Digital State of the Nation Candid Conversations with Marketers regarding Digital Strategy

Digital State of the Nation Report
Candid Conversations with Marketers
regarding Digital Strategy
November 2010

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Welcome
Welcome to the Nucleus Digital Strategy Digital State of the Nation Report. A
series of candid interviews and conversations that explore commercial digital
issues affecting senior decisions markers of Australian brands.
Digital: moving to the mainstream, yet still an
afterthought
Over the past decade in Australia, we’ve seen digital firsthand grow to
become digital primacy for many consumers. According to Morgan Stanley
and Yahoo1, consumers today spend 28% of their time online. This is
an amount that is increasing daily and even surpasses the time some
consumers spend watching television.
In many markets, the buying cycle begins online. PriceWaterhouseCoopers2
in fact predicts that online will become the largest media sector in terms of ad
spend by 2014. In almost all sectors, a significant proportion of brand advocacy
happens via digital channels. In the majority of verticals plenty of transactions
happen online too.
However, digital is still treated an afterthought when it comes to integration.
The ongoing disintegrated mismanagement and pure tactical approach, which
continues to be the case for many brands, is a serious mistake.
1 Morgan Stanley Yahoo presentation ‘Internet Trends 2010’
2 PricewaterhouseCoopers ‘Global entertainment and media outlook 2010–2014’ Viewpoint
Digital
The management and
execution of marketing using
electronic media such as
the web, email, interactive
TV, IPTV and wireless media
in conjunction with digital
data about customers’
characteristics and behaviour.

Digital ‘factions’ in conflict
We believe senior decisions makers – marketers, CEO’s, IT departments and
even digital marketing suppliers are feeling pain due from this. Familiar and
recurring stories of unrealistic demands, territorial ownership, scope creep,
budget blowouts and no return on investment – all in conflict.
These factions all function differently, have differing priorities, viewpoints and
even understandings of digital. Ultimately they should all be focused on the
same core objectives – increasing profitability and driving growth. But are they?
Over the next 12 months we’ll continue our candid conversations with these
warring decision makers. Discussing the real digital state of their nations and
learning how to work better together in the struggle to commercialise and ensure
digital is profitable for brands.
In many ways, the Digital State of Nation Report embodies the values Nucleus
was founded on – candid uncompromised advice. It marks a significant shift in
focus for digital research in Australia exploring real issues with real stakeholders.
Candid conversations with marketers regarding digital
strategy
In our first report, we’ve spoken with marketers; to understand their pains within
marketing departments and how they deal with digital. What we found was a
worrying lack of preparedness. 77% of marketers don’t have anything that could

be called a digital marketing strategy. 68% feel inadequately prepared, and 59%
are unhappy with their current suppliers of digital marketing services.
The problem is not that marketers are ignoring digital. As our findings reveals,
they know only too well that it is breathing down their necks. What they don’t
know is how to use it, how to incorporate it into their plans, and how to make it
happen commercially for their brands.
We believe that our ongoing findings will provide a new perspective on how
senior decision makers manage digital and hopefully evolve the partnership
model.
We hope you’ll all agree.
Anthony Baker
CEO and Founder
Nucleus Digital Strategy

Foreword
I am not a digital marketing specialist but I recognise digital is another extremely
important marketing channel.
As the CEO of a start-up business, one of the first things we had to consider
was how we could tap into digital marketing with all of its strengths and
weaknesses. Even as a baby boomer brought up in the less daunting world of
traditional marketing I knew that to ignore digital would be short sighted.
The Digital State of the Nation Report shows that Australian marketers are fully
aware of the potential value of digital as a marketing channel. But the dilemma is
more than just budget spend and how to get the most from the marketing dollar.
Its one of ignorance and being easily seduced by so called experts who seem to
know it all!
The report also highlights the importance for marketers to consider the most
appropriate way to capitalise on the channel within their own markets. Before
spending time tweeting, posting status updates on Facebook or being linked
in, be clear about what you want to achieve. Most importantly develop the right
plan and make sure the outcomes from your spend can be measured.
As for my own advice, be humble enough to ask for help. Digital is a specialist
area and continues to mature rapidly. Traditional agencies may not have the
answers, so beware of their claims. Ask for referrals and evidence of their
expertise and keep asking questions.

This report is a great place for marketers to start. It’s a testament to our needs,
and recognises the value of specialists such as Nucleus Digital Strategy and
their singular focus on developing digital marketing strategy. Well done!
Marcia Griffin
Director
Griffin and Row
Marcia is one of the few
Caucasian women to have
ever headed up a Japanese
company. She has been a
board member for Tourism
Victoria and PMP, won Telstra
Victorian Business Woman of
the Year and is a published
author.

Executive summary
We conducted 82 candid interviews with senior Australian marketers. Under
the assurance of anonymity they willingly discussed their views, experiences,
successes and failures with digital, and the development of digital marketing
strategy for their brand.
The key findings of this report include:
• Australian marketers are under pressure to ‘tackle digital’.
• 68% of Australian marketers feel inadequately prepared for digital.
• 77% of Australian marketers don’t have a digital marketing strategy.
• Australian marketers have difficulty in finding a trusted digital strategist.
• Marketing is most comfortable placing digital marketing in the context of
communications.
• Digital is usually tackled internally - badly.
• External agencies fail to understand digital in the context of their clients’
business.

• 59% of marketers are unhappy with their current suppliers of digital
marketing services.
• The lucky few have digital marketing plans but almost none have true
strategies with measurable objectives.
• There is a similar crisis of commitment to digital marketing strategy in the
UK, US and Europe.

Methodology
From December 2009 and through to June 2010 consultants from Nucleus
Digital Strategy interviewed 82 senior marketers across Australia. Interviews
were conducted either in person or by phone and often extended beyond the
intended 60 minutes.
These senior marketers undertake roles that include marketing director,
marketing manager, digital marketing manager and managing director (in small
businesses where their role encompasses the business’ marketing function).
Criteria for inclusion of this survey is that they do not work for a marketing
services organisation such as advertising agency, brand consultancy or the like.
They conduct their business within both small and large organisations across
an array of sectors. These sectors include: retail, not-for-profit, government,
automotive, sport and entertainment, transport, energy, finance and banking,
telecommunications, construction and property, FMCG, travel and tourism,
information technology and education.

Australian marketers under pressure to ‘tackle
digital’
Australian senior marketers recognise that ‘digital’
marketing plays an increasingly important role in the
marketing mix. For many, its emergence into their own
marketing plans has often been slow. They are feeling
pressure to ‘tackle’ digital from their industry peers and
the enterprise itself, while trying to remain relevant and
meet the demands of consumers.
32%
Yes
“Today, you cannot pick up a marketing or business publication that does not
tout the benefits of the ‘digital age’. We cannot avoid
questions from our own marketing staff and senior
executives querying why we are not doing more within
the channel,” said one Marketing Manager.
The smarter of these senior marketers, however,
recognise that whilst on one hand, ‘digital’ offers
massive opportunities for them to contribute to
increased sales and brand equity, on the other, it also
presents the risk of spent budgets without return.
Senior marketers, post the Global Financial Crisis,
face even greater demands from the business to
demonstrate ROI from their marketing budgets and
Are marketers adequately
prepared for digital?
“Today, you cannot pick up
a marketing or business
publication that does not
tout the benefits of the
‘digital age’. We cannot
avoid questions from our
own marketing staff and
senior executives querying
why we are not doing more
within the channel.”
Marketing Manager
Retail sector
68%
No

most recognise they do not have the necessary experience and skills to ‘tackle’
digital head on.
For these senior marketers, “it’s not a case of whether
we ‘tackle’ digital, it’s more a case of ‘doing it right’ -
not just ‘digital for digital’s- sake’”. Whilst their teams
may be performing some low-level digital activity they
admit they are “...closer to being R&D” activities rather
then strategic marketing moves.
“It’s not a case of
whether we ‘tackle’ digital,
it’s more a case of ‘doing
it right’ - not just ‘digital
for digital’s-sake’.”
Marketing Director
Finance sector

Most Australian marketers don’t have a digital
marketing strategy
Senior marketers were asked a fundamental question
of their current digital activities – “Do you have a
digital channel marketing strategy?” The majority do
not. Perpetuating the obviously painful disintegrated
approach, that naturally affects return on investment.
22%
Yes
For those that do, however, most admit that theirs was
not particularly sophisticated. For some, there are no
clear objectives and most, no specific measures. While for others they are in
fact campaign strategies, that is, tactical plans that ideally should dovetail into
a greater digital channel marketing strategy.
What’s particularly interesting is the interpretation (or misinterpretation) of what
strategy actually is and then what in fact is it in the context of ‘digital’. Few senior
marketers we spoke to could articulate what it in fact is.
What is digital marketing strategy?
UK digital marketing authority Dr Dave Chaffey describes it this way; “Digital
marketing strategy is a channel marketing strategy which defines how a
company should set channel-specific objectives and develop a differential
channel-proposition and channel-specific communications consistent with the
characteristics of the channel and consumer usage of it.”
Do marketers have
a digital marketing
strategy?
77%
No

And for all those that don’t have a digital channel marketing strategy, why not?
Well, whilst some believe that they don’t have a need or don’t’ see the value,
others know they are “not ready” or cannot acquire the budgets to do so.
But overwhelmingly senior marketers have ‘digital
marketing strategy’ on their agenda for this financial
year (2010-11).
Don’t have
the need
6%
Not
ready
10%
On the
2010/11
agenda
67%
Don’t see
the value
10%
No
budget
6%
Other
2%
Why marketers are
without digital marketing
strategy?

Australian marketers have difficulty in finding a
trusted digital strategist
And for those senior marketers who have ‘digital
marketing strategy’ on the agenda many are struggling
to determine who is best suited for the job. In their eyes
they are faced with two options – conduct it internally
or outsource it to one of their agencies. In either case
issues of trust and confidence are common.
68%
Yes
So we asked those senior marketers that had tackled
the digital strategy beast who they turned to? The vast majority tackled it
internally – within their own marketing departments. Perhaps unsurprisingly,
marketing departments appear to be at their most comfortable placing digital
in the context of communications – in doing so they miss the opportunity
entirely.
Digital is usually tackled internally – badly
It’s not a particularly strong case. Most of these senior marketers acknowledge
that they don’t have the necessarily skilled staff to perform this work at the
optimum level but their own internal team, in their eyes, is a safer bet in
comparison to their agencies. Whilst some senior marketers undertook the task
themselves, most turned to their team.
Do marketers prefer to
use internal marketing
departments over external
agencies for digital
strategy development?
32%
No

“Our digital providers don’t use a methodology we
understand, we’re marketers not developers,” said one
Marketing Manager.
“Our digital providers
don’t use a methodology
we understand, we’re
marketers not developers.”
And although there are often members within their
teams that have the appetite and desire to tackle the
digital strategy beast they are generally the more junior marketers. They
are generally more tactically focussed, caught up in the excitement and
enthusiasm associated with the countless burgeoning digital and social
media tools and trends. Their managers recognise that many operate without
exposure to the ‘truth’ of the effectiveness of these types of activities and lack
the commercial experience to contextualise their role as part of the bigger digital
strategic picture.
However, for senior marketers, the case for the internal marketing team is one
of control. Senior marketers can manage their own staff and whilst they may
not have the digital experience themselves they can direct their staff to take a
commercial approach to digital marketing strategy – that is, to apply the same
fundamental principles they use across all marketing planning.
Marketing Manager
Education Sector

External agencies fail to understand digital in the
context of their clients’ business
Marketers that choose to outsource their digital marketing strategy report
mixed results. Those that engaged agencies reported that the major benefit for
engaging them was the agency’s depth of exposure to what was “going on out
there”.
“Agencies work with lots of different companies, they
are a lot closer to the action than we are,” said one
Web Marketing Manager.
“Agencies work with lots of
different companies, they
are a lot closer to the
action than we are.”
Senior marketers recognise that they and their teams
cannot easily be across the breadth of digital activity taking place outside
their own insular marketing environments. They rely on their agencies to keep
them informed and to bring new and diverse thinking ‘to the table’.
All report that external digital services come from one of
two sources: ad agencies or digital agencies.
Advertising
14%
Web design/development agencies are the ‘digital
agency of choice’, serving outsourced digital marketing
support for 86% of respondents. The majority of those
respondents perceived these agencies as having
broader knowledge of the digital channel. These digital
web agencies tend to lead with creative and technology – and many do this
Web Marketing Manager
Entertainment sector
Digital
86%
What type of external
agency do marketers
engage?

well. But there is a perception that digital agencies are failing to deliver strategies
that effectively guide how the enterprise will deploy the digital channel.
The marketers we interviewed spoke of web agencies’ work meeting with
“varying degrees of success”. As with all agencies, but particularly these, it was
felt that while having a better knowledge of the channel, they often lacked the
commercial discipline or willingness to understand their clients’ business.
“We work in a low involvement commodity category. Our agency was trying to
get us to blog. If they understood our business and our customers they would
understand that we don’t have a lot to tell them that is worth hearing about!”
Marketing manager, utilities industry
The remaining source of digital marketing expertise at 14% share is advertising
agencies. Our survey indicates that marketers are sceptical about advertising
agencies’ ability in this area. Many find it difficult to believe that advertising
agencies have, in fact, ‘changed their spots’.
“Despite the promise of integration, digital is still a
‘tack-on’,” said one Marketing Manager. Supporting
the 41% satisfaction level marketers believed they were
receiving from their current digital services suppliers.
Are marketers satisfied
with their current digital
services supplier?
41%
Yes
59%
No

“Providers skip responsibility and ownership as much
as possible, especially when success criteria is involved
– it’s bad when you challenge a supplier in a meeting
about their commitment to return, and they state that’s
not their responsibility,” another said.
The more critical senior marketers accused some
agencies of biased advice that lead to more revenue for
the agency or work that was more in the interest of the
agency (e.g. winning awards) rather than working it the
client’s interests. More than one respondent expressed
their frustration with agency creatives masquerading as
digital marketers.
“Providers skip
responsibility and ownership
as much as possible,
especially when success
criteria is involved – it’s
bad when you challenge
a supplier in a meeting
about their commitment
to return on spend, and
they state that’s not their
responsibility.”
Director of Marketing
Retail sector

The changing agency ecology
The rise and rise of digital has for several years been a force for change amongst
the world of marketing agencies. A decade ago, ad agencies and design firms
bring their creative and visual skills to the medium. Next, direct marketers
brought the skills of targeted communications to the digital world. And in today’s
post-Web 2.0 era, PR firms have begun to deploy their proficiency in influence
and media management.
Then there are ‘web’ or digital specialists. These agencies have become the
fastest-growing group of marketing agencies for a reason: the traditional
firms have struggled to adequately master the medium. Of these, many
are web design firms, which have evolved out of the 2-D graphic design
discipline. Others are technically led firms, which are typically built on a base of
programming and project management expertise. A third category focuses on
particular products: search engine marketing, e-mail management, and (today’s
hot topic): social media expertise.
From the marketer’s perspective, digital should be firmly integrated with other
initiatives to engage and pursue markets. Digital strategy should be joined at the
hip with other aspects of growth and commercial strategy. But as brand owners
increasingly realise, the practice of digital is frequently a world away from the
practice of offline communications. So where should the marketer turn for expert
guidance?

It’s something of a free-for-all, with every type of agency claiming their divine
right to dispense strategic advice. The trouble is, each approaches digital with
baggage: Crudely speaking (and this is something of a simplification, I admit),
ad agencies bring a campaign mentality, designers are focused on usability
and highly-polished aesthetics, PR agencies attend to the message at the
exclusion of all else. And web specialists tend to be geared to keeping their
in-house designers or programmers busy with the business of creating stuff. In
the absence of an overarching strategy, hiring a bunch of delivery specialists –
however good at their particular skills – doesn’t fill the gap.
Clearly digital marketing needs a better model. So what form might it take?
The offline world has experienced a growing schism between strategy
(which in this context includes ‘creative’), and production. For the former,
the marketer is outsourcing problem solving, innovation and expertise; for
the latter, headcount, buying power and project management. There’s every
reason to think that over time strategy and execution will break into distinct
parts within the online world just as they have offline.
Chris Grannell
Consulting Director
Ellis Foster McVeigh
Chris has written extensively
on marketing matters in
Australia and internationally.
As well as heading brand,
marketing and business
development projects in
Australia, he has advised
clients in the UK, Germany
and Central Europe.

A marketers view of the digital marketing ecology
The diagram below illustrates how most marketers viewed the current digital
marketing ecology and how relevant agencies are in contributing to digital
marketing strategy.
Digital marketing
strategy
Traditional marketing
services agencies
First generation
digital service
agencies
Second generation
digital specialist
agencies
Web
Design
Search
Engine
Marketing
Size of circle
represents
market share
Declining relevance
Advertising
Direct
Marketing
PR
Graphic
Design
Web
Development
Email &
SMS
Analytic
Brand Mobile
Social
Media
Media

The lucky few have digital marketing plans. Almost
none have true strategies
Have digital marketing strategies been successful for those that have in fact
tackled them? For many, it’s either too hard to tell or too early.
In discussing the construct of those digital marketing
strategies conducted we found that many lacked
specific measures, in fact only 11% has measurable
objectives to benchmark successes and failures or
extract, at least, learnings. Objectives were often broad
with many organisations still taking a ‘learn and see’
approach. It seems that for many, digital strategy still
remains in the realm of tactics more so than strategy.
11%
Yes
One Global Marketing Director described her agency’s approach to more
of an “esoteric approach than one based on a clear
methodology with insight derived from real data and
research”. Two others were placed in the unenviable
position of having invested significant budgets into
strategies that were found to be of such poor quality
that those senior marketers felt they had no option but
to ‘bury’ the documents. “It just got to a point where
we were telling them how to write the document and
what to put into it. It wasn’t worth the effort.” one said.
Do marketers have
measureable digital
marketing objectives?
“It just got to a point
where we were telling them
(the agency) how to write
the document and what to
put into it. It wasn’t worth
the effort.”
Digital Marketing Manager
Government sector
89%
No

And ‘social media gurus’ received their fair share of criticism for their lack of
marketing expertise and commercial experience.
Despite some horror stories, however, many of those senior marketers that
did embark on the development of digital marketing strategies conveyed the
benefits of having gone through the process of its development. And while
some acknowledge that they may not possess the most sophisticated of
digital marketing strategies the fact that they have one at all, in their eyes, is a
significant step forward for their digital marketing activities.
One senior marketer commented “My team now takes a more disciplined
approach to their digital marketing. They have to ask themselves how what
they are considering doing ties back into our digital objectives and how they will
measure these. We have also started to ask that same question from our web
agency,” she smiled.

A global perspective
The Digital State of the Nation Report shows that in Australia, in common with
elsewhere, businesses understand the importance of digital marketing, but are
failing to approach it in a structured way. The most telling statistic for me is the
proportion of companies that lack a strategy.
I have found there is a similar crisis of commitment in the UK, US and Europe.
Without a digital strategy, major opportunities may be missed and almost
certainly more “digital savvy competitors will be eating your lunch”. But this is
just one of 10 major challenges that I see when a strategy hasn’t be developed.
10 reasons why you may need a digital channel strategy
1. You’re directionless and without clear strategic goals and outcomes
2. You won’t know your online market share
3. Existing and start-up competitors will gain market share
4. You don’t have a powerful online value proposition
5. You don’t know your online customer well enough
6. You’re not integrated (“disintegrated”)

7. Digital doesn’t have enough people or budget given it’s importance
8. You’re wasting money and time through duplication
9. You’re not agile enough to catch or stay ahead
10. You’re not optimising through continuous improvement
I think the major missed opportunity is treating online like other channels
- sure, there are similarities, but to be successful taking advantages of the
differences is vital. Your customer profile and behaviour may be different
online, your competitors different and there are completely different ways to
engage prospects through the fantastic digital tactics like search, social and
email marketing which need to be harnessed in an integrated strategy.
Dr. Dave Chaffey
CEO and Co-founder
Smart Insights
Dave is an international
bestselling author (of 5
acclaimed books on Digital
Marketing), consultant and
speaker who has been
recognised by the Chartered
Institute of Marketing as one
of 50 marketing “gurus”
worldwide who “have shaped
the future of Marketing”.

The good news
It would be easy to look at this report as all doom and gloom. I don’t look at it
this way. I think there’s some really good news.
That is, smarter senior marketers are taking a step back from their often
misguided tactical actions (or complete inaction) and
have recognised that digital marketing, like broader
marketing and business activities, requires a strategic
approach to it.
Even better news, for those marketers, is that there
are existing strategic marketing frameworks and
methodologies that can be applied to digital marketing.
One enlightened senior marketer has already
subscribed to this way of thinking. She summaries
the strategic opportunity quite appropriately. “I don’t
think they [marketers] are realising it’s happened -
implementation versus strategy. Businesses think they
need implementrs, it’s only when they experience a
strategist do they realise what they are missing. A true
strategist is your secret weapon, not only do they help
educate from within, but they help you sell to the rest of
the business.”
“I don’t think they
(marketers) are
realising it’s happened
- implementation versus
strategy. Businesses think
they need implementers,
it’s only when they
experience a strategist
do they realise what
they are missing. A true
strategist is your secret
weapon, not only do they
help educate from within,
but they help you sell to
the rest of the business.”
Marketing Director
Finance sector

Sure it requires channel expertise, but just like all marketing, it requires an
understanding of environmental factors, the discipline to set measurable
objectives and the development of a strategy that defines target market,
proposition and the communications and interaction mix based on an
understanding and recognition of the budgetary and organisational implications.
Chris Fiteni
Director of Strategy

Thank You
This report would not have been possible without the support of the 82
marketers we spoke to over the past year. They have our gratitude for helping us
develop the first Digital State of the Nation Report.
To the group of contributors and collaborators - thank you once again. It’s an
amazing privilege to have a network of some of the best minds in business,
marketing, digital and PR to collaborate with.
Contributors
Dr. Dave Chaffey
Chris Grannell
Marcia Griffin
Collaborators
Jon Hoel

As experienced marketers, Nucleus Digital Strategy does not focus on creative
and technology like most digital agencies. You’ll find our approach candid and
uncompromised as we collaborate with you on your digital marketing goals.
From insights into your customers’ behaviour, competitive environment and
our leading knowledge of digital trends, we’ll focus purely on developing digital
marketing strategy that will steer your brand towards improved profitability.
Contact
Phone: +61 3 9999 1133
Email: info@nucleusdigitalstrategy.com
Website: www.nucleusdigitalstrategy.com
Twitter: @nucleusdigital

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