Digital Businesses: 4 tips for Creating Value in Volatile Markets
Market conditions have changed dramatically in recent months. High inflation and the war in Ukraine, among other factors, are now having a significant impact on the economy, resulting in some of the lowest growth rates in many years.
These changes are challenging for leading digital companies. They have to ask themselves tough questions and determine their priorities, whether it's acquisition channels, customers or products. The key in this situation is to avoid rushing into implementing large-scale strategic changes. Instead, business leaders need to analyse the situation before directing their efforts to areas that can create value and benefit them in the short and long term. In other words, they need to take a critical look at their internal operations and refocus their priorities and activities. For most, the answer will be to prioritise revenue and margin protection - which usually means finding ways to reduce costs while increasing profits. But how can digital companies take these actions in times of crisis and uncertainty? We have identified 4 types of actions, focused on key business metrics, that companies should focus on to drive innovation and unlock value in volatile markets.
Invest in core customers and experiences
To avoid losing customers to an economic downturn, offer them value-added services and products that will increase their loyalty. Any digital business can do this by listening to its customers and focusing on what sets it apart from the competition. Both are essential in volatile times.
The first step is to reassess existing customer segmentations and better understand the people you serve. This is typically the approach taken by a leading global luxury and watch brand we have worked with. By gathering information on key customer groups from website visits and surveys, as well as identifying groups for personalisation purposes through anonymised data, this brand has developed a deeper understanding of its customers. As a result, it can now deliver more targeted advertising and create more personalised experiences based on anonymised information.
Remember, the best customers - those who bring the most value to the business - are the ones who keep coming back. That's why it's so important to invest in giving them the best possible experience. Any business that can optimise customer interactions to deliver a quality experience will be rewarded with loyalty, bringing value in the short term and preparing for the future.
Reducing churn is also linked to this. No company can afford to lose existing customers during an economic downturn. Companies must therefore ask themselves whether their strategy is primarily focused on first-time conversion or whether it is built to bring back existing customers. If it is the former, then a declining volume of interactions will be that much harder to turn into conversions.
Putting marketing priorities into perspective
In an uncertain environment, the priority from a marketing perspective is to analyse how the budget is spent and ensure that it supports wider business objectives. To do this, the first step is to optimise the acquisition tunnel and approach paid digital campaigns in a more granular way. This helps to identify growth levers and areas that could be improved.
For example, if lead generation is the top activity, work to identify the strategies that are proving most effective in achieving this. Companies should be prepared to test different approaches and optimise those that work best. The more visibility they have on the quality of their leads and the pathway to conversion, the more room they have to challenge themselves to improve ROI.
Optimising the marketing mix can be an effective way to increase the quality of online sessions while reducing costs. This can be achieved by leveraging the capabilities of data science, for example by creating self-generated reports that include recommendations for marketing spending and the expected outcome. These reports can then be sent to relevant departments as part of the marketing strategy.
Marketing budgets are always under scrutiny in difficult times. Therefore, it is essential to establish a clear picture of the impact of spending on the bottom line. Where does spending have the most impact? Which acquisition channels add the most value? Taking the time to understand whether marketing actions are actually reaching target customers is an important first step towards optimising operations.
Embracing data as a driver of growth
A data-driven culture helps businesses operate at maximum efficiency, even in times of economic uncertainty. Data is essential for understanding the state of the market. When an external shock occurs, digital leaders need to redouble their efforts in data analysis to understand what is happening and why.
Mastering this discipline can provide additional insights into customers and the market, and reveal a previously unidentified opportunity. This can only be achieved by adopting a 'data mindset' - ensuring that customer and website visitor behavioural data is used to test scenarios for innovation.
For example, we recently worked on a data project with a global manufacturer and provider of B2B solutions for the construction industry. To support the launch of its e-commerce business in over 20 markets, we connected all relevant data sources (traffic sources, web behaviour, financial systems, etc.) to provide the appropriate information and reports. This has enabled the company's global teams and local markets to improve their operations based on hard facts and relevant information.
This mindset needs to be applied to the entire customer journey. With data at the heart of their operations, companies are able to uncover opportunities, earn additional revenue and maximise conversions by applying best practices and establishing test & learn processes. This applies to both incremental gains and larger-scale growth opportunities, both of which contribute to outperforming the competition.
Reviewing internal working methods
The final type of action to be taken is to transform businesses into efficient mechanisms. So, when market conditions change and resources or budgets are limited, it is important to focus your efforts on the areas that will have the greatest impact.
This also involves an important operational component. By identifying inefficiencies in the workflow, taking the time to improve or adapt processes, and re-evaluating internal structures and hierarchies, companies are better equipped to deal with any crisis.
The Danish brand Coop is a perfect example of a company that adapted its internal modus operandi when faced with a decline in online demand. It refocused its resources and staff into cross-functional groups, with the aim of driving business excellence in three key areas: pricing, marketing and stock management. This organisational change has enabled Coop to optimise its sales performance and to learn key lessons that are now being applied in a more robust operational framework.
Ultimately, it is not easy to understand how to act in times of uncertainty. But there are many steps that digital businesses can take to thrive, even in the most challenging times. By focusing on these four key areas, they will be able to seize new opportunities and unlock value, when it might not have seemed possible before.