Each year, companies invest hundreds of billions of dollars in their digital channels to improve customer experience (and ultimately delight consumers). But ensuring this spending bears fruit requires organizations to gain an understanding of what consumers actually want. These preferences can evolve rapidly. Since the onset of the COVID-19 pandemic, digital channels have offered a valuable lifeline for consumers and companies alike. But will consumers return to their prepandemic behavior, maintain their digital ways, or adopt entirely new behaviors?
A McKinsey Digital Sentiment Survey of three markets in the Middle East—Egypt, Saudi Arabia, and the United Arab Emirates1—shines a light on the trends and patterns that companies must consider to formulate a winning strategy (see sidebar, “About the research”). Of course, consumer preferences can vary significantly across regions, among countries within a region, and by specific industries. This survey provides insights to help shape strategy: Do countries have a critical mass of digital users across industries? What are their preferred ways of accessing online channels? And once there, what do they value most in a digital experience?
Our research suggests growth in adoption of digital channels and spending will rise in the coming years. This coincides with the increased use of artificial intelligence (AI) across all sectors. According to a new McKinsey Global Survey on AI, AI adoption has more than doubled since 2017,2 helping organizations reinvent themselves by harnessing the foresight and precision of data and technology. Tailoring offerings by country and industry will be a crucial element in catering to digital consumers and capturing the full value from digital offerings. Companies across industries also have an opportunity to reallocate a higher share of their advertising spending to digital channels to engage consumers more effectively. The following nine charts paint a vivid picture of consumer preferences and offer clues for where companies can place their bets.
Since the onset of the COVID-19 pandemic, digital channels have offered a valuable lifeline for consumers and companies alike.
1. Digital access varies by country
The three Middle Eastern countries in our sample offer different windows into the region, but each has its own levels of internet penetration and modes of access. The United Arab Emirates leads the pack: 99 percent of its consumers have access to the internet, compared with just 71 percent in Egypt. Similarly, the United Arab Emirates outpaced Egypt and Saudi Arabia on subscriptions to mobile (by 3.0 and 1.6 times, respectively) and broadband (3.6 and 1.8 times, respectively). Egypt has the most room for growth in internet access in the coming years: 31 million of its residents lack internet access, representing the largest untapped segment for digital businesses in the region. Companies that can better harness their digital channels and cater to the Egyptian market could unlock significant sources of growth in the coming years.
2. Consumers embrace digital across industries
Over the past six months, the degree of digital penetration among Middle Eastern consumers places the region in line with leading European and North American countries. In Saudi Arabia and the United Arab Emirates, consumers use digital channels to interact with an average of approximately 4.5 industries. Overall digital adoption—the average of users in each industry who have interacted with it through digital or remote channels—stands at 78 percent. Although Egypt trails its regional neighbors, it is still at the level of developed markets in Europe and North America: Egyptian consumers engage through digital channels with about 3.8 industries, on average, and have a digital adoption rate of 74 percent. Because the Middle East has among the highest consumer digital engagement in the world, companies in the region have an opportunity to create an advantage by developing cutting-edge features and functionality tailored to Middle East consumers that can be exported to other markets around the world.
3. Apps are the preferred digital channel for consumers
Middle Eastern consumers are mobile first: they overwhelmingly favor mobile apps as their preferred channel. Indeed, the three surveyed countries had consumer engagement on apps that was 1.6 times higher than that of the developed markets of Europe and North America, where websites are still dominant. Accelerated digital adoption in the Middle East also makes marketplaces significantly more popular: consumers in the region interact with marketplaces at a rate that is similar to that of Asia but 1.7 times higher than that of developed markets in Europe and North America. In the Middle East, Egyptian consumers are the most reliant on alternative channels, with one in four users preferring alternative channels (such as social media, call centers, or instant messaging) over a provider’s website or apps.
4. Digital adoption takes hold across industries
Digital adoption across industries, both fully digital and remotely assisted (for example, through call centers), is similar in all three countries in our survey, with rates of about 75 to 80 percent. Digital consumers make up the majority of users in a number of industries, reinforcing how digital channels have reshaped engagement and commerce. Grocery and healthcare remain the least disrupted by digital: consumer adoption hovers around 55 percent, compared with an average of 76 percent for all industries. In-person elements are a large part of the consumer experience in these industries, so businesses will need to continually invest in developing a digital value proposition that rivals or exceeds great physical experiences.
By country, the United Arab Emirates lags behind its neighbors in digital adoption of grocery, healthcare, and apparel—a pattern that might be influenced by Dubai’s strong shopping mall culture. Consumers might require a much better value proposition to switch to digital channels. Meanwhile, Egypt has lower digital adoption of financial services (both for banking and insurance) than its counterparts.
5. User experience is key to higher digital adoption
Industries able to create a digital user experience that provides clear advantages over in-person interaction stand to increase digital adoption. Speed and convenience are primary reasons that consumers avoid digital services: 60 percent of nondigital consumers use physical services because they are perceived to be faster or more convenient. However, other barriers must also be overcome. For example, 32 percent of Egyptian digital consumers find it difficult to use digital services and don’t believe they offer the desired functionality—a level that’s five and six percentage points above that of Saudi Arabia and the United Arab Emirates, respectively.
Survey respondents, especially those in Egypt and Saudi Arabia, report that healthcare and government digital services are the hardest to use. While United Arab Emirates consumers are 1.3 times less likely than their peers in Egypt and Saudi Arabia to report that digital experiences are lacking, they are also 1.6 times more likely to feel processes are faster in person. This pattern is especially pertinent because the United Arab Emirates government has made strong pushes to promote digital adoption. To truly enable adoption, digital experiences must be superior to good physical experiences.
Organizations in the region have an opportunity to create a user experience that is tailored to consumer wants and needs and addresses pain points. Those that can do so successfully will stand out from the competition.
6. Trust in digital channels does not guarantee satisfaction
As companies in the region seek to create a distinctive digital experience, they should focus on the factors consumers value the most. Our survey revealed trust in digital channels does not automatically translate to increased consumer satisfaction. For instance, the Middle East ranks highly in terms of trust but is doing poorly on measures of satisfaction. So while Middle Eastern users are more open to embracing new digital services than users in other regions, the digital solutions being offered are not better than elsewhere.
These findings suggest that while trust is important, companies need to prioritize user experience, product availability, and information because these account for most user dissatisfaction. The good news is that companies are in a position to improve their performance on each of these measures—and, by extension, consumer satisfaction.
7. Digital use among consumers is on the rise
Over the past three years, consumers have increasingly migrated to digital channels, and this trend shows no signs of slowing. Across countries and industries, consumers expect to maintain or increase their use of digital channels in the next six months at a higher rate; the lone exception is grocery in the United Arab Emirates, where the share of users expecting to increase their digital use is eight percentage points lower compared with the previous six months. This consistent growth across the region is in marked contrast to Europe, where digital adoption appears to have slowed.
Overall, consumer use of digital services is poised to grow fastest in Egypt (an average of eight percentage points higher than in the previous six months across industries) compared with Saudi Arabia (three percentage points) and the United Arab Emirates (four percentage points). Insurance in Egypt experienced the greatest increase in intended digital use, followed by government and healthcare in that country and travel in the United Arab Emirates. Companies in other industries could use these elevated user experiences and activity as inspiration.
8. Spending in digital channels is also poised to rise
It’s no surprise that increased penetration and consumer adoption of digital channels have translated to more spending. Our survey indicates that digital spending is set to grow in the Middle East: more than 50 percent of consumers are ready to dig deeper into their wallets, and less than 10 percent of users expect to decrease spending. Across countries, Egyptian digital users are the most inclined to increase their spending, whereas United Arab Emirates consumers are the least inclined. Travel leads all industries in expectations for spending growth as consumers flock back to taking vacations. One-quarter to one-third of consumers anticipate spending significantly more on travel in the next half-year. Retail also saw impressive increases. Meanwhile, digital consumers of entertainment and telco services seem to be closer to their maximum spending potential.
9. Consumers warm to emerging tech
Emerging technology has made a big splash on the global stage, despite recent issues in cryptocurrency markets. To date, the potential of these offerings hasn’t translated to widespread adoption, because consumers are still seeking to determine their utility. However, digital users in the region expect these new trends to have a significantly positive impact, with Egypt slightly ahead of Saudi Arabia and the United Arab Emirates. In comparison, digital users in Latin America are in line with those in the Middle East, but users in Europe and North America anticipate that these technologies will have an almost neutral impact. Survey respondents pegged AI and hyperpersonalization as the trends with the highest potential, but the jury is still out on the impact of the metaverse and nonfungible tokens (NFTs).
Companies should focus on embracing a mobile-first strategy and design products to take advantage of the accelerated digital adoption.
Overall, the fundamentals for growth in the Middle East region remain strong, with customers poised to increase spending in digital channels and adopt new digital technologies. Companies should focus on embracing a mobile-first strategy and design products to take advantage of the accelerated adoption. In particular, Egypt will be an important growth frontier; first movers will benefit by unlocking the country’s latent potential.
At the same time, companies in sectors with more consumer touchpoints—such as grocery, healthcare, and retail—should continue to invest in an improved user experience and features to increase adoption, especially in the United Arab Emirates, which currently lags regional and global benchmarks. Companies have to become more sophisticated in their digital marketing spending to maximize ROI. They must also experiment with consumer engagement to find their sweet spot; understand the importance of customer value management to enhance pricing and product packaging; and invest in personalization at scale to deliver delightful experiences.
Companies that can manage these priorities simultaneously will be best positioned to capture market share in this dynamic region.