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Artificial intelligence is here, but is yet to make a big impact on marketing


AI (artificial intelligence) may be the buzzword in marketing right now, but CXOs seem more concerned with rethinking their marketing strategy to be able to measure the direct impact of ad spends and finding the right talent, Stephan Zimmermann, senior partner at McKinsey & Company, said.

Based in San Francisco, Zimmermann heads the consulting major’s digital marketing and data analytics team of 1,400, half of whom are stationed in India.

During his recent visit to India, Zimmermann had some 15-odd client meetings, but “nobody mentioned or discussed an AI tool saying they strongly believed in it or asked what I thought of it”, he told ET in an exclusive chat.

People are readily using generative AI to optimise marketing, automate repetitive tasks, and accelerate A/B testing. However, “none of the tools have yet transformed company performance”, he said. “A lot of companies spend massively on martech (marketing technology) tools but get only one-third of the value out of it,” he said, emphasising that the next few years will see many of them pick a few core tools to extract maximum value out of them as pressure for measurement mounts on them.
A few years ago, digital was less than 10% of the advertising pie in India. “Today, it’s at about 35%, and we expect it to go north of 60% in the next three years, similar to the way it has grown in the US,” said Zimmermann who has spent over 25 years with McKinsey and focuses on online businesses. Traditionally, companies had separate budgets for brand building and performance marketing, he noted. “The traditional channels for brand building, like print, TV, and outdoor, were hard to measure. But most leading companies are now focused on measuring the impact of full-funnel marketing, and digital brand building allows you to do that with access to data,” he said. Zimmermann pointed out that roughly 10% of McKinsey’s clientele in India, and 20% globally, now hire data scientists in their core marketing team. He expects 50% of these companies to have data scientists in their marketing departments in the next three to five years. How can McKinsey still provide value to these companies if they already employ data scientists of their own? Zimmermann argued they get companies “on the right operating models and build capabilities that help them utilise the talent optimally”. “We are moving from being advisors to companies or mere consultants, into the role of an impact partner,” he added.

Speaking of shifts, he pointed out how not too long ago, consumers “actively went shopping” whereas now they are “actively advertised” products on social media and the internet in general, based on their specific interests.

“Today, retail media networks in India may be getting about 5% of overall digital spending, but this number will dramatically go up to the global level of 15-20% in line with the overall digital marketing growth,” Zimmermann said. “And even as retail media networks like Amazon eat into Google and Meta’s share in the ad pie in pure percentage terms, it won’t take away much in absolute terms because the overall pie is growing massively with more budgets shifting to digital,” he added.

He doesn’t share the same optimism for the prospects of live commerce – selling products via a live stream on digital platforms – in India though. According to a McKinsey report from 2021, China’s live commerce industry was valued at over $171 billion in 2020 and had been growing steadily ever since. In India, the market is projected to be anywhere between $5 billion and $50 billion by 2025, according to multiple market research company reports.

“It’s not a function of what went wrong in India with respect to live commerce. The category hasn’t picked up in the US as well where it is still probably 2-3% of all ecommerce (roughly $30 billion),” Zimmermann said. “I think it has to do with the difference in shopping and social behaviour in markets like India and the US compared to China. Our sense is, it will grow in both these markets, too, but not become 20% of all ecommerce revenue the way it is in China right now, which is a highly influencer-led ecommerce market.”

Further, in a market like India, it’s likely that live commerce will be led by “info-based influencers” as opposed to the ones showcasing a “flashy” lifestyle, Zimmermann concluded.


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