Digital Marketing strategies to get ahead in the High-Tech ... · Publication Date: October 2016 Digital marketing strategies to get ahead in the high-tech industry

Publication Date: October 2016

Digital marketing strategies to get ahead in the high-tech industry

Digital marketing in the high-tech industry

© 2016 Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 2

Catalyst Introduction The level of competition that high-tech companies face is expected to increase as new players enter the market and established vendors continue to add disruptive technologies to their portfolios. Marketers are responding to these threats by investing in digital marketing.

This survey is part of a series of reports commissioned by Adobe to provide an understanding of the driving forces behind investments in digital marketing platforms and explores how they address the competitive threats. Marketers from 300 high-tech, software, Internet, consumer electronics, technology manufacturing, and professional/IT services businesses across the globe were interviewed by telephone between June and August 2016 and asked about the competitive landscape, digital marketing, and their investment strategies.

This report is essential reading for high-tech industry senior managers and digital executives because it will help benchmark their digital strategies against industry norms and explain the digital strategies that will define the future of the high-tech industry.

Key research findings § Competitive intensity in the high-tech sector will increase in 2017. Companies need to

respond to competitive pressures by innovating and launching new products and services, with a particular focus on digital transformation offerings.

§ Over the next five years, an increasing proportion of sales will come through digital channels; by 2020, one-third of companies will source more than 61% of all their sales via digital channels (an increase of 15% on 2016).

§ Twenty-three percent of those surveyed said the use of data to inform marketing planning and decision-making is one of the top three most important digital capabilities for their companies, while two-thirds listed it as their single most important digital tool.

§ High-tech companies are using digital to improve the quality of customer experience, with 61% of companies surveyed adopting it for this reason by August 2016 and another 30% planning to start using it by the end of the year.

§ Almost three-quarters of companies (73%) are engaging with other departments in their organizations to support digital marketing. Seventy-eight percent of these high-tech marketers work with sales to support a unified approach to digital, while 57% have a high level of collaboration with the IT department.

Competition is changing the high-tech market Existing business models under pressure Respondents were asked to outline the factors that contribute the most to the competition in the high-tech industry. The biggest concern to high-tech marketers is new products and services causing market fragmentation and that an increasing number of established high-tech vendors are adding disruptive technologies to their portfolios in local markets (see Figure 1).



The result of the competition in the market has been seen across a number of fronts:

§ Margins: 75% of respondents said prices and margins have been squeezed as a result of the current competitive landscape.

§ Product: Firms are having to reconsider their value propositions. This is against a backdrop in which 73% of marketers said their products and services are becoming commoditized.

§ Customer: Customers are moving more frequently between vendors, and 67% of respondents report an increase in churn rates. This is leading the same proportion of vendors to accelerate entry into new markets to seek additional revenue opportunities.

Figure 1: Competition in the market

Source: Ovum

Market competition will increase in 2017 For this survey, Ovum asked high-tech company respondents to rate the current and expected levels of competition, with 10 as the highest level and 1 as the lowest level. Figure 2 shows the weighted average "intensity" level is 7.64, with 60% of respondents scoring the competitive level at between 8 and 10. To put this into context, Ovum's 2015 telco industry study showed that 43% of respondents scored the competitive intensity between 8 and 10 in that year. Competition appears to be more intense in the high-tech sector than it was in the telecoms sector in 2015.

The level of competition is expected to increase further in 2017, with a weighted average intensity increasing to 8.12 and more than 70% of respondents forecasting competitive levels rising to the 8–10 range by 2017 (an increase of 10%).



Fourteen percent of marketers scored the level of market competition in the high-tech sector as a 10 in 2016, meaning competition was at the upper most extreme of what they could imagine. But in 2017, 18% of organizations expect competition conditions to be "extreme."

Figure 2: Competitive intensity is expected to increase between 2016 and 2017

Source: Ovum

Survey respondents were then asked to outline the factors that contribute the most to the competition in the high-tech industry, ranking the top three contributory factors.

Almost 30% of respondents said their top concern is high-tech vendors adding disruptive technologies to their portfolios in local markets. In fact, more than 50% of marketers who identified established competitors as a threat chose that as the single biggest factor contributing to the level of competition.

The next biggest contributory factor is the entrance of new disruptive players (20%). Innovation by both established players and new companies seeking to enter the market is increasing the intensity of competition and is seen as a threat for high-tech vendors.

The broadest overall contributory factor (regardless of rank) to high-tech market competition is new products and services causing market fragmentation, with more than 15% of respondents identifying it as one of their top three concerns (a position held jointly with the concern surrounding established vendors adding disruptive technologies). This is also the third most identified Top 1 factor; 34% of respondents who held this as a factor contributing to competition levels selected it as their top threat.

Organizations' exhibiting operational excellence is also driving competition, as evidenced, for example, by time to market. While few people selected this as their top concern (5%), it was the third most cited contributory factor (14%) to the level of competition seen in the high-tech industry.



Figure 3: Drivers of increasing competition intensity

Source: Ovum Note: N = 300

Strategic responses to competitive threats and customer expectations When asked "What are the three most important strategic responses your company is undertaking in order to counter the competitive threats and rising customer expectations?" 60% of high-tech marketers pointed to the need to focus more on innovation. This is seen particularly among consumer electronics respondents, where 72% chose it as a factor (12% higher than the broader industry average).

In the same vein, more than half of high-tech marketers said launching new products or services, with a particular focus on digital transformation offerings, would help them counter the competitive threats and rising customer expectations.



Figure 4: Strategic responses

Source: Ovum

Digital capabilities become increasingly important for high-tech companies over the next five years High-tech companies expect an increasing proportion of sales to be delivered via digital channels The increased focus of marketers on the launch of digital transformation offerings to counter competitive threats and rising customer expectations is reflected in the fact that many of them believe that an increasing proportion of their sales will be delivered via digital channels.

Ovum asked marketers what percentage of their sales are currently delivered via digital channels and what percentage they predict will be in 2020 (see Figure 5). These are "banded" answers: 0–20% of sales, 21–40% of sales, 41–60% of sales, 61–80% of sales, and 81–100% of sales.

Two-thirds of high-tech companies currently deliver less than 40% of all sales via digital channels. However, the marketers Ovum spoke to as part of this survey expect to see a very different picture emerging by 2020: One-third of companies will source more than 61% of all their sales via digital channels (an increase of 15%).



Figure 5: Current and future sales delivered via digital channels

Source: Ovum

Figure 5 illustrates the growing importance of digital as a sales channel and shows how the marketers who were interviewed as part of this process expect to utilize the digital channel for sales purposes.

Digital channels help high-tech companies engage with customers High-tech companies are using digital to improve the quality of customer experience, with 61% of companies surveyed adopting it for this approach now and another 30% planning to use it later this year.

There are four growth areas of digital customer engagement:

§ The largest growth area for digital is its use for providing contextual and relevant online ads: 36% of respondents are not using this technology now but plan to by the end of 2016.

§ Thirty-five percent of surveyed companies that do not currently use digital marketing channels to engage with customers plan to start doing so this year (2016).

§ More than one-third of those surveyed want to use digital to provide data that can be used to inform marketing planning and decision-making.

§ High-tech companies will transition to becoming "mobile first" in the way they communicate with customers throughout the remainder of 2016.



Figure 6: Utilization of digital capabilities in 2016

Source: Ovum

Digital capabilities support business planning and improve the quality of customer experience To understand the importance of digital to high-tech businesses in 2016, the marketers interviewed for our survey were asked to rank the three most important digital capabilities for their companies. Figure 7 shows that respondents were given the same five options as they were above, but a very different picture emerges.

Twenty-three percent of those surveyed said the use of data to inform marketing planning and decision-making is one of the top three most important digital capabilities for their companies, with two-thirds listing it as their single most important digital tool. This shows how high-tech organizations are making use of the analytics that customer engagement through digital channels provides.

The next most important digital capability was the way high-tech companies can utilize digital to improve the quality of customer experiences. Twenty-one percent of respondents listed this as important. Interestingly, while 20% listed it as most important, putting it in second place for Top 1, as Figure 7 shows, it was the most popular Top 2, with 31% of marketers selecting this option.



Figure 7: Most important digital capabilities for 2016


High-tech companies will continue to invest in digital marketing platforms The increasing use of digital marketing platforms High-tech marketers are using digital as a tool to respond to the increased competition they're facing and believe that a greater proportion of sales will come through digital channels. Supporting this transition to digital, 62% of companies surveyed have already invested in a digital marketing platform, and 43% of the 38% that do not have a digital marketing platform plan to invest in one in the future.

By 2018, almost three-quarters of all high-tech companies will utilize a digital marketing platform (an increase of 12% over the next 2.5 years).



Figure 8: Adoption of digital marketing platforms

Source: Ovum

Results of utilizing digital marketing Interacting with customers utilizing digital media has resulted in an improved understanding of customer needs, according to 83% of marketers. More than three-quarters have used digital to

§ improve customer engagement (81%)

§ reach more potential customers (77%)

§ see an improvement in customers' perceptions of the company (76%).



Figure 9: The effect of digital on marketing performance and measurement

Source: Ovum

Digital marketing investment plans Ovum asked high-tech companies "What are your investment plans with regards to the following broad digital marketing areas in the next 18 to 24 months?" and allowed them to select from 14 categories. The responses are displayed in Figure 10.

Customer experience had the highest number of investment plan responses (81%) of all 14 broad digital marketing areas suggested to respondents.

All 14 categories are investment areas for more than half of the respondents, with incremental differences between each one. This reflects the need for marketers to advance on all fronts in digital, embracing a holistic approach. By definition, this drives marketers toward the adoption of digital marketing platforms that "do everything."



Figure 10: Digital marketing investment plans

Source: Ovum

To understand the priority areas for investment decisions over the next 18 to 24 months, marketers were asked to review the 15 broad digital marketing areas they had identified (shown in Figure 10) and then select their top three areas of focus, detailed in Figure 11 below.

The top investment focus for High-Tech companies is campaign management. 14% of marketers selected this as their primary focus. Of those who consider campaign management a priority, over half (54%) of people selected it as the top priority (which is the largest proportion of any of the categories). This highlights the focus that marketers are putting on this area of digital marketing.

Content marketing, including the use of video was ranked second overall as the ‘Top 1’. 12% of all High-Tech marketers selected this as their number one area to focus on. Of the people that want to focus on digital content, 45% of these identified it as their top priority.



Investing in a Content Management system was selected by the most marketers overall as one of their top three areas for investment (93 people made this either their Top 1, 2 or 3 choice). Most people had this as their second priority (37 people). Another area that received broad appeal was investing to support digital marketing through Customer Experience.

Figure 11: Top investment plans for digital marketing areas (18–24 months)


Company-wide engagement to support a unified approach to digital In order to understand how high-tech marketers are working with other departments in their businesses to implement their investment strategies and create a unified approach to digital, Ovum asked respondents whether they were working with other departments to create a unified approach to digital. Almost three-quarters of companies (73%) are engaging with other business units.



Figure 12 provides a breakdown of which departments the marketing team was engaging with. Seventy-eight percent of high-tech marketers work with sales to support a unified approach to digital, while 57% have a high level of collaboration with the IT department.

Figure 12: Interdepartmental collaboration

Source: Ovum

Conclusions High-tech companies are subject to the "Red Queen's race" This Ovum survey showed that innovations to respond to competitive threats were likely to involve launching new products/services, with a particular focus on digital transformation offerings. Indeed, when asked "What are the three most important strategic responses your company is undertaking in order to counter the competitive threats and rising customer expectations?" 60% of high-tech marketers pointed to the need to focus more on innovation. This should not come as a surprise, given the squeeze companies are facing with new market entrants pushing up from the bottom and the disruptive technology that established vendors are launching. This has parallels to what Lewis Carroll describes in Through the Looking-Glass as the "Red Queen's race," where many high-tech companies find themselves in a position in which they need to run as fast as they can just to stay in the same place.

Consumer electronics companies such as smartphone manufacturers feel this keenly. Each year they launch new flagship models. These launches garner significant media attention and result in heightened demand as customers clamor to have the latest device with innovations in form factor, screen resolution, and camera technology. The strength of market competition creates an undertow



for vendors as they are often constrained to modest price increases – even for new models – in order to stay competitive.

Digital becomes an increasingly important sales channel Over the next five years, an increasing proportion of sales will come through digital channels. By 2020, one-third of companies will source more than 61% of all their sales via digital channels (an increase of 15%).

Companies such as Microsoft are leading this transition. With its launch of Office 365 in 2011, Microsoft offered consumers a range of software and services through an always-up-to-date cloud service. This marked a transition from the distribution of physical media (in the form of CDs and DVDs) to a new as-a-service business model based on digital sales. While it is easier for a software company to achieve digital product delivery, the results of this survey point to increased use of digital as a sales channel across the other high-tech sectors (Internet, consumer electronics, technology manufacturing, and professional/IT services businesses) too.

The Internet has empowered technology buyers to exert control over the purchase process. With the increasing volume of sales that will take place (or at least include) online, high-tech companies need to adjust their sales and marketing strategies to keep pace. That means vendors ensuring that customers can find the products and services they want to buy, and also that they are given the information (content) and experience as they move through the purchase funnel.

Organizations need to be data driven Twenty-three percent of those surveyed said the use of data to inform marketing planning and decision-making was one of the top three most important digital capabilities for their companies, with two-thirds listing it as their single most important digital tool (Figure 7). This shows how high-tech organizations are making use of the analytics they are provided with by customer engagement through digital channels.

Ovum's 2016 Trends to Watch: Digital Marketing Technologies report highlighted the importance of analytics. By conducting market-level deep data mining and sifting through customer data, companies can identify latent and adjacent market segments, product positioning opportunities, and competitive threats, and they can also predict future trends. This also supports customer engagement through digital personalization.

Personalization is the ability to drill down into an individual customer's data to identify, for example, online behavior, buying patterns, preferences, choices, and affiliated stakeholders and predict which customers are prone to churn. It applies analytics technology at the individual level at scale. Personalization is increasingly being used to predict what customers will do and buy next and to intercept customer intentions with pertinent communications. Amazon and Google are adept in this area; the latter is said to ship products to a distribution store located near the customer in anticipation of a future purchase so as to provide superfast delivery.

A deep understanding of a particular customer's profile and behavior is necessary to accurately predict the most appropriate type of content to engage that customer with next. eBay has created a "data discovery" group that organizationally sits between marketing and IT infrastructure. The



company's data scientists have developed more than 120 models of customer behavior that include customer lifecycle, category lifecycle, and purchase journey models that guide marketing activities.

To achieve this level of sophistication, enterprises are recognizing that data gathered in one area is useful to other customer touchpoints. The availability of a single customer view and the unification of departmental databases, especially across marketing, sales, and service departments, are critical business requirements for large enterprises today.

Digital marketing supports customer experience In the past, technology providers' go-to-market and sales models have been fairly consistent, with a familiar segmentation across product categories that define where a provider will sell directly and where it will rely on third-party partners for additional sales coverage. While these sales models were effective in the past, recent shifts in buyer behavior are expected to continue (Figure 5), making it more difficult for existing sales models to remain effective. To stay competitive, high-tech marketers need to offer a new customer experience, determining the most effective route to market for technology products and following a comprehensive process that should be clearly defined upfront.

Providing customers with the methods to engage with companies as they choose is increasingly important and results in digital approaches cannibalizing traditional channels. For example, it expands the number of channels through which customer service is offered; customers can now choose not only to write or phone companies, but they can use a range of digital media, including online chat, email, and social media to communicate.

High-tech businesses are seeking more effective ways to provide value to their prospects and customers. More than half the high-tech marketers that Ovum spoke to as part of this survey said launching a new product or service, with a particular focus on digital transformation offerings, would help them counter the competitive threats and rising customer expectations they were facing (Figure 4). This shows how companies are beginning to understand the need to innovate; it is no longer enough to simply move portions of the customer journey online or provide just digital information during the discover and learn portion of the buying cycle. Instead, companies are seeking to identify innovative ways to smooth every step of the customer journey. For example, this could include reducing paperwork to gain customer support or utilizing a choice of channels to share information, handle objections, and ultimately make it easier to buy. Using these sorts of digital customer experiences will help high-tech companies differentiate themselves and address the increasing competition they face.

Marketers engage across the organization to implement digital Almost three-quarters of companies (73%) are engaging with other departments in their organization to support digital marketing. Seventy-eight percent of these high-tech marketers work with sales to support a unified approach to digital, while 57% have a high level of collaboration with the IT department.

It is likely that these interactions with other departments will become more important over time. For example, whether companies are maintaining an active social media presence, sending out e-newsletters to customers and prospects, or writing a blog to create thought leadership content, input will be required from a range of people with different skill sets from around the business. It is also



important that these different outbound campaigns are orchestrated to maximize their effectiveness. A digital marketing platform supports departments as they work together and results in efficiency savings as data is shared and content is repurposed and reused, providing a joined-up communication mechanism for all stakeholders.

Appendix This report was researched, authored, and produced by Ovum in association with Adobe.

Research methodology The goal of this research project was to assess the current and the future states of digital marketing adoption and investments by large organizations in the high-tech industry. Between June and August 2016, Ovum, on behalf of Adobe, conducted 300 telephone research interviews with marketing directors, marketing managers, and digital marketing managers in high-tech companies with 500+ employees operating in Europe, Asia, and North America. Of these interviews, 33% were completed with global headquarters staff. Interviews were conducted in 28 countries, including France, Germany, the Netherlands, Scandinavia, Switzerland, the UK, Australia, China, Ukraine, Japan, Singapore, and Korea. The US, Europe, and Asia-Pacific each accounted for 100 of the total 300 interviews. Ovum conducted telephone interviews with software, Internet, consumer electronics, technology manufacturing, and professional/IT services companies.

Ovum Consulting We hope that this analysis will help you make informed and imaginative business decisions. If you have further requirements, Ovum's consulting team may be able to help you. For more information about Ovum's consulting capabilities, please contact us directly at [email protected].

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Digital Marketing strategies to get ahead in the High-Tech ... · Publication Date: October 2016 Digital marketing strategies to get ahead in the high-tech industry