The leaders in our study have a lot of digital data about their customers and how they use their offerings, as well as the ability to process and analyze it. The result is that they can get a much more granular sense of those customers. Nearly three times as many leaders as followers – 41% vs. 14% — can market to much smaller customer segments (even segments of one).
A Netflix executive illustrated this capability well when a reporter asked him about the company’s customer base of 33 million at the time (2013). His response: “There are 33 million different versions of Netflix.”40
By collecting more and more data from a growing number of customers digitally, and by using Big Data and analytics to gain more insights on those customers, companies like Netflix and Progressive are going far beyond traditional market segmentation practices. They are rewriting the rules of segmentation – practices that in the past often lumped customers into large and vaguely defined groups, which overlooked profound differences among them.
Channels to Market
By having more customers interacting with them through digital means (mobile apps, digital sensors, social media, and more), digital leaders are also more likely to have a digital channel through which they can sell and deliver more digital products. In fact, leaders are far more likely than followers (57% to 22%) to have created new digital channels for distributing their products and services.
But that isn’t the only advantage that leaders have gained in their digital channels to customers. For their physical products and services – i.e., offerings that can’t be delivered digitally – leaders are more likely than followers to have improved their forecasting of customer demand. A third of leaders said their digital initiatives have improved demand forecasting accuracy, compared with only 18% of followers.
A slightly higher percent of leaders than followers (27% vs. 23%) said their digital initiatives have reduced supply chain inventory. However, more than twice as many leaders (28%) as followers (12%) said their initiatives enabled them to create new and improved production processes. Some of these production processes include giving customers the ability to make products at their site of business. Some 30% of leaders said they had this digital capability today; only 18% of followers said the same.