Companies should be cautious about digital over-reach

IIM Ahmedabad’s Prof. Anuj Kapoor posits that the omnichannel experience provides brands with an opportunity to present a more cohesive and seamless experience to customers who start their purchase journey on one channel and finish on the other channel. He, however, cautions that with a greater digital presence, brands might also attract customers who are non-serious or have low lifetime value.

Source: https://bit.ly/2Zkbaoj

IBT: What benefits does establishing a virtual presence entail for brands planning to advance their business (both B2B & B2C) in a post-Covid world?

Prof. Anuj Kapoor: Establishing a virtual presence entails numerous benefits for brands. These include –

1) More consumers and wider reach: Digital offers an opportunity to enhance reach on much lower budgets as compared to offline mediums. However, there’s a caveat: Brands need to be cautious about the over-reach or the quality over quantity trade-off i.e. with virtual presence, brands might attract customers who are non-serious or in other words, don’t have high CLV i.e. customer lifetime value.

2) Speed: Online customer journey is agile and quicker than the offline world.

3) Complement versus Substitute: Brands can leverage virtual presence to supplement (if not substitute) the offline experience. This omnichannel approach provides brands with an opportunity to present a more cohesive and continuous experience to customers who start their purchase journey on one channel and finish on the other channel.

IBT: How can SMEs leverage the power of online platforms to grow their business? What organic and inorganic tools can be deployed for the same?

Prof. Anuj Kapoor: Apart from the benefits and the caveats mentioned above – digital presence allows businesses with the following:

Real-time tracking and evolution of customer tastes: Digital platforms allow firms to track the activities of users real-time and tweak their marketing mix.

Data stitching and aggregation: Digital platforms don’t just let SMEs track users on their website i.e. own platforms, but also leverage myriad data sources that can help them stitch the different data sources together to understand user preferences.

Predictive abilities: Not only can SMEs leverage user data to understand users’ current movements but also predict their next move.

IBT: What are the reasons & constraints why SMEs are reluctant to use virtual platforms to advance their business?

Prof. Anuj Kapoor: First, lack of understanding: To implement a technology, SMEs first need to understand it and then implement it in their organization. The lack of proper understanding of virtual platforms is a barrier to adoption by SMEs.

Second, any tech product relies on network effects for its adoption and any delay in the initial adoption has spillover effects in terms of the overall adoption across the network. Therefore, one SME in a community adopting a virtual platform will lead to ripple effects in their local community.

Third, fear of substitution: The SMEs need to be educated that virtual platforms will only complement their existing physical platforms and won’t replace them.

Fourth, secure payments and accountability: Many SMEs still aren’t interested in complete transparency and financial disclosure and moving operations online can potentially lead to the need for full financial disclosure. Many SMEs are not comfortable with this.

IBT: What can be done by the government to encourage more brands to start using online platforms to promote their business?

Prof. Anuj Kapoor: First, incentivise: Government can incentivize the SMEs on

(1) Providing awareness regarding the various advantages of the virtual platforms

(2) Ensure technical support once the SME has adopted.

Second, covering the setup costs: Governments can provide the setup costs – partially to let SMEs come on board.

IBT: Please give us an example of a company that you think managed to use social media/online channels successfully to advance its B2B goals. What can Indian SMEs learn from it to replicate this success?

Prof. Anuj Kapoor: Air Liquide, a leading supplier of gas to the industrial and healthcare sectors leveraged digital technologies to forge a customer-centric strategy and strengthen its relationships with its broad portfolio of customers following its acquisition of US company Airgas. Air Liquide’s challenge was to develop customer-centric skills to address the fast-growing “long tail” of small and mid-size industrial customers – a segment that relied on digital technologies to effectively order gas and acquires expert knowledge – from blogs and social media to e-commerce. 

Air Liquide traditionally focused on large customers, leaving other distributors to serve smaller ones, but rapid growth in the smaller industrial customer segment demanded attention. Serving an increasingly diverse set of customers implied leveraging various digital technologies and a multi-segment customer-centric strategy. Airgas developed a fully-integrated multi-channel approach to SME customers – who can buy online, by phone, or collect from a local Airgas store and has acquired 500 distributors and a “distributor mindset,” for a large part at the origin of Air Liquide’s decision to acquire Airgas. The company developed a typology of customer segments and articulated which technology best fits each segment, and how to deliver novel value at specific points of the customer journey. Finally, the company learned from its experiments with digital technologies – both positive and negative – and adopted an organizational structure for agility in a fast-paced environment where customer expectations and market conditions are shifting.

Similarly, Indian companies can segment their customers based on their technological prowess, target them and most importantly, experiment with different approaches. 

IBT: From a customer’s perspective, what could be the challenges in ordering products online from an SME through virtual apps?

Prof. Anuj Kapoor: Customers in India face the following challenges in their virtual experience of buying things online:

 First, lack of familiarity with English: The content has to be developed in vernacular languages.

Second, trust and security issues: A secure and hack-proof interface is super important. 

Third, the entire process starting from information gathering to the exit phase has to provide a simplified and hassle-free experience. Second and third points present a paradox where they can be at crossroads but the firm has to find a balance between the two objectives.

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Anuj Kapoor is an Assistant Professor (Marketing) at IIM-Ahmedabad. His research interests include computational social science, marketing analytics, platform design, machine learning algorithms, and causal inference. His research brings together theory from psychology and economics, statistical tools and granular consumer data to better understand consumer decision making and to improve the strategic marketing decisions of firms. He has worked closely with Indian startups to suggest them more ways to become data-driven.