Should brands be focusing on digital tech rather than digital advertising?

Both Starbucks and Domino’s have highlighted the benefits of investing in digital technology and ecommerce capabilities to improve the customer experience. Domino’s saw its app sales overtake desktop for the first time and Starbucks’ posted its “most remarkable quarter” yet thanks to its mobile ordering and payment service. The results show that brands should be focusing on the benefits of investing in digital technology rather than simply pushing money into digital advertising.

Starbucks mobile pay

In its half-year results, Domino’s e-commerce sales were up by 24.4% in the UK, while its app now accounts for the majority (52.4%) of its internet sales. The pizza brand credited its e-commerce investment for the success.

CEO David Wild said the tech focus had made it easier for customers to place orders. Perhaps unsurprisingly that meant they ordered more often.

“Our success in the UK is a result of the investment we have made in market leading e-commerce initiatives. Our app has now been downloaded over 10 million times and our app sales have overtaken desktop sales for the first time.”

Wild also sees e-commerce as key to its future growth, saying that the brand has a “continued programme of e-commerce initiatives and other marketing campaigns” in the pipeline. That includes trials of one click orders for customers that have a standard order or know exactly what they want.

Over at Starbucks it is a similar story. The company’s third quarter results, revealed last week, showed that its “continued meaningful investment” in mobile and digital platforms had resulted in one of the “most remarkable quarters in our over 23 years as a public company”.

Global revenues were up by 18% to a record $4.9bn and store traffic increased by 4%.

The brand has focused on improving the in-store experience through its digital app, offering customers in the US the option to pay for their coffee digitally and using its digital loyalty scheme to boost sales.

CEO Howard Schultz was dismissive of other brands that have focused on digital advertising instead of investing in tech.

He said: “Many traditional retailers and consumer brands have responded to the seismic consumer shift in bricks and mortar retail by substantially increasing their digital advertising budgets, significantly driving up their cost of customer acquisition and producing little to show for it.

“We on the other hand, took a very different approach.”

With strong sales, increased traffic and customers visiting more frequently it’s not hard to see the advantages of investing in digital tech over digital advertising. Both Domino’s and Starbucks’ results suggest that while few people (although Schultz is one of them) are suggesting digital advertising isn’t effective, brands could do better to pump some of that resource into improving their tech capabilities.

Brands follow Starbucks and Domino’s lead

Schultz highlighted the three key advantages to digital tech: “shorter queues, faster service and more efficient in-store operations”. Those are three key reasons why other brands should look at how technology can improve the customer experience.

Other brands have been slower to realise this and are now forced to play catch-up.

KFC is planning to implement click-and-collect mobile payment technology in an effort to improve customer satisfaction by reducing waiting times. McDonald’s told Marketing Week in February that click-and-collect is an area it is “exploring very closely” as it looks to digital innovation as part of its mass personalisation and customer convenience strategy.

Meanwhile burger chain Gourmet Burger Kitchen released a digital order and collect service through its GBK app earlier this year.

The key takeaway seems to be that brands are finally realising that technology can improve the bottom line in a much bigger and more measurable way than digital marketing alone while at the same time engendering loyalty.

Digital advertising should remain a part of this strategy, but without using technology to boost the customer experience brands are missing out.

The likes of Procter & Gamble, which is increasingly investing in digital, social and mobile campaigns, could benefit from focusing more on ways to get closer to its customers through apps and ecommerce as well as through digital ad spend. That’s something rival Unilever understands as it tests ways to make online retail work for its products.

In order to stay ahead of the game brands should adopt the approach of Alistair Macrow, McDonald’s UK and Northern Europe CMO. “If we can find ways of using the technology that people carry with them to help enhance their McDonald’s experience then that’s exactly what we’ll do.”

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