Data management
Data
collectionData
integration

Collection ofIntegration ofdata from online existing(cookies, social structured (e.g.,
media, etc.) and CRM) andoffline (dealer
unstructured
visits, events,(e.g., DMP,
etc.) sources and transactions)enrichment
data in a datafrom 3rd parties’ lake for storage
and cleansing
databases

Data intelligence
Analysis &insight

Identification of
frequent paths,
most preferable
attributes andright timing
throughmachine-learningalgorithms able
to define new
actions withhigher success
rates

Advancedclustering

Actions vs. users
Targeting &offer design

MultipleIdentification ofdimensions
unique group ofclustering
users/customers(purchaseto address
intention,
specific actions
personal(advertising,interests, etc.) to campaign,define variable
surveys, etc.).
profiles ofPricing andpotential
bundling
customer groups techniques

Continuous and iterative loop
Source: Arthur D. Little

8

Campaigns

Userinteraction

Display of
Gamification,
personalized
marketingoffers (productautomation,
type, price andspeed ofancillaries) based response to
on clusters
raise thesimilarity,
engagement
preferredlevel from theattributes andfirst contact andpurchase timing augment leadgeneration

While e-commerce is increasing its performance, targeting oneday delivery time and highly efficient order fulfillment, physicalnetworks are still the center of retail business, cooperatingwith online websites in the so-called ROPO1 model. However,
the rise of smartphones and cheap prices from online storesis pushing the growth of the opposite phenomenon: TOPO, try
offline and purchase online – also known as “showrooming”.This
model defines a new purchase behavior, and ultimately has thepower to transform the business models of retailers and the roleof physical networks deeply.
The future might no longer see physical stores as the core ofsales operations, but as the core of customer emotion, intended
to be everything that cannot be experienced online: feel, touchand immersion into a real experience can make the differencein the engagement process and eventually determine the sale(even if online). An American online men’s apparel brand createda physical network, now accounting for 20 stores in the major
US cities, with the purpose of allowing customers to try on
its clothes. Other fashion brands are equipping their storeswith interactive glass walls to support customer choice withadditional online content.
Pop-up stores and hot spots will increase their penetration in
urban and metropolitan areas, delivering highly emotional andcontent-rich experiences with the aim of capturing incoming
traffic and the attention of potential customers. The automotive
industry is one of the most active in this sense. All major
premium brands have already set their city showrooms to
seduce passing pedestrians and raise the emotions created byhigh-tech products. In line with this trend, a shift in budget fromnetwork development to big retail events is expected.
The physical network as we know it will not disappear, but it islikely to be re-engineered. Retailers will have to optimize stores’
distribution and dimensions, design new formats, rationalizeinternal layout, improve operations efficiency and create
sensorial networks that can track customers’ in-store behavior.
At the same time, other devices will need to interact withcustomers to provide real-time, customized content.
Customer data is driving the optimization process. Some
digital-born retailers are already exploiting the customer
insight generated in the digital channel to build more rational(and profitable) retail networks. Leveraging information about
customer locations, they are placing their stores closer to theircustomer bases, sizing them in accordance with the real market
size and minimizing the value erosion of last-mile delivery.
Additional intelligence on historical online transactions allows

1

customized promotions to be created, the right pricing to beestablished and customers’ purchase frequency to be matched.
Disregarding where the sale or other phases of the purchaseprocess will happen, online and offline channels will be more
and more integrated. Customers demand an omnichannel
experience, and companies with large physical networks must
recognize the gaps to fill:
nn Non-digitized data collected offline, which prevents
integration with online data and a better understanding ofcustomer omnichannel behavior
nn Shortage of product-portfolio offers, despite the website
showing the full product linenn Lack of highly emotional experience, which the online
channel cannot deliverTo fill these gaps, companies must make good use of customer
data and deploy new digital-marketing visions that can reshape
the way they interact and engage with their customers.

Closing the circle with an effective conversion model
A forward-thinking approach and productive use of sophisticatedtechnologies to perform digital marketing can be uselesswithout an effective conversion model in place. All the datacollected and analyses executed must create sales opportunities
and increase their quality level. However, even the “most-likelyto-purchase” situation might not be successful if a proper set ofactions is not triggered to complete the sales process.
For companies that market durable goods, this issue is moreevident. In fact, it creates clear discontinuity between thecreation of an opportunity online and the real purchase, because
the latest must occur in the physical channel. An example is theautomotive industry. Leads generated in OEMs’ owned media
and recorded as “interested in purchase within one to threemonths” might not be converted into contracts if they are notproperly managed by the dealer’s network. In this case, theconnection between the digital and physical channels must be
seamless to prevent low conversion rates and impacting thedigital marketing strategy.
Our experience shows that with a systematic and structured
approach to sales-funnel management, the conversion rateof a marketing campaign can be boost by 87 percent, withsevenfold offline conversion of leads. The pillars of successful
lead management are still data analysis and customer centricity.
The generation of insight from unsuccessful sales allows
minimizing of dropouts from the sales funnel in the future. In
addition, an essential support to steering and improving the

ROPO: Research online, purchase offline

9Figure 7: Leads management performance of automotive dealers network, before and after digitization
Automotive sales funnel
Leadqualifycation

Dealers management

Showroommeeting

BEFORE dealer network digitization

AFTER dealer network digitization

100%

100%

59%

14%

86%

Test
Quotation Contract
drive
41%
5%

15%

1%

Leads
Not
Managed Quotations Contracts
sentmanagedto dealers

7%

Leads
Not
Managed Quotations Contracts
sentmanagedto dealers

x7

Source: Arthur D. Little project experienceoffline process has been the “voice of the customer”, gathered
through thorough market research on different clusters of leads
that have connected with the OEM’s brand. Implementationof the proper lead management solution valorized the existing
physical network by digitizing the traditional sales process andtransforming the sales force’s approach towards customers.
Many other industries can benefit from sales-funnel analysisand “voice of the customer” insight. In the telecom industry,a major breakthrough occurred with the introduction of push
notifications and geo-localization. Leading companies havedoubled campaign conversion rates after improving sales-funnelmonitoring through new sets of information collected withmobile apps. In the financial-services industry, a case study

10

proved a 39 percent increase in the new-account conversion
rate: the analysis of customer data gathered in the digitalchannel enabled identification of clear actions to improve theapplication process.
Ultimately, to achieve high conversion rates, companies must
establish attentive lead management practices. This endeavorrequires companies to embark on medium-term programs totransform their sales-force approaches in physical channels.
Regardless of where purchases are finalized, companies need todevelop data analyses and market research to minimize salesfunnel dropouts. Effective lead management will guarantee fullaccess to digital-marketing returns.

1

3. The digitally transformed marketingorganization
The digital-marketing vision depicted in the previous chapter
might miss its goal of engaging potential customers if notproperly implemented. Nevertheless, this vision integrates
the two main changes that any industry must accomplish to
overcome future challenges: achieve customer-centricity andembrace digitization.

nn Development of an omnichannel approach

Unfortunately, many companies face internal resistance toorganizational transformation. Generally, they limit the change tosmall parts of their organizations, keeping the existing structure
and introducing dedicated teams to deal with digital channels
and customer centricity. In the end, the impact on company
performance is secondary and, most of the time, business
management remains in the hands of traditional functions.

nn A leaner governance model with specific objectives for eachMarketing and sales departments in particular need to findnew organizational solutions to embrace digital marketing. A
small team of digital-savvy people within the communication
department cannot be enough to exploit the full potential of
digital marketing. Conversely, marketing and sales should rethinktheir structures and governance and identify the resources
with the capabilities to implement a real digital vision that cangenerate benefits for the whole organization.

The set-up of a new organization model
Most existing marketing and sales organizations consider datafrom digital channels byproducts of online advertising, using
it to feed a basic targeting process. Each unit keeps its datasiloed, even if it relates to the same customer. Market-insight
generation is limited by first-level data analysis that cannot
completely decode customer behavior. Consequently, actions
towards customers/users are not as effective as they might be,
and high returns on digital investments remain locked.
A transformation must occur in order to define a new marketingorganization inspired by a set of guidelines to exploit the digitalchannel and develop specialization in the customer:
nn High level of integration of the offline and online customer
journeysnn Higher speed in decision-making for all customer/prospect

nn Development of advanced analytics and big data
managementnn Specialization of communication in paid-media budget
allocation and earned-media management
marketing unit
In order to achieve this transformation, organizations need tochange their perspectives of digital marketing and customer
management. They must recognize the business impact ofthese activities and define objectives accordingly. This includes
establishment of dedicated KPIs and new incentive schemesthat take into account sales results attributed to them.
With the creation of digital and customer-focused units
accountable for business results, marketing departments canbring customer and product to the same level. The specializationin the two main assets of the market can enable themarketing practice to drive sales performance. While a productmanagement team is common in most marketing organizations,a new unit uniquely focused on customer management canmake the difference now that the digital channel allows effective
interaction with customers.
All the typical functions that deal with customers (or prospects),
in both digital and physical channels, converge within thecustomer management unit. In addition to traditional CRM
and customer-service teams, a team of experts on leadmanagement focuses on carrying customers along the sales
funnel, maximizing the conversion rate of each step of thecommercial process. Finally, the digital owned-media teamis responsible for both data management and the digital
experiences of customers: its main goals are to improve theeffectiveness of customers’ digital journeys and collect andintegrate their data in order to arrange it for analytics. Separationof digital operations from communication purposes will increase
the effectiveness of lead generation by aligning the digitalteam with the conversion objectives of the whole customer
management unit.

operations

11

Figure 8: The digitally transformed marketing organization
NOT EXHAUSTIVE
Focus on savings fromadvertising spend

CMO
DemandGeneration

Communications

Paid media
Management

Earned media
Management

Analytics &insight

Productmanagement
Focus onprofitability

Campaign
Strategy

Customermanagement

Digital own media

Focus onadd. revenues

Leadmanagement

Focus onvolumesCRM &cust. service

Source: Arthur D. Little

Other staff units complete the marketing department, providing
services to the product and customer units. The communication
unit turns into an internal media agency, managing both paid
and earned media. The communication manager focuses on
generating savings from paid-media purchases by effectively
dealing with external media agencies or directly managing
programmatic ad marketplaces. Mindful utilization of earned
media, as previously discussed, will require a new specializationin content strategy in order to produce content that improves
brand reputation and increases word of mouth.
In the demand generation unit, analytics and campaign strategy
converge to provide market insight and define offers andcampaigns to be executed by customer management. This
last unit must concentrate its efforts on developing advanced
analytics by leveraging big data collected from the customer,
and on identifying clusters that effectively describe the multitude
of customer-base profiles. Eventually the success of data
intelligence activities also depends on skills and competencies
that companies can develop internally or take from the outside.

Building skills and competence for digital marketing
While companies raise the bar of digital-marketing expectations,marketing directors feel the urgency to develop expertise that
their current teams still have not mastered. Advanced analytics,
data management and digital-channel operations face a shortageof required skills and capabilities.
One of organizations’ recurring answers to competency gaps
is outsourcing expertise from specialized firms. This might bea valid alternative during the initial phase of the transformation
process, but it must not be considered a permanent solution.
The growth of digital marketing will increasingly impact business12

performance, and hence the capabilities it demands will becomecore assets for any organization. Newly established analytics ordata management teams need time to grow and learn the newskills before taking over the activities outsourced to experts.
Recently, new models have been emerging to spur innovation
among market incumbents. One of these is collaborative
innovation, or co-innovation, among companies, whether
they are established brands or start-ups, with state-of-the-art
expertise in specific fields. Even partnerships with existing
technological suppliers can produce mutual benefits. In fact,
co-innovation can accelerate the innovation process by providing
companies with skills they have not yet developed, and technicalpartners with concrete business cases with which to test andimprove their products and/or services. In addition, companies
can reduce time to market by leveraging their partners’
experience in other industries and transposing their bestpractices.
By following this model, digitally transformed marketingorganizations can support advanced data intelligence activities
from the very beginning. They should seek collaboration withsmall firms that are focused in big data analytics and filled withdata scientists able to add value to the enormous data sets oflarge companies. Digital marketing will have a long-term impact
on business if companies can innovate their practices andtransform their organizations continuously, in order to improvetheir ability to extract value from all data collected in physical anddigital channels.

1

4. Open-data platforms – the next digital
breakthrough?
The evolution of the marketing department into a modern
organization that can leverage opportunities offered bydigital channels is still behind expectations in most of theindustries. In this report, we uncovered two major challenges
to achieving success in digital marketing: (i) governing the new
media ecosystem by innovating customer communication
management and (ii) realizing a new engagement model that
individualizes the relationship with the potential customer. To
accomplish this endeavor, companies must pursue disruptive
transformation of their organizations, firstly redesigning the roles
and responsibilities of the internal marketing structure and theninternalizing the new skills and competences needed to handle
a digital world.
We have seen how advanced players in the advertising value
chain are reshaping their role, driven by the new capabilities
unlocked by digital channels. The rise of earned media
offers companies the opportunity to balance media-budget
expenditures counter to paid media, and gain a degreeof freedom to stimulate customers. The consequence isevolution of the communication function into an internal media
agency, which can manage and create innovative content,
leverage programmatic advertising to reach a better-targeted
audience and generate savings from traditional media-budget
expenditures.
The proliferation of touch points and the need to connect
physical and digital journeys have increased the complexityof customer engagement. The latest developed technologies
can facilitate knowledge transfer between online and offline
channels, enabling identification of users/customers during
interaction with brands. Businesses equipped with retail
networks must adopt omnichannel approaches integrating their
online and physical presences, focusing on providing emotional
experiences. An attentive use of customer information gathered
throughout the buying process can boost the conversion ratio ofleads in sales.
Companies that will have the vision and commitment toaccomplish these changes will gain distinctive positions in themarket and be able to exploit the best market opportunities
through the latest technology innovations. They will rely oncompetitive advantage built around deeper customer knowledge
and solid ability to manage and comprehend large amountsof data.
Furthermore, companies operating in the EU will have toincrease their specialization in data policies as they will facestrengthening of customer data protection laws with the May
2018 introduction of the new EU General Data Protection
Regulation (GDPR). This regulation requires companies tocomply with more duties such as data-breach notifications
and appointment of data protection officers, but it also offersinteresting opportunities such as those behind the principle ofdata portability.
At Arthur D. Little, we believe the next level of this trend will be
the employment of “open-data” platforms: the creation of more
and more valuable insight by connecting cross-industry data.
The “open-data” model particularly suits companies that operate
in adjacent sectors, since they can all benefit from data sharing
and expand the knowledge of their customers into different
journeys without any competition conflicts.
The typical digital experience can involve different products
and services from different vendors, although the customer
perceives the journey as unique. For example, a railinfrastructure manager, a telecom company, a financial-services
company and a tourism player could collectively gather different
data sets for the same user, and would find mutual advantages
from sharing this information. As a result, the comprehensionof the customers’ behavior and profiles could be discerned andunderstood in a wider and more complete context.
Deeper knowledge of the customer would originate more
personalized relationships and better-tailored actions, resulting
in higher success rates for businesses. Eventually the potentialof these “open-data” platforms, though still undiscovered, could
represent the visible point where digital marketing should direct
its expansion and set its ambition.

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Notes14

Contacts
If you would like more information or to arrange an informal discussion on the issues raised here andhow they affect your business, please contact:

Austria
Karim Tagataga.karim@adlittle.com

Italy
Francesco Marsella
marsella.francesco@adlittle.com

Spain
Pedro Fernandezfernandez.pedro@adlittle.com

Belgium
Gregory Pankert
pankert.gregory@adlittle.com

Japan
Yonoshin Morimori.yonoshin@adlittle.com

SwedenJohan Treutiger
treutiger.johan@adlittle.com

BrazilRodolfo Guzman
guzman.rodolfo@adlittle.com

Korea
Kevin Lee
lee.kevin@adlittle.com

Switzerland
Wilhelm Lernerlerner.wilhelm@adlittle.com

China
Russell Pellpell.russell@adlittle.com

Latin America
Daniel Monzon
monzon.daniel@adlittle.com

TurkeyCoskun Baban
baban.coskun@adlittle.com

Czech Republic
Dean Brabec
brabec.dean@adlittle.com

Middle East
Thomas Kuruvilla
kuruvilla.thomas@adlittle.com

UK
Jonathan Rowan
rowan.jonathan@adlittle.com

FranceAurelia Bettati
bettati.aurelia@adlittle.com

The Netherlands
Martijn Eikelenboom
eikelenboom.martijn@adlittle.com

USA
Sean McDevittmcdevitt.sean@adlittle.com

Germany
Wilhelm Lernerlerner.wilhelm@adlittle.com

NorwayDiego MacKee
mackee.diego@adlittle.com

India
Srini Srinivasansrinivasan.srini@adlittle.com

Singapore
Yonoshin Morimori.yonoshin@adlittle.com

Breakthrough levers to embark on digital marketing– How companies should transform themselvesto attract and engage customers with real,omnichannel journeys

Arthur D. Little
Arthur D. Little has been at the forefront of innovation since1886. We are an acknowledged thought leader in linking
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