When it was COVID-19at its peak, digital technology was the only option for European consumers to meet their needs. But now that the worst of the pandemic has passed, European consumers are not only entering the analog world, they are also demanding more from the digital world. Businesses should be on alert, especially as emerging concerns arising from economic and geopolitical uncertainties fuel more anxiety among consumers, businesses and governments.
Our third annual European Digital Sentiment Survey1The 2022 Digital Sentiment Survey collected responses from more than 25,000 consumers in 19 countries: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Italy, Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland and the United Kingdom.found that despite an expected increase in offline activity following the end of COVID-19-related lockdowns, digital adoption remains strong. But as uncertainty grows, companies must focus on digitization. Past experience has shown that this capability leads to greater resilience by opening new markets, improving efficiency and improving decision-making. These uncertainties highlight the need to double down on three key areas of digital opportunity that emerged from our research: user experience, mobile and monetized interactions.
This year's research also sends a strong message: companies need to invest differently in digital offerings. While IT investments have soared over the past two years to enable growth in digital adoption, these investments have not been fully focused on the areas that consumers themselves value most. The nine exhibits that follow tell the story behind the trends and how companies can act.
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1. Digital adoption has calmed down, but usage has generally increased
Although digital adoption1 Digital adoption: Share of users for a given industry who have interacted with it digitally or remotely in the past six months. Digital adoption by country is the weighted average across sectors.Although, as expected, it has fallen somewhat from the height of the pandemic, Europe still recorded a net gain of around 100 million digital users as of 2019. Europeans are interacting digitally with twice as many industries as before the pandemic. Banks, food and healthcare recorded the biggest gains in countries with high adoption rates, with the public sector, utilities and insurance lagging behind. However, in countries with low digital adoption, banks and telecommunications providers continued to perform best, while education, retail and healthcare lagged behind.
Digital adoption during the pandemic is strongly correlated with GDP per capita: of the six countries with the highest adoption rates, five (Denmark, Finland, Sweden, Switzerland and the United Kingdom) had a GDP per capita above €45,000. At the other end of the spectrum, countries where GDP per capita was less than €30,000 (Czech Republic, Hungary, Poland and Romania) had much lower adoption rates. Two exceptions to this trend were Greece and Portugal, which experienced very strong growth in digital use in education and healthcare, although adoption slowed in 2022. they are younger, live in urban areas, and have more education and higher disposable incomes than their peers.
2. Countries are converging on digital adoption
Digital adoption has brought about great convergence between the countries of the European Union. Austria and Germany, which have historically been slower to adopt digital behaviours, have seen the biggest increase in adoption, with sectors such as banking, healthcare and groceries coming close, as well as satisfaction with digital services. The UK had the highest adoption overall, while the Czech Republic, France, Greece and Portugal, on the other hand, saw the biggest decline in adoption, although they returned to more modest growth between 2020 and 2022.
3. There are significant differences in digital adoption by sector and country
Overall, adoption trends fell into two groups: a consolidated group of leaders, including banking, telecommunications and insurance, which maintain high adoption rates of 80 to 90 percent, and a second group of “high-touch” industries, including education , health care and travel, which depended almost exclusively on face-to-face contact before the pandemic. The countries with the highest digital adoption showed steady adoption across all industries in most cases, with some notable exceptions (insurance in Austria and public sector in Germany). While some digital practices are declining in use, some new digital offerings, such as telemedicine, persist. The education sector still places a high value on face-to-face education and therefore faces the toughest battle in digital adoption across countries. In some sectors, notably supermarkets and telecommunications companies, digital adoption varied significantly by country.
4. Despite high adoption rates, customer satisfaction lags behind design and experience
Even with historically high digital adoption rates and historic increases in digital and analytics spending – up about 25% over the past two years across all industries1Change in enterprise IT spending between 2020 and 2022, estimated in surveyed countries, according to Gartner report Forecast: Enterprise IT Spending by Vertical Industry Market, Global, 2020-2022, updated Q1 2022, taking into account following spending categories across industries: development and management services, analytics and business intelligence, other application software, and ERP/SCM/CRM.— an unpleasant trend emerged: customer satisfaction with digital experiences decreased by four percentage points from 2021.2We measured net customer satisfaction as the difference between satisfied and very satisfied users (4 or 5 on a scale of 1 to 5) and dissatisfied and very dissatisfied users (1 or 2 on the same scale).Poor user experience tops the list of pain points for 28 percent of dissatisfied users. Shortcomings in user interface (UI) and user experience (UX) also top the list of sources of dissatisfaction in 15 of the 19 European countries surveyed.
Finding products that meet specific needs is a major concern for 23 percent of users, particularly in apparel shopping and retail in general. In these industries, consumers often cannot try a product before they buy it and must return it. The need to avoid physical contact when making payments during the pandemic has fueled a significant spread of electronic payment systems, both online and in physical locations.
Another worrying finding in our research is that consumers are losing trust in digital channels, which was two percentage points lower than in 2021.3We measured pure trust using a Likert scale (1–5) as the difference between users with a high or very high level of trust (4 or 5 on a scale of 1 to 5) and users with a low or very low level of trust. self-confidence (1 or 2 on the same scale);The main sources of mistrust are the handling of personal data and cyber attacks. Interestingly, trust in payment processes has increased.
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5. External factors also threaten to hinder digital growth
Consumers are clearly concerned about economic uncertainty. Many fear dangerously high inflation, financial market volatility and the possibility of prolonged bear markets. These fears can easily translate into lower consumer confidence. Our research found that these negative expectations could significantly reduce consumer discretionary spending on travel, groceries and retail.
Interestingly, consumers currently do not expect the war in Ukraine to have much of an impact on their digital usage. About 15 to 30 percent of European consumers in five major European markets, three of which border Ukraine, expect a negative impact on digital usage from the war (although Spain had the most negative sentiment). In addition, those concerned about the Ukrainian conflict say they are likely to cut discretionary spending. Although negative digital sentiment numbers are currently low, we expect them to increase if the situation in Ukraine worsens.
6. Digital can protect against weakening markets
As companies consider how to address consumer pain points and global uncertainties, they should learn that digitized industries have historically been the most resilient, as companies have the fewest customers who intend to go digital.
One of the main pillars with the biggest impact could be increasing the number and quality of revenue-generating transactions. The vast majority of consumer digital transactions are service-oriented, such as checking shipping details or product availability or other simple transactions. Companies may consider moving these interactions to social media, which has eclipsed call centers as the primary point of contact for service-related inquiries.
7. There are significant opportunities for businesses to create more revenue-generating interactions
Simple service transactions are not where the money is. For all but entertainment digital leaders, more than half of interactions are service-oriented and non-monetary. For banking, a traditional digital leader, less than 30 percent of online interactions generate revenue (such as wire transfers or direct debits). The same applies to the utility sector (such as monitoring energy consumption or service status).
Sectors such as banking and insurance can grow significantly by digitizing more complex transactions that users still do mostly in person or on paper (such as mortgage applications and insurance claims). Their fintech competitors are already doing it: processing insurance claims in minutes. Additionally, as mentioned earlier, digital users tend to be younger and live in urban areas. This means that companies have significant opportunities to expand their customer base in rural areas. Insights from our research suggest that mobile could be key, as mobile penetration rates are high in rural areas.
8. Mobile is the key stepping stone to digital adoption
Industries with higher use of mobile apps as the primary communication channel for a brand tend to have a larger share of all digital users. Banking and entertainment are at the forefront of mobile adoption and digital interactions. They also have a low percentage of users who use remote assistance (via chat, email or phone). Industries with a high share of remote assistance users (such as insurance, utilities and education) have an opportunity to optimize their digital channels by encouraging more users to use mobile channels.
9. There are clear opportunities to better allocate IT investments
Fueled by the digital boom during COVID-19, companies have made significant investments in IT. Compared to 2020, IT spending in Europe has increased by 25 percent across all sectors, with digital leaders spending the most. However, there is a clear opportunity to shift these investments to the most important customer pain points. In the rush to create complete online customer experiences, many companies have invested in online payments and more efficient means of tracking packages and providing customer service-related support. They failed to focus as much as possible on the UX/UI they offered, nor on improving the holistic consumer experience to determine how right a product is for them. This trend was clearly visible in clothing and furniture, but also in other natural products. Frustrations grew.
The good news is that technological solutions to address these pain points are rapidly improving. For example, natural language technologies are becoming increasingly sophisticated and, when used with other forms of artificial intelligence, can enhance the digital user experience journey. In addition, virtual reality allows the consumer to try on almost anything, from new glasses to a new house, without ever touching or seeing it beforehand.
Klemens HjartarSenior Partner, Copenhagen
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