Steinbeis experts and the specialist magazine Acquisa unveil the 2017 Digital Transformation Index
How digital are German companies in their marketing and sales departments? Is there a benchmark for digital transformation? Or perhaps one could ask: How far have digital champions come? Is there such a thing as a digital ideal, and how long does the journey take getting there? Who leads and who follows? These are the issues looked at for the 2017 Digital Transformation Index, a study carried out by the specialist magazine Acquisa with the Göppingen-based Sales and Marketing Institute (VMI, a Steinbeis Consulting Center). The index was based on the responses of 114 marketing and sales managers.
“We’d like to use this instrument as a stock-taking exercise,” explains Prof. Dr. Rainer Elste, director of the VMI Steinbeis Consulting Center. “We can then return to it in the years to come to gauge where the digital journey is taking us.” Elste is pleased that the respondents were so scathing about their own performance. Germany’s decision-makers in marketing and sales have recognized that they still have lots of homework to do if they don’t want to fall behind in digital terms.
And the results send out a clear message: Over 40% of the respondents could not say if they were trailing behind the competition in digital solutions or whether they were perhaps the digital champions in the industry themselves. 46% believed they are a long way behind the competition when it comes to digital transformation in marketing and sales. Only 14% of respondents see themselves as digital pioneers. It’s difficult to say what is more worrying – being a follower when it comes to a crucial topic like digital transformation, or not even knowing how you’re faring. There is a lot of catching up to do.
It’s also astounding to see how much digital transformation has changed different sectors of industry. 59% of managers believe things have changed a bit or not at all and only 4% feel it has changed completely. This makes the future position occupied by different sales and marketing topics all the more important. When marketing and sales managers are asked to gaze into a crystal ball, they see significant rises in the importance of digital solutions for securing sales leads (69%), advertising (64%), customer acquisition (64%), complaints and warranty management (61%), and client information and training (58%). They do not expect negotiating terms or contract delivery to become more automated.
Over half of the respondents (58%) gave themselves 2 or 3 out of 5 stars when asked to judge how far they have come toward achieving their own goals. 20% gave themselves no more than 1 star. Only 9% believe they are just about to reach optimum levels – so in the overall picture, there’s still a long way to go for people to achieve their own goals.
One ostensibly important measure of digital progress has to be the level of sales achieved online. For 69% of respondents, digital sales are below 10%. This is believed to be 12 percentage points behind the competition, who managers believe are much more active in the internet: Respondents believed that 21% of their competitors are already doing more than 50% of their sales online. Only 6% of respondents stated that they have achieved such high online sales themselves.
But more is not necessarily better. Accordingly, the respondents were challenged to say what they felt was the optimum degree of digital technology use. A quarter of respondents said the optimum level of online sales is over 50%. Just under a quarter of the others see the 10% barrier as desirable. For Elste, this can be interpreted in two ways: The respondents do not think becoming strongly dependent on online revenues is a goal worth aiming for. But also, it’s important to catch up with the competition, which is doing more business online.
Good old CRM, perhaps the great-grandfather of digital transformation, is highly important (81%) for supporting marketing and sales, despite all the criticism regarding the function and meaningfulness of CRM systems – although incidentally this is on a par with company-wide ERP systems. And internal processes? When it comes to marketing, sales and after sales, product development, and supply chain management, companies are still a long way from a world of purely digital processes. Only 13% of respondents said that their marketing and sales systems revolve around digital processes; all they require is manual controls. 38% stated that their processes are mainly carried out manually and are only supported by systems like email communication. It will be fascinating to see how this develops in the coming years.
Data flows can also bring digital advantage. Companies currently find it important to exchange data with clients when it comes to online invoicing and EDI standards, with 58% and 54% of respondents respectively seeing this as at least very important. In comparative terms, digital contract tracking (to make things more convenient for customers) was described by the respondents as less important. This is interesting, because even if a company only wants to engage in online business, under certain conditions, their clients still want to be proactively informed about the status of their orders or delays. Digital technology is currently educating customers to see such levels of convenience as a matter of course.
So are digital solutions making personal communication obsolete? Will machines soon be the only ones talking to one another or will personal interaction be a decentralized point of differentiation for a good sales department? The answer lies in the numbers: Emails – which 76% of respondents see as a highly relevant communication channel – are leaving others behind as an important means of communicating, with the telephone on 69%, face-to-face sales meetings in general on 64% and, particularly significantly, field sales visits on 51%. It should not be overlooked that emails are a delayed form of communication. They offer no immediate option to interact directly. Becoming accustomed to this could be the next step toward alienation. So is this the beginning of the end for direct personal communication with the customer? Surely, this can’t yet be the case. Other forms of digital communication are still of secondary importance: 69% of respondents described online chat as unimportant and 60% said this about blogs, communities, and forums.
When it comes to pricing, the respondents tended to be extremely traditional – to put it mildly. 59% still actually use cost-based pricing. It is therefore hardly surprising that 80% of them still used printed price lists. 50% of the respondents said that they do not set different prices according to the anticipated value of a product. Also, most respondents do not base pricing on demand, time factors, or the product user (rejected by 80%, 77%, and 58% respectively). The opportunities to make use of the digital support offered by pay-per-use, freemium models, coupons, or auctioning are not appreciated by 80%, 85%, 67%, and 91% of respondents respectively. 50% of respondents also said that they believed their end prices are not transparent for the market. 36% believed that their pricing is transparent. Given the use of digital searches, the way people exchange opinions, and how prices can now be compared, this finding is particularly interesting. If pricing becomes transparent, price or other differentiation strategies have to be found to avoid sliding into purely competing on price.
As a sales expert, Elste comes to a clear conclusion regarding the Digital Transformation Index: The perceived impact of digital solutions on marketing and sales is surprisingly low. Most respondents saw themselves as digital followers and they felt that they are not actively steering digital developments. A surprising number of old methods are still part of everyday business and because of this, not enough is being done to leverage digital opportunity – digital transformation will remain a key challenge for companies in 2018.