The Elusive Nature of Digital Economy and Its Marketing Implications

We listen jargons like “digital marketing, online business, digital footprint, search engine marketing” and a lot more nowadays. But do marketers really get the subtlety of this new ‘click-marketing’?
There is no denying the fact that the paradigm shift towards a digital world is underway and is headed towards its peak. Digital Economy Report 2019, published by the United Nations Conference on Trade and Development (UNCTAD) suggested that estimated 1.3 billion people, or one quarter of the world’s population aged 15 years and older, shopped online in 2017 up 12% from 2016.

Businesses and consumers are moving from a traditional way of interacting and transacting towards a virtual and web-based one. The digitalization is drastically altering the way marketing works. Particularly, how brands advertise themselves and reach new customers is changing. While we increasingly talk about the importance of digital footprint of brands out there, we might be overlooking the elusive nature of the digital economy. So, what exactly is ‘elusive’ about the modern digital consumer, or, more generally, about the overall digital environment in which marketers must operate? Here we will go over some data that would at least make marketers question the blind belief in digitization and convince them to approach it with more vigilance to get better results out of their digital investments.

Gaps in the access to the internet

Half the world’s population was still offline in 2019, one in five people was online in the Least Developed Countries (LDC), and gender gap in the access to the internet is still the widest among the LDCs!

Most of the digital economy is concentrated in the US, China, and some European markets. Almost 90% of the market capitalization value of the 70 largest digital platforms goes either to the US (68%) or China (22%); while Europe stands on third at 3.6%. These markets we know are mature economies and offer less potential for growth to the cross-border operating companies. However, developing economies including Pakistan are still facing critical challenges in inclusion to the digital world. While at the same time, these markets possess high potential for growth for the global giants. From the perspective of the national marketers (inside out approach), Pakistan still has some good internet penetration and digital media statistics. But if compared it to the overall world (outside in), it is far behind. This also implies an opportunity for the growth—internet penetration might increase as well as the gender divide between males and females using internet might also decrease over time. But what marketers right now need to consider is that online marketing strategies will have to be adapted to the prevailing situation. For example, in an area where small proportion of female population is online, marketing mix strategy of a cosmetic brand (Dove for example) will have to be significantly different than if a larger proportion of female population used the internet.

In addition to the differences among regions, within-countries differences are also prevalent; and those gaps are wider in the developing countries including Asian countries except China. Connectivity varies with socioeconomic status, and geographic location. Developing countries show a divide in urban vs rural groups with respect to access to the internet. According to the International Telecommunication Union (ITU) statistics, approximately 89% of urban households had a mobile phone compared with only 63% in rural households in 2018 in the LDCs.

 
More upsetting is fact that the gap between internet penetration in the developed and developing markets has not narrow over a considerably long period. Look at the graph in figure I.11.

Gender gap in the access to the internet

Another prevalent gap that marketers should be concerned about is between the proportion of male population with access to the internet and that of female population. This gap is almost 11.6 per cent for the world in 2019. As mentioned earlier, this gap is wider in developing countries where it is 16.1 per cent compared with only 2.8 per cent in developed countries. The highest gaps exist in LDCs (32.9 per cent).

Note that these gaps increased between 2013 and 2017 for LCDs, African, and developing countries.

Unreliability of data

Well to me, the foremost advantage of online business—at all stages of the marketing process—is the handiness with which consumer data can be collected. Marketers collect data on several important variables while consumers complete their online purchase (or just visit a website). Such data are then processed and turned into valuable insights about customers’ behaviors and demographics. If a marketer misses this point, do you think digital footprint of their business won’t mean anything? Researchers Patricia Al-Salom and Carlin J. Miller from University of Windsor found that participants filling surveys online as compared to offline (in a lab with paper and pencil) data collecting provided data less reliable. The data collected online failed more validity checks as compared to the same collected offline. Note that I am not suggesting that data collected online are useless or should not be used to assist decisions, in fact it is otherwise. However, it is a fact that such data are relatively less reliable. And it challenges the notion that assigns overinflated importance of online data collection.

Other psychological hurdles

Consumers express several other reservations with online purchases which they would never raise if making the same purchase online. For example, 57% of users will abandon a website after waiting for 3 seconds and 80% of them will never return. Security and privacy are other main concerns. According to SmartInsights.com, 59% of American consumers will abandon a transaction if they can’t find their trusted method of payment, and 80% consumers feel safer engaging in a transaction if they find trustworthy card logos for payment. Facts such as these show that online marketers must put extra effort to hook consumers to their website or page.

E-commerce Index is one measure based on four criteria—account ownership at a financial institution or with a mobile-money-service provider; share of individuals using the Internet; Postal Reliability Index; and secure Internet servers—which measures how ready a country or region is for e-commerce. Look at the following table from UNCTAD B2C E-Commerce Index 2019; it once again shows that developed countries lead while African and Asian, developing countries lag.

Conclusion

In a global perspective of digital marketing, digital economy is more elusive than it seems. Because almost everyone believes it is an easy opportunity to grab, they miss it. Only those who take it as a challenge to overcome, and more importantly work to solve it subtly, are the ones to understand.