How to make money from digitisation.

IN LAST MONTH’S digital edition of Acuity, we argued that chartered accountants (CAs) must be front and centre with digitisation [“Leading the way”].

Firstly, to ensure a balanced approach alongside the CMO and CIO, and secondly because of the impact digitisation can have on enterprise value.
Outlining key principles and presenting three trans-Tasman case studies, we discuss here how to make money from digitisation.

CAs’ digitisation responsibilities have two key aspects: preventing financial or reputational loss through project failure or wastage, and generating enterprise value. That is, will the net cash flows, discounted for both risk and the time value of money, be acceptable? Critically with digitisation, capital expenditure must be included in the cash flows.

The power and value of a robust digitisation strategy is that it can:

  • lead to competitive advantage via jumping over less active competitors
  • leapfrog older technologies
  • drive vertical integration where an organisation aligns with up or downstream partners
  • harvest ideas and value by placing the customer at the centre of all an organisation does
  • decrease the cost of marketing, especially customer acquisition and retention, greatly increasing the efficiency, timeliness and value of information acquisition.CAs should put existing operating models to the test. Do they:
  • position the customer at the centre throughout all stages of the sales cycle
  • lower the cost to operate, acquire, retain and serve customers
  • allow advocacy, new market opportunities and innovation to grow the organisation
  • act as enablers for the supply chain?

Here are three case studies of organisations that have adapted to digitisation, introduced new operating models, and generated significant economic benefit, both in terms of cost savings and revenue generation.

Global wine company (Australia)

Sales growth for a global wine company with an advanced physical distribution network, including licensed importers and international distributors, had reached a plateau.

While traditional but expensive distribution methods had earned market share, the international procurement market had become digitally accessible. Global suppliers could now sell wine via online spot markets, where subscription- based buyers are notified of opportunities and purchase wine at display cost, or bid in auctions similar to eBay.

This online marketplace provides direct supply to buyers from leading distribution networks (for example, Diageo, Suntory and Kirin) and procurement departments for large retail, on-premise chains, or travel and sporting markets.

Utilising this new digital opportunity has allowed the company to get closer to the customer, in near real time, and significantly lower its marketing and business development costs – for example, fewer staff, less overseas travel and accommodation, and lower collateral (marketing and promotional material) costs.

Property company – apartments (Australia)

A property company had relied heavily on traditional design, build, market, and sell models (ie design and build apartments first, then find customers later).

Consumer research was conducted regarding market opportunity, price ranges and the bases for design and build. However the cost to acquire, that is, the sales and marketing methodology, had never been questioned. The keynumbers were A$1.2m spent to internationally market and sell (including sales commission) every 25 apartments.

By taking its extensive existing customer database and adding an integrated customer relations system, marketing automation, and purchase intent with buying cycle modelling, a new digital engagement strategy and implementation plan emerged.

An online, social media forum and web-based e-chat facility was developed for potential customers. Here they could view concepts and participate in the co- design of apartments. For example size, configuration, lifestyle needs, finishing, colours, and amenities. This was an intelligent, online, adaptable, and learning design showroom.

Potential customers from the rich database were then presented with purchase opportunities both relevant and attractive to them – because they were founded in the online forum – and chose to buy without the company having to use traditional push techniques with related high costs. The overall campaign cycle was greatly reduced with 100% of stock pre-sold. Key figures were A$120,000 to sell every 30 apartments.

Health product innovator, manufacturer and global distributor (New Zealand)

This company invented a “high need” remedy for the worldwide epidemic of back and neck pain.

Distribution through retail networks, whilst providing modest consumer reach, relied heavily on point of sale and in-store promotion. The public relations machine
– articles, interviews and TV news – generated website traffic and increased
in-store purchases, however the growth the business needed to pay back start-up costs and fund global distribution was lacking.

With a low price point and high product need, a digital solution was considered.
Digital marketing using social media, remarketing via Google, content marketing and organic search marketing (to coincide with the launch of an online store) enabled the previous website traffic to move into purchase cycle modes not previously conceived.

Using targeted media content and digital campaigning lifted the website traffic by up to 450% with a lower cost to acquire leads. On average 45,000 visits, or leads, were generated internationally in a two-to-three-day period.

The introduction of a targeted digital marketing campaign and a low-cost
e-commerce facility enabled the startup to reach, qualify, nurture and sell to customers with a genuine need for the product. The average conversion rate was 15%, meaning 6,000 leads were converted in each campaign, generating NZ$400,000 in new sales with a very low cost of acquisition.

Conclusion

These case studies all have something in common: each business broke away from the traditional sales model and implemented a new digital model based on three key elements:

  • understanding “customer intent”
  • digitising the customer interaction, in a way that placed the customer at the centre
  • a well thought out commercialisation plan.

These three elements are the keys to making money from digitisation.