Strategy. Innovation. Brand.

Digital Segmentation

The future isn't what it used to be.

The future isn’t what it used to be.

As I read reports from McKinsey, Bain, Boston Consulting Group, and others, it appears that we’re moving into a phase of digital segmentation. Analysts used to be content to write about digital consumers in the very general sense. They compared the online (or digital) consumer to the offline (or traditional) consumer in very general terms. Now they’re comparing the different segments of digital consumers to each other.

As part of this process, McKinsey seems to want to brand the term “iConsumer” and has put out a series of reports on how digital consumers are changing the value chain. A recent report (April 2013) includes a summary of six fundamental shifts in the digital landscape that can help us understand segments and trends. I’ll summarize them here and will refer back to them in future posts. Here are McKinsey’s big six:

Device shift – from PCs to mobile/touch devices. In 2008, the PC accounted for 78% of all personal computing usage. By 2012, the PC’s share of usage had fallen to 57%. Mobile was 33% and tablet was 11%. About 60% of consumers in the US now have smart phones.

Communication shift – from voice to data and video. What do we use phones for? Well, it’s not for talking anymore. Only 20% of our phone usage is voice, down from 60% five years ago. Essentially the phone is now a data terminal, for games, web browsing, music streaming, and social media.

Content shift – from bundled to fragmented. Newspapers and traditional television channels bundled together news and entertainment programs. Bundling added significant value until the rise of the modern search engine. Now we can find whatever we want, whenever we want. We buy apps for specific, point solutions, further fragmenting the market. Getting your message across to a large audience depends much more on search engine optimization than on courting the bundlers.

Social shift – from growth to monetization. About a quarter of our personal computing time is now devoted to social networking. Social networks have grown with incredible speed but now seem to be leveling off. Social networks are now trying to monetize what they have. The results are mixed – to wit, my experiences advertising on Facebook.

Video shift – from programmer to user controlled. As I was growing up, my family got together every Sunday night to watch Bonanza and drink homemade milk shakes. No more. We now watch on DVRs, on video streaming services, or on DVDs. We’ve shifted time and place and device. We watch what we want to watch when and where we want to watch it. I sort of miss Bonanza though.

Retail shift – from channel to experience. E-commerce has grown dramatically but still only accounts for about 5% of all retail sales. However, e-commerce – especially mobile – is transforming the retail experience. While we shop in brick-and-mortar outlets, we use mobile devices to enhance our experience and find better bargains. Successful retailers will invest in true multi-channel integration.

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