Daffodil International University
Faculties and Departments => Business & Entrepreneurship => Business Administration => Topic started by: Shah Alam Kabir Pramanik on June 07, 2015, 02:59:38 PM
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Digital disruption: Six consumer trends and what businesses need to do now
March 2014, Ewan Duncan, Eric Hazan, and Kevin Roche
Consumer behavior is rapidly changing, with “digital” activities growing rapidly in every sphere (see text box below). In the US, 48 percent of all the video viewed is now either “time-shifted” (using DVRs or video on demand) or “device-shifted” (from television sets to laptops, tablets, or mobile phones). Music is even more digital, with just over two-thirds of usage from streaming services, MP3 files, and satellite radio, leaving traditional AM/ terrestrial FM radio with a mere 32 percent share. On the communications front, mobile phones have overtaken landline voice, even among consumers aged 55 to 64. These changes in user behavior have and will continue to disrupt existing industry value chains and economics, creating many opportunities and risks for stakeholders.
Six “digi-shifting” trends
McKinsey’s research with and among leaders in the telecoms, media, and technology (TMT) sector tracks the cross-platform and cross-device behaviors of tens of thousands of consumers each year in both developed and emerging markets around the globe. Findings from the fifth and most recent year of research highlight six major ongoing consumer trends that are further compelling this shift to digital and reshaping TMT and related industries.
Achieving real and measurable returns on social networking marketing efforts will be a continuing challenge for players across the spectrum.
Device shift – from PCs to mobile/touch devices. Smartphones are fast becoming ubiquitous, with penetration of about 60 percent in the US. Just over 30 percent of US Internet-equipped households now have a tablet as well, and the rest of the developed world is close behind. Mobile phones and tablets now account for around 44 percent of all personal computing time, having nearly doubled since 2008. Most device manufacturers and their major retail partners are already experiencing the implications of this shift.
Communications shift – from voice to data and video. E-mail and telephonic voice have fallen from over 80 percent to about 60 percent of the telecoms “communications portfolio,” while time spent on social networks has doubled to take over a quarter of all user communications time. And when consumers do use their phones, only about 20 percent of the time is for talking (down from over 60 percent just five years ago). The majority is used for more data-centric activities such as streaming music, browsing Web sites, and playing games. Mobile carriers in particular face challenges in reorienting their business models to focus on data rather than voice minutes. The US market has many lessons for the rest of the world in this area.
Content shift – from bundled to fragmented. Thanks primarily to powerful search tools, the “long tail” of media and content (whether text, video, classifieds, products for sale, etc.) is accessible to anyone. Thus, some of the value in traditional “bundles” (newspapers, network TV stations, or big-box retailers) has been eroded. The way mobile phones are used illustrates this well. The number of apps installed (typically for a specific, single purpose) has doubled to over 30 per phone from 2008 to 2012. Spending on these apps is, however, highly fragmented, and growth potential remains very uncertain. Challenges abound for both content owners and marketers in reaching and engaging audiences that access such eclectic, fragmented media.
We hear the word all the time, but what do we mean here by “digital”? In the consumer device and media context, digital refers to consumer-controlled electronic interactions or cross-platform usage rather than the specific technology layers behind a product and service.
Magazine publishers, for example, have been using digital page layout and printing techniques for decades, but we discuss “digital” in the context of how readers now are accessing those products through tablets and smartphones rather than on the printed page. Similarly, while cable broadcasters have long transmitted digital signals to digital set-top boxes, we now discuss “digital” in how consumers can watch unmanaged, Internet-based video on their main television sets from a variety of different providers.
In the consumer context, “digital” is shorthand for all things “non-traditional” that flow from online and mobile usage.
Social shift – from growth to monetization. Social networking represents almost a quarter of all Internet time (up 10 percentage points since 2008) and reaches over 75 percent of all Internet users. But for the first time, we have seen small declines in both total audience and levels of engagement in developed economies. This is a remarkably fast climb to maturity, given that major players like Facebook, LinkedIn, and Twitter have yet to celebrate their tenth birthdays. Facebook and LinkedIn now face the quarterly earning pressures of the public markets as well. At the same time, businesses of all shapes and sizes are actively trying to use social media as part of their marketing efforts. Achieving real and measurable returns on these efforts will be a continuing challenge for players across the TMT spectrum.
Video shift – from programmed to user-driven. Traditional live, linear television consumption remains relatively flat on an absolute basis, but has slipped on a relative basis. It now represents just 65 percent of all video viewing for US consumers on their television screens and 52 percent across all screens. Time-shifted DVR content – watching video on PCs and over-the-top Internet video services such as Netflix – makes up much of the balance. The increase in all varieties of time-, place-, and device-shifting video options will continue to pressure traditional advertising-supported business models for distributors, advertisers, and content owners in the value chain.
Retail shift – from channel to experience. Despite its tremendous growth and transformation of the retail landscape, e-commerce only accounts for about 5 percent of all retail sales. As connected mobile devices proliferate, their potential to transform the shopping experience (both in the store and online) is the next opportunity. About half of all smartphone owners now use their devices for retail research – and although only few today, significantly more consumers will soon be using smartphones and tablets to complete their transaction as well. The combination of mobile retail and true multichannel integration will have a transformative effect on the retail experience and ring in the era of Retail.