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(originally published by Booz & Company)


The Digital Commerce Revolution

Data and analytics are a key source of targeting and conversion advantage, charting a new frontier for collaboration between brands and retailers. If a retailer can deliver tailored messages and product personalization better than its competitors, consumers will choose to return there again and again (the retailer will “win the trip”). And those same messages and recommendations will lead consumers to buy more each time (they will “grow their basket”). For example, Amazon’s highly effective product recommendation engine is powered by transaction data and insights across its entire customer base. This keeps consumers returning to Amazon for each incremental purchase, and purchasing more at each visit as complementary products are showcased along the way. The access to shared data across partners is expanding this value even further.

Integrating team priorities and strategic objectives within marketing organizations, as well as across other ecosystem partners, is paramount to unlocking the potential of digital commerce. The more fluid the organization, the more results players are capturing in the market.

The roundtable discussion and early survey results also revealed some of the most pressing pain points. Many are tied to ROI measurement for digital advertising strategies and the integration of e-commerce solutions across platforms and marketers’ campaigns. During the next two to three years, most tangible investments in e-commerce will be focused on driving more effective digital promotions, developing compelling original content, and using “big data” and analytics in more sophisticated ways. But for most retailers and brands, determining which ROI metrics are the most reliable (for example, click-through versus page visits versus time spent), or which ad formats will persist into the future (for example, display, banner, rich media, and shoppable) remains a struggle. High rates of innovation and experimentation across both fronts are creating a wide variety of options, but little informed insight on what is really working—and few, if any, standards.

Moreover, both technology and retail players are expected to drive the next wave of innovation in these key investment areas, with specific focus on solutions that will power data and insights, mobile commerce, and advances in shoppable content. Yet, which of the two players will lead the effort is still unknown. Retail players, now placing greater attention on their owned websites and ad inventory, could come to define what types of marketing are most effective online and how they are managed. But technology players, with ongoing investments in platform technologies and audience aggregation tools, could define the underlying norms simply through customer acquisition and expansion—much as Google has become an underlying norm for search, and Facebook for social interactions.

Finally, new relationships are creating new pressures. E-tailers, in particular, are making big investments in their own ad platforms, focused exclusively on creating more incentives for brands and marketers to funnel advertising through them versus other marketing vehicles. They are also investing in user data and merchandising capabilities to capture more of the digital advertising and promotion spending that brands would typically disperse among other publishers, ad networks, search engines, and social media sites. The critical mass of visitors, transactions, and insights that large e-tailers control is creating tension between these e-tailers and their brand partners. E-tailers are trying to steer a higher share of digital advertising dollars to themselves, and their brand partners are striving to reach their core consumers at the right digital place and time.

Executives will need a set of best practices and standards to manage these challenges and drive digital commerce growth—standards that are applicable across ad formats, media platforms, and devices. The insights gathered from industry leaders through our survey can provide the building blocks. And the timing is critical: A focused digital commerce strategy can be a game changer for most businesses, and can become the foundation for multichannel revenue expansion that is enabled across devices and powered by compelling content and insights.

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