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07/06/2015

Customer-Centricity and the Retail CMO of the Future

Millennials’ use of digital technologies has transformed consumer shopping behaviors, forcing retail chief marketing officers (CMOs) to re-think the way their organizations gather intelligence about and engage with customers.

Since 2004, U.S. ecommerce has grown by about 18 percent a year, now accounting for 8 percent of total retail sales. Smartphones and social media have given consumers immediate access to tools that compare prices, offer product reviews and enable instant feedback from friends and family all while standing in the middle of the store.

By 2020, Millennials will account for nearly one-third of total retail spending. Rapidly advancing technologies and an increasingly tech-savvy consumer base will demand that the retail industry evolves at an even faster pace. Yesterday's CMO — that is, the tactical marketing leader focused on brand building, in-store advertising and targeting consumers — will become extinct. Today’s CMOs must embrace a new role that stretches beyond the traditional marketing function. They must be visionary strategic thinkers, focused on actions and outcomes that inspire peers and, ultimately, transform their organization to meet current and future business needs.

The customer is at the center
A key element of CMO survival in retail today: develop more than a 360-degree view of the customer. But what does that mean?

Marketing leaders must find new and innovative ways to listen to customers. It's not just gathering intelligence about those who purchase items in-store, but also extracting insights from those who simply browse the racks or skim the shelves. The end goal is to cultivate and provide a shopping experience that current and potential customers crave, as a way to increase sales and transform browsers into purchasers.

John Aylward, executive vice president and chief marketing officer at HSN, sheds light on this customer centricity:  “The customer is at the heart of every decision we make.  We are always thinking about ways that we can nurture that relationship, stay top of mind, all while curating engaging content that invites customers to interact with us daily. We believe that by delivering an experience, rather than being just a place to transact, we are differentiating ourselves in the marketplace.”

But how do CMOs achieve this result? The customer's voice must carry stronger weight than before and serve as the backbone of all marketing decisions. To activate this customer-centric mindset, retail CMOs must leverage data-driven insights that more specifically define who the customer is — in terms of demographics, socio-economic status and shopping behavior — and the elements she values in the shopping experience, especially when it comes to product assortment, pricing and promotions.

Martine Reardon, chief marketing officer at Macy’s, leverages data analytics to learn more about and connect with customers:  “Our analytics have convinced us today more than ever that our customer wants to shop when, where and how he or she prefers,” says Reardon. “That means being always available — in-store, on the Internet via desktop or laptop, or on a mobile device. We've shifted to an omni-model, keeping in mind that many customers begin shopping online, then go to the store to complete their purchase; others start by shopping in store then buying from their mobile device on their couch at night. Understanding the customer journey has led us to rapidly evolve right along with shoppers, to take risks calculated to continue our momentum and drive growth.”

Aylward adds, "The very nature of our Boundaryless retail business allows us to learn a lot about who our customer is, her preferred way to transact, what is meaningful to her, and the list goes on.  As CMO, I have to keep the team focused on not getting lost in copious amounts of data, but rather using that information to create meaning on a one-to-one basis.  As we continue to see digital sales increasing, one way we are strategically focusing our efforts is in personalization.”

It's not enough to just collect customer data. Retail CMOs must be able to translate this wealth of information into actionable insights by analyzing vast amounts of real-time data on the needs, preferences and attitudes of their target consumer groups to create a strategic plan.

For example, according to a 2015 report by Accenture, consumers today desire a personalized shopping experience.  By gathering and analyzing consumer data on personalization, CMOs will be equipped with the knowledge to create a more engaging and personalized shopping experience to ultimately improve sales and foot traffic.  

Advanced data analytics not only allow retail CMOs to make better, faster decisions, but also more accurately measure and monitor their return on investment. This leads to improved resource allocation, giving CMOs critical intelligence about how to shift funds to maximize effectiveness and impact. While CMOs at big-box retailers and other established brands may have been among the first to embrace data analytics through their loyalty programs, these types of data-driven marketing strategies are becoming increasingly prevalant among CMOs across the board, regardless of the size and scale of their company.

Ultimately, it will be the forward-looking marketing leaders with a hunger for gleaning a deeper understanding of their customers, and the initiative to act upon this knowledge, who will lead their companies to success.

Out with the old, in with the new
A major challenge lingering inside many retail organizations that hamper customer-centric marketing strategies: departmental silos. Successful marketing leaders must be able to break down organizational silos, inspire cross-department collaboration and gain “buy-in” from leaders across the organization to affect the necessary change — both cross-functionally and geographically — required for a customer-centric mindset. These leaders must be viewed as trusted business partners with the knowledge and experience to guide the organization through a continuous evolution. It demands a compelling vision, commitment, honesty and superior communication skills.

“It's critical to nourish a level of mutual respect,” says Reardon. “If people are going to listen to you, it can’t be one way. This is especially true for people in positions of significant responsibility — you have to be mindful of what others are thinking and aware of the human touch points — it’s not one size fits all.”

In this expanded role, retail CMOs must be adept at engaging both their left brain, to glean actionable insights from data and analytics, as well as their right brain, to develop creative approaches to complex problems. To keep pace with shifting consumer preferences and shopping behaviors requires that leaders have an innate curiosity and innovative capabilities to foster new and creative ways to connect more deeply with consumers.

An equally critical skill for successful CMOs is managing the bottom line in this evolving environment, as CEOs and corporate boards scrutinize marketing activities with unprecedented analytical intensity. Retail CMOs must have the courage and expertise to execute a project based on gut instinct when faced with incomplete data and drive it to the finish. They must also have the follow-through to assess results and tailor their strategy, as necessary, moving forward.

So, what's next?
The speed of change will only intensify going forward. To stay one step ahead of the competition, customer-centricity will continue to gain importance as a key facet underlying retail CMOs’ marketing strategies. Customers, and the technologies with which they choose to engage, will continue to transform the retail industry, and CMOs must adapt quickly to gain market share.

With change and uncertainty looming large, one of the most crucial skills separating leaders from laggards is learning agility, or the ability to draw from past experience to navigate the uncharted waters of tomorrow’s retail industry. Constructing and motivating energetic and passionate teams, as well as building bridges between organizational silos to affect real change, will differentiate the outstanding CMOs.   

Aylward concludes, “The world of marketing is so diverse and more complex than it’s ever been — and I don’t see that slowing down any time soon.  For me, that’s what makes it so exciting.  While I certainly try to stay current, I understand the importance of hiring a team of experts that specialize in the nuances of today’s ever-expanding, ever-changing world of marketing.” 

Caren Fleit is a Senior Client Partner and Leader of Korn Ferry’s Global Marketing Center of Expertise who specializes in senior-level executive search for marketing-driven and customer-centric companies, with a focus on brand-oriented retail and multi-channel consumer goods and services businesses, and the B-to-B companies that partner with them.

Denise Kramp is Senior Client Partner and Leader of Korn Ferry's North American Retail Sector. Ms. Kramp partners with global retail and consumer companies to recruit board level executives and build high performing senior teams. Her functional expertise is in merchandising, marketing, international expansion, and operations, and she is actively involved in the retail, wholesale, and direct-to-consumer businesses.