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Marketing, IT Form Tech Tag Team
Retailers’ marketing and IT departments are coming together to take advantage of digital marketing opportunities
Michael Garry
June 3, 2013
15 Min Read
Chief marketing officers and chief information officers have traditionally played fairly distinct roles at retailers, but that distinction is beginning to blur with the explosion of digital technologies.
For one thing, CMOs are gaining greater influence over IT investments. Gartner, the research firm in Stamford, Conn., went so far as to say last year that “by 2017, the CMO will spend more on IT than the CIO.”
There is also the growing recognition that CMOs and CIOs, while something of an odd couple, ensconced in their respective silos, need each other to maximize the potential of digital technologies. IBM, Armonk, N.Y., which conducted a survey of the marketing industry last year, observed that “the chief marketing officers and chief information officers must join forces in order to connect with today’s consumers across new channels including mobile devices and social networks.”
Citi Research, New York, came to the same conclusion in January in its “2013 Retail Technology Deep Dive” report, declaring that “the line between marketing and IT will continue to disintegrate as the overlap between the two functions grows. We also believe the most successful retailers will focus on how to coordinate and even merge these departments, despite [their] often having reductive and stereotypical views of each other.”
Thus, in a kind of role reversal, marketing is becoming more technology-driven, and IT more marketing-driven. “The IT department is much more fluent in speaking ‘marketing,’” said consultant Gary Hawkins, former owner of Green Hills, Syracuse, N.Y., a one-store independent, and now head of CART (Center for Advancing Retail & Technology), Skaneateles, N.Y.
In many ways this is a win-win scenario for CMOs and CIOs. On the one hand, marketers gain by enhancing their understanding of customers and developing more effective offers with the new technology, and on the other CIOs gain because that marketing need “is driving the business case for technology,” noted Ellen Dixon, senior vice president of marketing for Symphony EYC, Palo Alto, Calif., which provides applications supporting omni-channel retailing.
The technology available to marketers begins with data — or big data as it is now called, comprising information gleaned from loyalty, web, social and mobile sources. The data is converted with analytics to messages that can be sent to shoppers via email and to smartphones and tablets wherever they are. The multitude of social media channels through which retailers and brands can connect with shoppers demand more marketing resources, often tied to technology requirements. And marketing is helping drive technology investments in-store, including interactive digital signage and wireless tracking/communication networks, “to influence the shopper in the store,” noted Hawkins.
Efforts to harness the torrential flow of big data are more frequently being initiated by marketers, according to a report released in April by Brick Meets Click, Barrington, Ill. Asked which divisions are sponsoring big data projects, 49% of respondents to a Brick Meets Click survey said marketing, followed by merchandising (16%) and IT and operations (both at 11%).
Marketers’ interest in big data — and the insights it provides about consumers — stems from a need to find more revenue, said Bill Bishop, chief architect, Brick Meets Click, and chairman, Willard Bishop. “We know from loyalty work that one of the easiest ways to generate more revenue is to sell more to your own customers,” he said. To that end, the personalization resulting from big data “increases relevance, which breaks through the clutter and should result in more buying.”
Passive to Active for Sprouts, CVS
In the grocery industry, marketing and merchandising executives have usually been passive users of technology, adapting to the limitations of systems and databases, noted Mark Heckman, president of Mark Heckman Consulting and a former vice president of marketing for Marsh Supermarkets, Indianapolis. “But today, thanks to the evolution of the CIO position, the needs of marketing, merchandising and even advertising are now in the conversation at the strategic level.”
One food retailer that has taken this approach to heart is Sprouts Farmers Market, Phoenix, which in January named CIO Steve Black to the dual role of chief information and marketing officer. On his LinkedIn page Black wrote that the combined role came with “the emergence of social/mobile/cloud technologies” and would support “blending together new technologies and new marketing tools to lead the teams that will make it easier to shop and get information where you are and on what device you use.”
Some retailers are appointing chief digital officers to straddle the IT and marketing functions. For example, in February, CVS Caremark, Woonsocket, R.I., named Brian Tilzer senior vice president and chief digital officer.
But most retailers still maintain distinct CMO and CIO functions, though they see the relationship evolving. “The old relationship of marketing to IT was ‘My Mac isn’t working today,’ or ‘My phone line is down,’” said Ron Cook, vice president, director of marketing, for Niemann Foods, Quincy, Ill., a family-owned retailer that operates 46 supermarkets, mostly under the County Market banner. “Today, it’s a whole different relationship. We have to understand each other’s future needs more. We stay in contact all the time.”
Cook’s needs increasingly have to do with harnessing customer data and digital channels, such as email, mobile and Facebook, to communicate with consumers on a more personalized basis. He, like many grocers, is transitioning from printed circulars to Web-based ads and graphical mobile offers. “It’s all about communication,” he said. “Here’s the traditional way and how is it going to change in the next five to 10 years and what resources apply?”
Cook admits that as a retailing veteran he’s somewhat taken aback. “I’ve spent 38 years in the [grocery] business, almost 30 in marketing,” he said. “I’ve seen a lot of changes, but nothing more than what I’m seeing today.”
His counterpart at Niemann, Larry Schaffer, director of information technology, is responsible for the infrastructure that supports the company’s growing digital platform. In a recent project making digital coupons available on the web (my countymarket.com) and downloadable to loyalty cards, Cook and Schaffer were “joined at the hip,” Schaffer said. “They want to do digital coupons and need help on how to get there. We help oversee the design and interactivity to make sure it all works together.”
Overall, Niemann’s IT department is “the keeper of all data and systems, making sure that from a design and architectural standpoint all these systems can interact with each other,” said Schaffer. “The marketing people don’t necessarily understand — or need to understand — how it all works.”
Sometimes Schaffer identifies third-party services for digital marketing programs, such as MyWebGrocer to host the website, and VRMS to handle digital coupons and the loyalty program, as well as companies to manage mobile text messages and in-store messages on screens. Cook believes those services will eventually migrate to being managed in-house.
But several observers noted that third-party services and cloud-based software-as-a-service (SaaS) applications, which are poised for growth, facilitate the marketer’s transition to digital technology. For retailers with fewer than 300 stores, the SaaS model may have greater appeal since it represents more “digestible” investments than costly in-house implementations, said consultant Heckman.
“I am absolutely seeing a significant trend towards using software-as-a-service or hosted solutions rather than in-house implementations,” said Hawkins. “Retailers typically are lean operations and simply do not have the resources and bandwidth to bring a growing number of increasingly sophisticated solutions in-house and be able to manage them.”
Still, some sources believe that for sensitive consumer-related data applications, retailers continue to be wary of letting them out of their control.
The convergence of IT with marketing is also extending to other business areas. Kevin Stadler, global head of customer engagement for Symphony EYC, observed that marketing-driven IT initiatives correlate to participation from merchandising and fulfillment sides of the retail organization, in order to ensure that all of the digitally marketed products are available at the store or online. “Omni-channel marketing and technology coming together is actually enhancing total execution,” he said.
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The applicability of digital applications to supply chain operations management and retail efficiencies was emphasized by John Keeley, senior vice president, business technology systems & services, Bozzuto’s, a wholesaler in Cheshire, Conn. “This has proven to be successful for us to better manage our business and communicate real time to our [retail] customers.”
Bishop observed that other technology-driven methods for increasing demand, such as reducing out-of-stocks, can result in additional revenue, perhaps more than personalization. And here, too, non-IT executives are important players. “In the companies I work with, the executives moving things forward are tech-savvy, but not IT people,” he said.
Sobeys, Stellarton, Nova Scotia, is a highly customer-focused company that has connected IT to marketing and other business functions via a business process optimization team (also called the business technology center) that serves as a conduit to the IT department, and reports to CIO Clinton Keay. Most of the members of the team “are business people with an IT background,” he said. “They are facilitators supporting the business requirements.” In addition, Sobeys has subject matter experts who oversee implementation of technology in stores and report to the business process optimization team.
Digital Strategy Team at Niemann
To facilitate its marketing-IT relationship, late last year Niemann launched a digital strategy team — digital having been identified as one of the company’s top 10 initiatives — consisting of Cook, Schaffer, other marketers as well as representatives of operations and merchandising; one if its members is the digital marketing manager, a position created two years ago that reports to Cook. The digital strategy team, which meets monthly, provides key findings and recommendations to Niemann’s executive committee, which decides on the allocation of resources to marketing and IT.
Cook acknowledges that he, like his peers at other food retailers, is trying to figure out how to gain resources to support new digital marketing initiatives. “The bucket didn’t grow overnight with digital marketing dollars,” he said. “Larry and I have to be creative about how we support this with today’s budget.”
Ron Cook
The software and hardware behind digital IT initiatives are funded by Niemann’s IT budget while the promotional dollars supporting those programs come from the marketing budget. Cook acknowledges that he may “push IT a little bit,” noting that “If I think we need to find room in the budget, then that forces them to find a way to make it work.”
Schaffer said that about 10% of Niemann’s capital expenditures budget is devoted to technology.
At the same time, Cook tries to move promotional dollars in his budget from traditional marketing channels to support social and digital initiatives. But it’s a difficult transition for a grocer in the Midwest where shopping patterns still favor traditional print communication over digital avenues. “We still have to support our primary consumer communications,” he noted. “The numbers are slowly transitioning, but we’re years away before the balance tips.”
Another challenge facing Niemann as a relatively small operator is that digital coupons tend to get sucked up by larger retailers and their consumers. “Vendors will throw out 100,000 offers and when they’re gone, they’re gone,” said Cook, who sees greater value in digital private-label coupons. Still, Niemann decided to launch online downloadable coupons recently to make sure the company is ready for the expected growth in this area.
An example of Cook’s increasing involvement in technology is his role in overseeing and allocating resources for Niemann’s participation in the National Grocer Association’s “Innovation Center,” done in association with Hawkins’ CART; to support the center, independent retailers like Niemann are allowing their stores to serve as test labs for new technology.
Niemann is currently testing technology from three vendors: Personiphi, Skaneateles, N.Y.; Birdzi, Iselin, N.J.; and PAR Technology, New Hartford, N.Y.
The aim of the Personiphi pilot at Niemann’s stores and other retailers is to aggregate loyalty card transaction data from multiple independents that can be shared with CPG vendors. Niemann’s Birdzi pilot involves installing a grid of wireless access points that can anonymously track a shopper’s GPS-enabled mobile phone throughout the store, potentially sending them targeted offers.
These projects also involve store operations and food safety people, who report to Cook, who updates the executive committee. The multi-department participation demonstrates that it is not just marketing but other functions whose jobs are evolving with the growth of technology.
Buyers, for example, play a key role in asking vendors whether they have a digital strategy and support digital promotions beyond traditional print. “We’ve been engaged at a new level the last six months trying to make sure we’re taking advantage of all resources available to us from vendors,” said Cook.
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Similarly store operations, as another member of the company’s digital strategy team, communicates to store managers about the digital changes that are coming and how store fulfillment will be affected.
Cook himself has been undergoing a change in how he views digital marketing – from a traditional mindset demanding to see a monetizing effect to a more expansive approach that embraces the brand-enhancing effect of a Facebook presence, blogs or online videos. He now finds himself — along with Schaffer — imparting that philosophy as a digital evangelist to the company’s executive committee. “We have to understand that while there will be a few sales opportunities in digital, they will not always be there,” he said. “But it is where the consumer is going for information so we have to be there.”
Cook noted that he got his start as a proponent of marketing technology with Niemann’s loyalty program, which also “doesn’t always have accountability,” he said. “We stuck with loyalty because it’s important. We’re doing the same with digital today.”
About a year ago Cook went through an exercise with his marketing team about the connection between traditional and digital marketing, writing a list of traditional methods on the left side of a white board and a list of digital approaches on the left, with the object being to conduct a fall harvest sale. “It doesn’t mean that the left side goes away,” he said. “It means that the traditional marketer talks to the digital marketer and they’re working together.”
Work in Progress at Remke
For many food retailers, the convergence of marketing and IT, however laudable, remains at best a work in progress as CMOs and CIOs jockey over budgets, ownership and governance. Marketing has long perceived IT as being focused mainly on cost takeout, risk management and process improvement as opposed to marketing’s interest in new business growth, noted Gartner. In IBM’s 2012 survey, 60% of marketers pointed to their lack of alignment with their company’s IT department as the biggest obstacle to reaching consumers.
“These things take a lot of cultural change and change management to have groups in alignment,” said Diana McHenry, director of global retail product marketing for SAS, Cary, N.C., a provider of customer analytics, adding that the grocery industry is still “a mixed bag” when it comes to CMO/IT collaboration.
Some grocery marketers are still struggling to wade through the myriad digital systems presented to them. For example, Pat Iasillo, director of customer relationship marketing for Remke Markets, Erlanger, Ky., is in the process of evaluating various mobile offerings with the help of Remke’s CIO Joe Walter. “We are constantly investigating what path to take but it’s hard because there’s so much out there,” Iasillo said. He thinks about what app he, as a consumer, would like to use to make the shopping experience easier, but he hasn’t seen that yet in the marketplace.
And as attractive as digital technology is, it still lacks the coverage offered by traditional print and broadcast media. Moreover, many retailers have yet to figure out how to convert digital from the “push” approach used by mass media to the “pull” method of enticing shoppers to engage with promotions, observed Bishop.
Another concern as marketers figure out how to use data and digital marketing is that they overlook security and privacy issues — areas where the CIO has to take over. Even in companies where marketing and IT don’t work together, IT is becoming more involved with marketing around privacy and customer data issues, noted Ellen McLellan, vice president, marketing strategies for Gartner.
Sidebar: The Vendors' Perspective
Technology vendors queried by SN generally concur with the notion that the marketing side of retailers is becoming more involved with technology.
When approaching retailers about customer analytics, Lyle Walker, vice president, customer analytics & insights, Manthan Systems, Scottsdale, Ariz., said his No. 1 audience is marketing, followed by merchandising and IT. Marketing ultimately gets IT involved, he noted, adding that except for relatively small expenditures, marketing doesn’t own the technology budget.
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“Mobile and big data have turned the marketing spend into a more technological spend,” said Kevin Stadler, global head of customer engagement for Symphony EYC. This comes from the IT budget, in which marketing projects “have been pushed to the top of the list.”
In an upcoming meeting with a grocery company, Stadler will meet with executives from digital marketing and IT. “That’s quite unusual but we’re seeing more and more of that. These are joint initiatives and marketing is part of the team.”
At larger food retailers, Diana McHenry, director of global retail product marketing for SAS, Cary, N.C., a provider of customer analytics software, is seeing chief marketing officers approaching SAS individually “to understand the customer better.”
IT spending is coming from both the business side and the IT department, she added.
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