Channels are expanding
The Covid-19 pandemic pushed companies to quickly adapt and respond to new customer requirements. One of the ways this dynamic was most apparent was in the marketing channels companies adopted to engage with and sell to customers.
So, what changed? The latest version of The CMO Survey identifies five key trends gleaned from 314 U.S. marketing leaders. We also offer our analysis and recommendations to help marketers operationalize these trends.Nearly two-thirds (61%) of companies reported increasing the number of channels they use. While true across both B2B and B2C firms, B2C services led with 77% reporting an increase.
One upside of channel expansion is that consumers can now choose their preferred method of interacting with companies. However, expanding channels takes significant effort and investment. Before jumping in, marketing teams should ask:Will the new channel attract new customers to the category, steal existing customers from competitors, or increase share of wallet from current customers?;
Is the larger number of channels aligned from a brand and customer experience perspective?;
Do the touch points point to the same benefits and brand image?; and Are the channels seamlessly connected?
Do customers understand the value they acquire by using different channels and how to move easily between them?
Marketing is the generous act of helping someone to discover the solution to their problem
Face-to-face (F2F) channels are alive and well
Only 6.7% of companies report that their F2F channels have become completely digital — meaning most have stayed F2F. Further, 28% of companies are opening new F2F channels.
Given the digital transformation of companies and marketplaces, we expected to see a larger reduction in F2F channels. We think there are three reasons channels have persisted.
First, consumers are exposed to 5,000 to 10,000 advertisements a day. This digital clutter is hard to penetrate, so staying F2F may provide marketers with different ways to reach consumers and achieve breakthrough.
Second, consumers report experiencing digital fatigue from the number of apps used and screen interactions they use in an average day — a level that has increased by more than 100% during the pandemic. As a result, we suspect that many people are craving human interactions from their all-consuming digital lives. Consumers also want more authenticity, a natural response to the risk and uncertainty of the last three years.
Third, many companies view F2F channels, such as brick-and-mortar stores, as labs for learning about consumer behaviors. They’re leveraging advanced technology, such as IoT-connected merchandise and footfall analyses, to learn more about what customers want and how they behave during the journey.
We did, however, observe several differences in our sample that may be useful in diagnosing the need for F2F channels in your industry. Product companies are less likely to go fully digital and are more likely to report opening new F2F channels (31%) compared to services companies (22%). Only pure-play internet companies are not opening F2F channels. New F2F channels are most prevalent in the real estate, retail, and communications/media sectors and least likely in health care, pharma/biotech, and technology.
Brand social media use is expanding
Nearly half (45%) of companies are now using social channels to sell products and services, and (61.5%) of B2C services companies are. In this sector, real estate firms (100%), communications/media companies (82%), and retailers/wholesalers (70%) lead the pack.
Social media companies such as Snapchat, Facebook, and Instagram achieved record-high e-commerce sales during the first year of the pandemic. Instagram’s rollout of in-app checkout in 2020 may have accelerated this process, opening the door to reach more than 1.2 billion users scrolling their social feeds. Furthermore, the ease of social messaging allows marketers to engage in real time with customers to answer questions. In 2022, more than half of U.S. adults purchased something through a social media channel, and a Sprout Social survey found 98% expected to use this channel to make a purchase in the future.
Take the example of Scrub Daddy, which has established a cheeky TikTok personality and collaborated with up-and-coming social media influencers, resulting in billions of views and millions of followers and online sales.
When we think about brands on social media, we tend to envision B2C brands. Indeed, those companies are more likely to sell their products and services on social channels (58%) compared to B2B brands (37%). However, there is a place for B2B companies in this world.
Take the case of Maersk, the Danish shipping company, which launched a social media campaign more than a decade ago to build its brand reputation. Managers were surprised to find that 22% of its 850,000 Facebook followers were actual customers (even though Maersk was not yet selling shipping services online). Leveraging this channel for feedback and follow-up sales was a natural next step for the company.
Similarly, it has been reported that 89% of B2B marketers turn to LinkedIn to generate leads. These numbers are encouraging and we expect they will only increase as younger, social media-savvy consumers move into management positions.
The D2C revolution has begun
Almost a quarter (24%) of companies added a direct-to-customer (D2C) channel in 2023. B2C product companies led the charge with 41% of brands adopting this channel.
Why are brands moving into D2C channels? First and most importantly, D2C allows companies to gather valuable firsthand insights into customer online behavior and needs — an opportunity companies in certain sectors, such as consumer packaged goods (CPG), have historically lacked. This first-party data is more important than ever given growing privacy restrictions on access to third-party data around the world.
Second, D2C lets companies test new strategies and collect valuable feedback. If used wisely, this type of experimentation should yield more effective and efficient strategies.
Third, D2C means companies can control the customer experience with the brand. This is especially important for premium and unique brands that deliver their benefits, in part, through the channels experience.
Given these reasons, we weren’t surprised to find that 55% of CPG companies report adding D2C. B2C services made the biggest leap — up from 15% in 2022 to 45% in 2023.
Tesla has fully embraced the D2C revolution. The company sells its vehicles directly to customers through its online platform and national network of retail stores in major urban centers in U.S. By bypassing traditional car dealerships, Tesla is able to control the sales experience (and markups), which most consumers find unpleasant.
Companies should consider two important factors before entering this space. First, does the company have a robust digital footprint in place to analyze and execute D2C strategies? This is important considering D2C models’ reliance on digital marketing, social media, and data analytics skills to deliver positive returns. Also, does the brand have customer-service structures ready to handle the likely increase in customer interactions from this direct channel?
To prevent partners from moving direct to consumers, we recommend distributors and other intermediaries provide value-added services in marketing, inventory, or logistics. Sharing customer data and analytics can also foster long-lasting and mutually beneficial partnerships between organizations. Another powerful partnership strategy is to leverage cross-category perspectives to share recommendations with key partners for new products, in-store advertising and promotion strategies, and even potential acquisition targets. The point is: provide value! The pandemic undoubtedly changed how marketers approach channel strategy, and there is no single route to success. With more channels than ever, marketers need to map which channels add clear value and forget the rest. It can be tempting to enter a channel because your competitors are there. But with limited customer time and attention, marketers must strategically determine in which channels they can have the greatest impact.