Creating the Digital Customer

How do companies attract the digital customer? According Creating the Digital Customer, a research report conducted by Accenture, there is good reason to give considerable thought to this question. Representing 30 percent of the market, that loyal segment of consumers known as the “early majority” must be captured if the digital industry is to enjoy the additional $530 billion in additional revenues the segment represents. But, there are many obstacles standing between the digital industry and that $530 billion.

Today, consumers just don't buy into the “digital” concept. Many consumers have little experience with digital technology; digital technology is too expensive and complex; and compatibility and integration seem to be antonyms to the very word digital. Combine all of these with the fact that 84 percent of consumers surveyed by Accenture reported having problems with digital technology. However, the overriding reason why consumers have not yet “gone digital” is that they simply don’t see the benefits—they’re satisfied with what they already have.

And yet, another Accenture study, “Content Company of the Future: The Future of Digital Devices and Content” (June 2000), found that a significant number of people say that they are likely to buy key digital devices, provided that the right content is available, the devices are easy to use and of an acceptable size, and the price is right. Yes, these consumers had some very encouraging, if not contradictory, answers: Sixty-four percent of those surveyed said they would buy Interactive TV; 66 percent said they would be willing to read eBooks; and an incredible 71 percent reported a willingness to invest in digital music. Encouraging statistics, but there are still problems.

To date, only a narrow range of digital products have achieved high penetration rates. So, while consumer products such as TVs, VCRs, CD players, cell phones, and PCs are in the majority of U.S. and European households, the penetration of DVD players, Personal Digital Assistants (PDAs), and other new digital devices is still below 10 percent in most parts of the world. In addition, most digital sales have been to the technologically savvy segment of the market and much of the sales growth has come from selling upgrades to this same set of savvy buyers. The market really hasn’t expanded. For example, of the home computer sales in the U.S. in 2000, only 39 percent went to new households with the remaining sales as either new upgrades or additional units within households.

To accelerate the pace of adoption for all digital products and services——and unlock bonus revenue—the industry serving the digital customer must remove the considerable barriers to consumer take-up. Many consumers are daunted by the complexity of integrating the various options and confused by the sheer number of options. Also, and this cannot be overstated, the costs are simply too high. Turning these firmly held perceptions around will not be easy. It will require digital product and service providers to focus on four critical priorities: Engaging the early majority, not just the early adopters; Simplifying the digital value chain; Engineering an acceptable price point; and Developing the “aggregator” channel. Many might well question if the effort is worth it.

Currently, consumers spend 40 percent of each year enjoying some form of leisure activity. They enjoy these activities so much that they are willing to spend $7.7 trillion on them annually. (Of this number, roughly $11 billion or 0.15 percent is attributed to digital products and services.) Remember that “early majority” the industry has been so valiantly courting? They represent a full third of the market, and a full third of that $7.7 trillion in sales came from this segment. Under the right conditions, the digital market for these activities could grow to $500 billion, making it comparable to the global communications services industry.

So, again, how do companies attract the digital customer? Accenture believes there are five approaches to attracting and, more importantly, keeping the digital customer:

1. Make it easier for consumers to enjoy digital technology by removing complexity (if companies work together, this is easily done)
   
   
2. Simplify the digital value chain by setting collective standards, thus ensuring compatibility of devices and equipment
   
   
3. Build alliances and work with partners to create joint market offerings that companies can cross-market and promote
   
   
4. Create bundled products and services to link products and services that work together and give customers that always hoped for "one-stop-shop" package
   
   
5. Find the right price (two-thirds of consumers surveyed said they were waiting for the price of digital products and services to come down, while the remaining third were unsure if digital was worth the cost).

If the digital industry’s intentions for the “early majority” digital consumer segment are serious, they must communicate with and understand the consumer. If companies want to know what the consumer values and what motivates them, these companies are going to have to take a bi-directional approach to product development—using customer insight to help shape products and services that customers will want to buy.

While research has laid out some clear imperatives for companies that want to create the digital customer, Accenture understands that to do so will require difficult transitions for many companies. Some of the major changes companies face include: Moving to an integrated strategy, applying flexible and adaptable business models, achieving success by growth and profitability, accepting reasonable cannibalization, tolerating risk as part of the learning process, elevate marketing, not just technology as the claim to fame; and developing a mass-market mindset.

How quickly the digital market materializes depends on the speed at which consumers adopt digital products and services. These digital opportunities create new possibilities for how consumers pursue a whole range of activities—communicating, reading, shopping, playing games, listening to music—enjoying life. These, ultimately, are the reasons customers will turn to digital. We have the opportunity to not merely be the object they turn to, but the solution they embrace. The digital industry is going to be big; but companies are going to have to change the way they do business to engage the early majority.

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