Many things had to come together over the last two decades for us to have a digital economy. But they have, and it’s here. And, newsflash, if you aren’t participating in it or don’t have a strategy for how to outpace your competition in it, your business will be left behind.
It’s actually a term dating back to the 1990s, when the internet defined a ‘digital’ channel for retailers to sell products to consumers. This digital channel was meant to supplement physical stores. Fast forward 30 years and it has become any transaction occurring online.
The digital economy is swiftly moving to become the economy, which is why if you don’t have a strategy for how to connect with customers online, your business is unlikely to survive the Web3 transition.
Multiple factors had to coalesce for the digital economy to take off. Databases needed to manage very tangled data. Tools to unscramble disparate databases and connect them together had to be created and optimized. The consumer economy had to go digital. The COVID pandemic supercharged all of those factors, forcing rapid adoption of new behavior.
Even our payment systems have changed. We’ve moved from global, national and community banking systems based on local LANs to massive, global networks enabling instant transfer of funds and borderless payments. And we know more about why individuals are purchasing what they are than ever before.
The internet has become an ocean of data for personalization in a way we couldn’t have imagined 30 or 40 years ago.
With the arrival of AI-powered technologies, we are getting ready to make a similar surge forward that will make the last 30 years look like antiquity.
The more we thrive in the digital economy, the more pervasive it will become. Today the internet is so pervasive that data miners know what you ate, when you ate it and where you bought it.
Let’s say I got hungry and grabbed a bag of Cheezits. Data miners can examine my Costco receipt and see I forgot the Pepsi. Before I’m done eating my snack size bag of Cheezits, I can be served an ad for 20 cents off a Pepsi at my local grocery store that I’m within a mile of.
Opportunities for one-to-one marketing are truly emerging. As personalized advertising advances, brands that send irrelevant ads will be judged much more harshly by consumers than before.
Business that don’t using purchasing data to inform marketing decisions simply won’t be able to deliver the new level of ease, convenience and value that consumers are coming to expect. And while B2B brands will have more runway than B2C brands to get personalized campaigns in the digital economy right, expectations from buyers will rise for B2B brands as well.
If your competitor can find a way to save shipping fees by getting your customer to purchase the same product from them three days earlier than they would have bought them from you, do you really think they won’t bolt for the savings?
As with just about anything in life, there are both opportunities and threats for businesses and brands in the digital economy. Benefits are four-fold.
1. Increased market reach. The digital economy enables brands and businesses to reach a broader audience than ever before. Online platforms, social media and digital marketing strategies enable businesses to connect with target audiences globally, expanding market reach.
2. Cost-effectiveness. Traditional marketing and advertising methods can be costly. The digital economy reduces acquisition cost and enhances ROI by enabling the ability to target very specific demographics, create highly customized campaigns and measure results in real-time, all at a lower price point.
3. Data-driven insights. Perhaps the greatest benefit of the digital economy is the access to customer insight it has delivered. Thanks to technology advancements, marketing leaders have access to vast amounts of consumer data at their fingertips, which they can mobilize for targeted campaign tactics. By analyzing customer behavior, preferences and purchasing patterns on an increasingly specific level, brands can make more informed decisions, market tailored options, and deliver personalized experiences, all while enhancing customer satisfaction and loyalty.
4. Enhanced customer engagement. Digital platforms let businesses engage with customers in real time, fostering two-way communication and building stronger relationships. Through social media, chatbots and online reviews, brands can actively converse with customers, address concerns and provide personalized support, all for less time and cost than was possible through traditional methods.
However, as brands chase the benefits of doing business in the digital economy, they must also be mindful of the risks.
Four risks are inherent to the digital economy: cybersecurity, reputation, competition and noise.
1. Cybersecurity threats. Once you embrace the digital economy, you become increasingly susceptible to threats from hackers and criminals who target businesses for customer data. Implementing robust cybersecurity protocols and updating them regularly is critical.
2. Online reputation management. One breach, one bad PR campaign or one service failure is all it takes for a misstep to become an epic failure in the digital economy. Negative reviews, social media backlash and viral content can create disaster quickly for trusted brands. Active online reputation management, including a crisis communications plan, is vital to protect brand reputation.
3. Increased competition. The digital economy has lowered barriers to entry for every business. To stand out, businesses must differentiate themselves and provide unique value propositions. Focus on continuous innovation and fostering customer loyalty to come out on top.
4. Noise (a.k.a, information overload). With the amount of information available online only increasing, businesses must cut through the noise to capture the attention of their ideal audiences. Creating compelling content, delivering relevant messaging, and using effective digital marketing strategies will help you compete in the chaos.
The digital economy is here. In fact, it has already reshaped our world. While opportunities abound to revolutionize the way we live, work and interact with one another, your business has to pursue a smart, aggressive strategy to thrive in it.
If you want help capitalizing on opportunities in the digital economy, connect with me today.