TRANSFORMING THE RETAIL CMO THROUGH DATA-DRIVEN MARKETING

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1 TRANSFORMING THE RETAIL CMO THROUGH DATA-DRIVEN MARKETING 3 Steps To Using Analytics To Connect Strategy And Execution Across Customer Centric Organizations Today s retailers are in the midst of a sea-change. About a decade ago, the retail industry experienced a seismic shift from brick-and-mortar shopping to online purchases. This adoption of digital technologies has transformed buyer behaviors we are entering an age when consumers, who never knew life without the Internet, are coming of age. It s time for retailers to makes some serious changes. A RETAIL TOUCHPOINTS WHITE PAPER

2 The volume of data currently generated will grow by 40% annually. McKinsey Global Institute As a starting point, retailers must be positioned to introduce datadriven strategies throughout their businesses, from new technologies for optimizing advertising and promotions to draw store traffic, to engaging consumers beyond the point of sale. Retail CMOs must listen to customers in new and innovative ways. To accomplish this, they need to have data from all channels at their fingertips connected with the appropriate blueprint. That task can feel a bit overwhelming. According to a 2011 study by the McKinsey Global Institute, in this brave new world of exploding data, companies are capturing trillions of bytes of information about their customers, suppliers and operations through digital systems like mobile phones and web sites. To put that fact in perspective, retail giant Walmart collects and stores 10 times more data on customer transactions and other parts of its operation than is housed in the entire Library of Congress, according to the same report. It is no wonder that McKinsey estimates a 40% projected annual growth in the volume of data generated. Now the question is just how do retailers, and specifically retail marketers, make sense of all of this data to drive competitive differentiation to the next generation of consumers? CMO REDUX It s this data deluge that s redefining the role of today s CMO. It s this same data deluge that also has CMOs looking for lifeboats. CMOs for betterperforming companies, though, have identified strategies that are enabling them to gain significant competitive advantage. Thanks to vast amounts of stored data and highly sophisticated predictive analytics tools, CMOs now face the opportunity of a lifetime to parlay an unprecedented wealth of data into business-impacting decisions and customer-centric marketing campaigns across all relevant retail channels. A RETAIL TOUCHPOINTS WHITE PAPER

3 Big Data could help U.S. retailers boost margins by 60%. McKinsey Global Institute THE 4 VS OF BIG DATA VOLUME: the amount of data being worked with VARIETY: the number of different sources and data types VELOCITY: the speed at which it changes, which is very fast VALUE: the ability of an organization to process and leverage machinederived insights Source: a-conversation-on-the-role-of-big-data-in-marketin.html Today s Chief Marketing Officer can now be considered a Chief Customer Officer, charged with the task of harnessing the power of analytics and Big Data. But creating a data-driven marketing strategy presents specific challenges. For starters, many organizations are drowning in their own data. Cutting through the clutter for a clear picture requires an aggressive stance. CMOs need to access the right data at the right time, strategize to meet the expectations of empowered shoppers, integrate data and mine insights at record speed, demand architecture support from IT whiz kids and be in relentless pursuit of campaign execution efficiency. It can t be stressed enough that CMOs must drive the need for a customercentric organization and partner with IT to enable it. It doesn t mean that CMOs have to be tech whiz kids, but rather they need to be very clear about what their business requirements are, understand budget requirements to get where they need to go and have clear executive leadership support across the enterprise. Becoming a data-driven marketing organization where the customer is at the center of your business is not something that marketing can take on independently. It is a strategic direction requiring retail leadership commitment. This commitment requires equipping your IT department to support both current and future state business requirements for a customercentric organization. The rewards, however, of creating a customer-centric organization through actionable intelligence are plentiful. The first step is discovering and managing Big Data. Defined, Big Data describes sets of data that are so large and complex that they become awkward to work with using onhand database management tools. Some difficulties with Big Data include data capture, storage, search, sharing, analysis and visualization. McKinsey revealed that Big Data could help U.S. retailers boost margins by 60%. But that s not all. By harnessing the power of analytics and Big Data, a CMO can establish him- or herself as a guiding leader in an organization one who not only anticipates a customer s buying preferences and habits, but also actually thinks like a customer. A RETAIL TOUCHPOINTS WHITE PAPER

4 As CMOs think about Big Data, they also need to think about the expertise required to unleash the power of these new analytics. THE 3 STEPS TO UNCOVERING CUSTOMER SECRETS Before we look at technology, we have to remember that marketing is still about people. Marketing needs more analysis-driven decision makers who are digital natives and intuitively understand data. There are new roles in marketing for data scientists, marketing technologists and data mavens; as CMOs think about Big Data, they also need to think about the expertise required to unleash the power of these new analytics. Forrester reports that as many as 45% of Big Data initiatives will be driven by marketing departments. Fortunately, there are tried-andtested steps for CMOs to create a data-driven marketing strategy. These include: 3 STEPS TO DATA-DRIVEN MARKETING SUCCESS 1. INTEGRATE AND UNDERSTAND data across multiple commercial channels or touch points. 2. ANALYZE AND DISCOVER the value and meaning of data and learn the right lessons. 3. Then it s show time! ACT AND OPTIMIZE marketing operations for excellence. This white paper will demonstrate what each of these steps entails, and how these strategies can help a CMO create a truly data-driven marketing strategy. A RETAIL TOUCHPOINTS WHITE PAPER

5 Capturing and storing data cost 1/6th the amount in 2011 compared to IDC STEP 1 INTEGRATE AND UNDERSTAND DATA ACROSS MULTIPLE COMMERCIAL CHANNELS OR TOUCH POINTS The statistics are staggering: In 2011 alone, the world created 1.8 zettabytes of data the equivalent to every U.S. citizen writing 3 tweets per minute for 26,976 years according to the fifth annual IDC Digital Universe study. And by 2020 the world will generate 50 times that amount of information. It s no surprise companies are inundated with data. U.S. employees are adopting data-centric devices such as smartphones and tablet PCs in record numbers, creating a trail of digital exhaust for smart marketers to track. What s more, as people interact with new data sources more now than ever before, companies are getting better at storing vast amounts of information. Thanks to deduplication, compression and analysis tools, capturing and storing data cost one-sixth the amount in 2011 compared to 2005, reported IDC in its June 2011 study titled: Extracting Value From Chaos. The challenge for today s CMOs, however, is identifying all these available sources of data and integrating them into a comprehensive, 360-degree view of the customer. The first step entails taking an in-depth inventory of an organization s environment on two fronts. The first is an understanding of all consumer interaction points (such as stores, web site, , social media and mobile channels). A RETAIL TOUCHPOINTS WHITE PAPER

6 Analytic tools, monitoring solutions, application builds, customer relationship management systems, databases they must all be documented as key contributors to an organization s digital treasure trove. Next, the organization needs to understand where and how valuable consumer data is managed and (sometimes) captured within the organization. One of the key challenges in today s environment is that with the proliferation of new channels comes multiple vendor suppliers with data external to the retailers environment. Such critical customer insights sit outside of the four walls of the organization and tend to form silos whether internal or external to the organization. Unfortunately, this siloed infrastructure is costly to build and maintain, and makes it challenging for CMOs to mine data and glean accurate insights. To start to move to an infrastructure where all data points are flowing together, cleansed and properly orchestrated, an organization must first investigate its available assets. Analytic tools, monitoring solutions, applications, customer relationship management systems, databases they must all be documented as key contributors to an organization s digital treasure trove. From here you can start to look at what you have and what you need to create an infrastructure to support these disparate reserves of data. By tightly integrating data silos into a next-generation infrastructure, a company can flag substantive customers across channels, apply data cleansing and create a single, complete view of its customers. AN ANALYTICS GUMSHOE The path to agile analytics doesn t end there, though. Next, a CMO must determine what key business questions to ask of an organization s data. Are you curious to discover conversion rates, ROI, member count increases, buyer churn or monthly downloads? Only by asking the right business questions can an organization test the validity of a truly data-driven marketing campaign. For example, how swiftly did a web site redesign increase conversion rates by 3%? Or rather, by what percent did placing dark-colored cereal boxes on the bottom of a grocery shelf result in increased basket size? By asking tough questions of the data, and getting the answers to long-held queries, smart marketers can once-and-for-all discover what s been missing from their data, and how to gain a real competitive edge in today s global marketplace. A RETAIL TOUCHPOINTS WHITE PAPER

7 Armed with knowledge of which potent products lead to actual transactions Cabela's can now leverage and optimize this information as part of its data-driven marketing campaign across multiple channels. Jeff Tanner, Baylor University STEP 2 ANALYZE AND DISCOVER THE VALUE AND MEANING OF DATA AND LEARN THE RIGHT LESSONS Recognizing data assets, knowing how to integrate silos of information and figuring out what to divine from data including marketing and social media are only the preliminary steps in establishing a data-driven marketing strategy. CMOs also must find innovative ways to listen to (across all touch points) and gather insight from customers and test everevolving hypotheses. Who are my customers? How do they behave across channels? How best can I reach them? And how can I measure the effectiveness of my marketing efforts? CMOs are likely to have gut feelings. But testing these hypotheses is the only real way to gain unprecedented insight into your customers. Consider Cabela's, for example. Recently, the sporting goods giant worked with Jeff Tanner, an associate dean at Baylor University, to test the hypothesis that: When shopping online, if certain products are first in basket, a customer has a higher probability of consummating the transaction than abandoning the purchase altogether. To test its first in basket hypothesis, Cabela's created a predictive analytics model based on historical data and identified products, said Tanner. The result: Not only did Cabela's discover that certain products, such as its predator call items, were more likely to compel online shoppers to complete their online purchases, but also that they actually increased the overall value of a basket. Using predictive analytics, Cabela s discovered that certain products were more likely to compel online shoppers to complete their purchases. A RETAIL TOUCHPOINTS WHITE PAPER

8 With predictive analytics, companies need to build a model, test it, learn from it, and then build the next model to constantly find opportunities to improve. Jeff Tanner, Baylor University Armed with knowledge of which potent products lead to actual transactions, Tanner noted that Cabela's can now leverage and optimize this information as part of its data-driven marketing campaign across multiple channels. For example, by identifying first in basket products, Cabela's may opt to feature these finds on the home page of its web site, in the subject line of an campaign or on the cover of a catalogue in order to drive sales. It s precisely this data homerun that Tanner said can actually change a company s business model. Thousands of transaction points here and there can equal some real dollars and make a big difference in an organization s overall performance. RINSE & REPEAT But there s much more to a successful data-driven marketing strategy. It s critical that companies like Cabela's adapt their tactics in order to continue delivering value to empowered customers. With predictive analytics, companies need to build a model, test it, learn from it, and then build the next model to constantly find opportunities to improve, Tanner noted. Do CMOs risk testing and validating data to the point where there s nothing left to discover? Not a chance, according to experts. Consider this: Nearly 10 years ago, a group of astronomers turned the Hubble space telescope on what appeared to be an empty patch of sky. For 10 days, the powerful instrument soaked up all the light it could until a fascinating image emerged from that puzzle piece of cold, dark universe a treasure trove of thousands of galaxies, each with a secret to tell about how the universe came to be. By continuously testing data using sophisticated algorithms, CMOs have the opportunity to go boldly ahead of the competition, and unearth significant customer insights. A RETAIL TOUCHPOINTS WHITE PAPER

9 By 2017 the CMO will spend more money on IT than the CIO. Gartner STEP 3 IT S SHOW TIME! ACT AND OPTIMIZE MARKETING OPERATIONS FOR EXCELLENCE Establishing reliable sources of data, testing predictive models and gathering actionable insights are part and parcel of being a stellar CMO. Forrester reported that 75% of CMOs were rearranging their teams last year to keep pace with the demands of digital media. Additionally, Gartner projects that by 2017 the CMO will spend more money on IT than the CIO. Fortunately, there are ways to feed fresh customer insights into realtime, relevant and personalized marketing campaigns. Look no further than Premier Bankcard. A South Dakota-based provider of First Premier credit cards, Premier Bankcard relies on predictive analytics to flag credit card holders who are most likely to default on their payments. By populating a predictive analytics model with markers such as missed mortgage payments, credit line limit extensions and high interest charges, Premier Bankcard now knows exactly which customers to target with personalized customer services like financial counselling and debt restructuring. This customer segmentation and scoring strategy not only helps Premier Bankcard boost customer satisfaction, but also protects its bottom line by identifying delinquent accounts before they end in disaster. Marketing operations are also optimized by identifying pricing scenarios on credit cards so that they still deliver a return. A RETAIL TOUCHPOINTS WHITE PAPER

10 DSW s new mobile platform now accounts for 7% of DSW.com demand, and has helped DSW grow from 5th in market share to 2nd in two years. DSW is another example of a retailer that optimized its marketing process and operations. By collecting and parsing data on its customers, the shoe giant now markets to its customers on a cross-channel basis shoppers that are worth about twice what a single channel shopper is worth. For example, a recently launched mobile web site lets customers shop, check rewards balances and find nearby stores on handheld devices. The mobile platform now accounts for 7% of DSW.com demand. And Shoephoria, a stock locator system that lets in-store customers shop online for a product when it is unavailable in stores, is yet another data-driven tool that has helped DSW grow from fifth in market share to second in just two years. By collecting and parsing data on its customers, DSW is now able to market to its cross-channel customers who are worth 2x the value of a single-channel shopper. A RETAIL TOUCHPOINTS WHITE PAPER

11 By scoring and segmenting its customers through predictive analytics, Cabela's managed to quadruple the rate of responses to its catalogue mailings. HOW MARKETING OPPORTUNITIES IMPACT BRAND PERFORMANCE CMOs can t simply examine customer segments, flip a switch, cross their fingers and hope that a particular promotional campaign or marketing message will instantly drive revenue. Strategic concept design of a marketing campaign, especially across multiple channels, requires building a strong business case around the insights you ve gathered. What return on investment can a company expect by offering a 10% discount on the online purchase of diapers? How much more likely are the patrons of a popular restaurant chain to order dessert after reducing a menu s appetizer section? To reach this level of granularity, companies must move beyond developing a strategic concept design and leverage the right campaign management tools to set goals such as forecast numbers, business response rates, incremental revenue gains and sales objectives. Next, a CMO must identify the platforms and channels most likely to optimize marketing operations. In the case of Cabela's, which peddles its products through channels ranging from the Web to print catalogues, the retailer built a model using its customers buying history data, preferred product categories and zip codes. These customers were then scored to determine which should be snail mailed certain catalogues. By scoring and segmenting its customers through predictive analytics, Cabela's managed to quadruple the rate of responses to its catalogue mailings. A RETAIL TOUCHPOINTS WHITE PAPER

12 Detailed reports let CMOs track where every marketing dollar is being spent on a data-driven campaign, and the ROI. EMPLOYING CAMPAIGN MANAGEMENT CMOs must assign the necessary marketing resources to the various phases of a campaign. By loading these specifications into a campaign management system, CMOs can signal the status and progress of campaign milestones to all members of a marketing team. A campaign management solution also can help leaders from creative and legal departments lend their expertise to a campaign and ensure a steady workflow. Better yet, once a data-driven campaign has been launched via multiple channels, a management module encourages constant feedback across an enterprise, enabling real-time modifications. With a well-crafted campaign template in hand, and a strong business case built around it, CMOs are better poised to generate campaign reports that are jam-packed with important program performance details. Are customers buying patterns and responses to a campaign not what was expected? A properly executed customer-centered marketing campaign can tell you what performance milestones are being missed, where along the pipeline a campaign is losing its effectiveness and which customers are responding. That s good news given that CMOs once had to wait weeks before being able to evaluate a campaign s effectiveness. With real-time feedback, a marketing department can make critical improvements on the fly or shut down a campaign altogether fail fast/adapt/improve thereby saving the organization a whole lot of blood, sweat and marketing dollars. Not to mention today s fast-paced business world and the need to be able to make changes at record speed. Another perk of a properly managed and executed campaign: detailed reports let CMOs track where every marketing dollar is being spent on a data-driven campaign, and the return on this investment. That s especially critical given that CMOs must now answer to other C-level executives on marketing spend and its impact on an organization s bottom line. By being able to justify investments in social media channels and online promotions, a CMO stands a far better chance of transforming the company s perception of a marketing department from a cost center to a valuable profit center. A RETAIL TOUCHPOINTS WHITE PAPER

13 Test, test and test again. It s the only way for CMOs to find out customers true identities and how they behave across multiple channels. CONCLUSION Today s CMOs are faced with the opportunity of a lifetime: to redefine their value to an organization by successfully delivering customer-oriented solutions and services across all relevant retail touchpoints. It s a tall order but one that s possible with harnessing the power of analytics and Big Data. To be sure, today s data deluge can be overwhelming to even the most savvy and experienced marketing executive. But it s not impossible with these three strategies: 1. Evaluate and integrate data across multiple touch points. Determining sources of data, and integrating these disparate reserves into a comprehensive snapshot of a company s customer base, is a critical first step. By doing so, a CMO lays the foundation for discovering unprecedented insights. 2. Explore the meaning and value of data and learn the right lessons. Test, test and test again. It s the only way for CMOs to find out customers true identities and how they behave across multiple channels. 3. Moving it to show time! Execute, manage and optimize marketing operations for excellence. Slicing and dicing data using predictive analytics is revolutionary. But feeding these data discoveries into a well-crafted, marketing campaign is ultimately what drives revenue for a company and enhances the customer experience. With the right strategies and proper tools, never before have CMOs been so ready to dive into the minds of their customers with data-driven marketing campaigns. A RETAIL TOUCHPOINTS WHITE PAPER

14 411 State Route 17 South Suite 410 Hasbrouck Heights, NJ P: F: ABOUT RETAIL TOUCHPOINTS Retail TouchPoints is an online publishing network for retail executives, with content focused on optimizing the customer experience across all channels. The Retail TouchPoints network is comprised of a weekly newsletter, category-specific blogs, special reports, web seminars, exclusive benchmark research, and a content-rich web site featuring daily news updates and multimedia interviews at The Retail TouchPoints team also interacts with social media communities via Facebook, Twitter and LinkedIn. ABOUT TERADATA U.S. and Canada For International Callers: (937) Teradata Corporation's Office Locations: World Headquarters Innovation Drive Dayton, OH Atlanta Office Johns Creek Parkway 4th Floor Johns Creek, GA San Diego Office Via del Campo San Diego, CA Teradata Corporation is helping retailers become data driven marketers to support strategic cross channel customer & marketing insight. Teradata is the world s leading analytic data solutions company, focused on integrated data warehousing, big data analytics with its Teradata Aster solutions, and business applications. Teradata s innovative products and services deliver data integration and business insight to empower organizations to make the best decisions possible and achieve competitive advantage. Through Aprimo, a Teradata company, we help advance the productivity and performance of marketing organizations. Aprimo enables marketers to engage, lead and perform by empowering conversations on new engagement channels, enhancing internal collaboration, and improving marketing performance and accountability. Aprimo s modular and on demand Integrated Marketing Management (IMM) solutions provide a global, integrated marketing platform that can be broadly adopted across an organization, letting companies balance creativity with a data-driven approach and simplify the complexity of a rapidly changing marketing environment. Contact us at A RETAIL TOUCHPOINTS WHITE PAPER

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