Ep. 3: Digitizing Beauty Experiences
WILSON RAJ: From virtual try-on features to AI-enabled skincare analysis, the pandemic and ensuing disruption have accelerated innovative and immersive technologies. And with a further emphasis on health and wellness, beauty brands have had to evolve from a one-dimensional category to something more holistic and inclusive. Hi, I'm your host, Wilson Raj. And welcome to this episode of Reimagine Marketing, Digitizing Beauty Experiences. Welcome, everyone. And I'm really excited to introduce our guest today, Kelly Mahoney, vice president, customer marketing at Ulta Beauty. Welcome, Kelly.
KELLY MAHONEY: Thank you, Wilson. I'm happy to be here.
WILSON RAJ: As we are, too. So this is such an exciting and, I think, very interesting topic given the state of affairs, past the pandemic and now as we move to 2021 and to the future. And I know that, in your role, you've got a huge responsibility. You lead the global loyalty and CRM team. You're responsible for that journey from start to finish and the personalization across touch points. So tell me a little bit more about that role and some of the pressures that you're facing there.
KELLY MAHONEY: Yeah, absolutely. Yeah, customer marketing at Ulta Beauty is all about really engaging and connecting in as authentic way as possible with all of our members. And we're so fortunate that we have well over 32 million active members. So you're right, it's a lot to be responsible for. We manage our Ultimate Rewards program. We manage all of the customer contacts that we deliver across all of our channels with our guests.
And to your point, a big focus of our team right now is, how do you personalize every single connection?
WILSON RAJ: Right.
KELLY MAHONEY: And from, you mentioned, the pandemic, a big focus this year is just how do we re-engage? How do we welcome our customers back into our stores, online, and do it in a way that keeps them coming back to Ulta Beauty?
WILSON RAJ: Absolutely. And that will be a huge focus of our conversation today. Now also, from your experience perspective, you had a wealth of experience, but one really caught my eye here, you've had a significant number of years in the oil and gas industry, I think at least something like around 10 years or so?
KELLY MAHONEY: Yeah.
WILSON RAJ: This is really interesting. So how has that industry shaped your perspective on what you're doing now with Ulta Beauty?
KELLY MAHONEY: Yeah. I always like to say BP was my home, so to speak. It's really where I grew up, from a leadership perspective. And I look back with such fond memories of my experience in BP. I ran their loyalty, their point of sale for North America. And it was a fascinating industry. To have that challenge of trying to find ways to differentiate your brand in such a low involvement category is definitely not an easy task. But the brand itself is just so highly differentiated, a lot of it can be applied to beauty, believe it or not.
WILSON RAJ: Right.
KELLY MAHONEY: And that's what I've been doing. I mean, I agree, it's fascinating. And there's a lot I can take from my experience at BP over to Ulta Beauty.
WILSON RAJ: We'll see some of that transference in-- because, I think, the industries, while they're different, there's definitely the same challenges, in terms of reaching your brand affiliation and connecting with suppliers and consumers, so definitely interested to hear a little bit more about that.
KELLY MAHONEY: Absolutely.
WILSON RAJ: So now, getting on to this topic around this tech-infused beauty consumer, I saw a recent report by McKinsey that says-- this is pre-COVID research-- nearly 85% of all beauty product shopping took place in the brick and mortar store. And today it's closer to 60% online. And another stat from that research also showed that basically beauty sales declined as much as 30% in the first half of 2022, according to McKinsey.
So I think the health of beauty brands and the industry that you're in, Kelly, is tightly, tightly connected with the ability to try out new products or have on-site consultations with advisors. So how do you view recovery when these sorts of in-person experiences have basically fallen by the wayside?
KELLY MAHONEY: Right. Yeah. I mean, in March of 2020, we had to close our entire fleet of stores because of response to the rise of the pandemic and, obviously, the health and safety of our guests and our associates, absolutely our top priority. But that meant we became an online only retailer overnight. We had to accelerate, I would say, about two to four years of Omnichannel innovation in a matter of months.
WILSON RAJ: Wow, that's incredible.
KELLY MAHONEY: Right. And to your point, and you hit on it, in our category in particular, it's all about the art of discovery and exploration, and it's a moment of fun, and it's a moment of joy. And so what was on our minds is, how do we bridge that? How do we bridge that gap without our brick and mortar stores open? And we leaned-- we leaned into our shopping experiences on digital to deliver that.
So things like our GLAMlab-- which we were so fortunate to have invested in GLAMlab. That's our augmented reality technology that's embedded into our app-- this ended up being a key tool that we used to really amplify ways to explore. So this is things like foundation, that are typically difficult to find the right shade, we were able to bridge that in a digitized way to help support finding the right shade of foundation, as an example.
WILSON RAJ: Right.
KELLY MAHONEY: It also allows you to try and makeup. You can try on new hairstyles. And it's fun.
WILSON RAJ: That's a key point, I think, to make this-- still keep that fun, that discovery sort of DNA experience as part of it. Now, not just beauty brands, I think retailers at large because of the disruptions and so on, they had to-- they were forced to actually rethink their marketing efforts, moving from some more transaction oriented interactions, so maybe cheap deals or discounts, to something that's more value oriented. And you hit on some of those. And we're going to delve into those a bit later. We talked about experiential. Now, what's your take, as far as Ulta is concerned, from your brand perspective?
KELLY MAHONEY: Oh, absolutely. It's all about this idea of moving from transactional, functional to experiential, emotional. And we start, really, with our brand and our purpose. So about two years ago, we were on this mission already, to move our functional branding purpose. And so you might know, all things beauty all in one place is very purposeful. We will always keep that purposeful message, because there's a lot of value in having all things beauty all under one roof. That's inherent to our brand value proposition.
But about two years ago, we started to move, because we started to recognize that beauty is meaningful, and it's very, very highly emotional. And we wanted to play more in that space. So our bold new purpose is, bring the possibilities to life through the power of beauty. So we've been on this journey, and only accelerated it really, over the last 18 months or so to amplify the meaningful role that beauty plays in all of our lives.
And we believe we have the power to really influence that through our branding, kind of our North Star, and then everything we do to personalize all the different touch points across all the different channels that we're interacting with our customer.
WILSON RAJ: Kelly, what you said there is-- I think it's got huge ramifications for all brands, or in terms of their branding. And the beauty all in one place, it's not a bad thing. It's certainly valuable and functional. But I think this notion of bringing to life the beautiful possibilities, that's that aspirational, that emotional connection. I believe all the things that you do from a CX perspective definitely falls out from that. So I think that that's such a cool thing.
KELLY MAHONEY: Thank you. We're very proud of it. And we continue to invest in it. We launched our ad about two years ago. And even in the midst of the pandemic, we felt it was important to continue to lean into that, and especially as we started to note that people needed this from us. Our customers actually needed us to amplify sources of joy and light during what was dark times. So it was just kind of coincidental in some ways, that we had already been on this journey. And it allowed us to really amplify content that resonated during the pandemic and resonates now, ongoing.
WILSON RAJ: Absolutely. And I think, Kelly, here's another thing for our audiences, I think the brands, the leading brands that actually invested in marketing during this difficult time were the ones or are the ones that are continuing to be resilient. So there's no pulling back. The ability to launch such a big brand campaign in the midst of that is such a brave, and bold, and certainly, I think, a gutsy move that I think serves you well.
KELLY MAHONEY: Thank you. Thank you, very much. I mean, we had to be nimble in that moment. We had to act swiftly. We definitely had to reroute things, to ensure that we were hyper relevant in our communications during that time but without moving away from our bold purpose, which is to bring the possibilities to life through the power of beauty.
WILSON RAJ: Excellent. So this is an excellent segue here, to kind of now get into that, now, how do we merge all those things, that personalization, that brand purpose to build that loyalty. We acknowledge that consumer behaviors have changed as in-person engagement has been forced more into a digital, or maybe you could call it physically distant model. Now in your opinion, do you think this is temporary, or is it going to last? Is it-- how is this going to net out for you guys in the next couple of years?
KELLY MAHONEY: Yeah, as I mentioned earlier, we were an online only business overnight, fortunate to have the 32 million active members in our loyalty program, many of which pivoted along with us to our online shopping properties. No, the answer is, this idea of showing up where your customers want you to be, that's never going to change. Now, we are now leveling out, and we're seeing a return to brick and mortar, because it's a lot of fun to go into our stores and explore and discover. But we will always pivot where our customers need us to show up.
So our focus is still very much on delivering Omnichannel experiences, whether that be buy online, pickup in store, or whether that be even more personalization within our online. And how do we enhance that, even within our brick and mortar?
WILSON RAJ: Gotcha. And that is a key thing in terms of what's the mix, in terms of really giving the best experience and therefore, also value to the customer. Now, you said something that's really important, so that personalization now. Clearly, the type, and the intensity, and the depth of personalization that you do at Ulta requires tons of data. Now, that data has to be protected in order to not just gain trust but continue to maintain and build trust.
So you're caring for the personal well-being of your consumers of the brand, but you're also taking care of their data. So what's your philosophy in terms of building that trust to reinforce these engagements and continue building relationships with your clients?
KELLY MAHONEY: Oh yeah, definitely. Trust is paramount with our members. And I think, at Ulta we build that in a variety of ways. You hit on this idea of privacy and ensuring that the way in which we are tending to the data that we have about our guests is done with the utmost security and credibility that we could possibly deliver to our customers. So we take that very, very, very seriously.
From a marketing standpoint, at the heart of it, we talk about trust, more about authenticity. So showing up to our customers everywhere we show up with our customers, we want to show up in an authentic way. We think authenticity is really what builds trust. So how our associates are showing up to our guests in our stores by providing credible guidance, by the way in which we're communicating, understanding who we're talking to when we're personalizing, it's highly relevant. And it's delivered in channels that our customers want to see those messages. That's really what we mean when we get to trust, is showing up in an authentic way.
WILSON RAJ: Mm-hmm. And that seems, from a data perspective, there is certainly a lot of collaboration with-- as you're responsible for customer marketing, that involves such a wide swath of things right there-- CRM. There's loyalty. Now, who are the stakeholders that you connect with in the management team, broadly, to really build that trust that you just talked about?
KELLY MAHONEY: Yeah. So data is at the heart of everything that we do, from a building trust and building authenticity with our customers. And you don't do data by yourselves, for sure. So it's very much a cross-functional effort to deliver anything in a personalized way. So we partner very closely with our data and analytics team. We are almost symbiotic. As one team, they attend all of our team meetings. So they're ingrained and embedded in the customer marketing team, high focus with the partners in IT. So I have regular connects with our IT partners and our IT leadership.
But also our digital and our e-com teams are included as well. We have an agile pod that we work in. So we actually apply agile methodology to the way in which we go to market with our customers, from a marketing communications standpoint, which consists of all of those stakeholders that we just talked about, including creative, because creative is such a core component to really getting personalization.
WILSON RAJ: Oh, absolutely. Yeah.
KELLY MAHONEY: Yeah.
WILSON RAJ: I love your concept of the agile pod. I've heard different kinds of structural teams and stuff like that, but this notion of a pod, it's self-reinforcing, and, I think, Kelly, you used the word symbiotic. That is such a great word to describe collaboration. It's not just one way or one dimensional, even few dimensional. It's-- everybody gets benefit from that. And so I think it's how you've orchestrated that or externalized that from a team perspective, it is really commendable.
So just related to that, as you shift your brand, you have shifted from that transactional function to something that's more meaningful and personalized, the changes in your clients, the younger generation, that Gen Z, the millennials, how do you see them in terms of this digitizing beauty, all this orchestrated digital beauty journeys?
KELLY MAHONEY: Yeah, I see it as a must have. And I think that's probably true for every retailer out there, a must have, to be operating in a personalized way across all of your digital platforms, it's an expectation. That's how we see it. And so for us, it's license to operate. It's part of our table stakes right now.
And we are so fortunate, because we started this journey three years ago, four years ago, maybe, just getting the data right and getting the data housed in a place that allows us to scale and allows us to access the data so that we can actually activate. I think that's a mistake that many retailers have made, is that the data is there, but how do you activate it? And we're so fortunate to have the 32 million active members that we've talked about. You know, having access to first-party data is such a luxury. It's a differentiator, even, especially in the landscape that we're living in right now.
WILSON RAJ: Yes.
KELLY MAHONEY: So it's really, it's all of that that's allowing us to be able to action against highly personalized experiences in the digital landscape, to create that sort of human connection when there isn't a human.
WILSON RAJ: You know, Ulta has always been sort of in the forefront, in the category for digital innovation. We talked earlier about the virtual GLAMlab, and I know that there's a host of other very innovative immersive interfaces that you have created for your clients. Could you talk about some of them?
KELLY MAHONEY: Oh, absolutely. About 18 months ago, we created a digital innovations team. And their focus is all about in a plane, really figuring out new technologies that we think our customers will love. And one important one, outside of GLAMlab, that we talked about, but another important one is the skin analyzer. So the skin analyzer is an important one because skin is a difficult product to sell.
Makeup, you can try makeup on. And you can see whether or not that looks good, whether or not you like that. Skin's different. Skin's about problem resolution. And you don't necessarily see those results immediately. And so we figured out this tool that you can use on your mobile app, and it allows you to analyze your skin and provide you with recommendations in the moment, based on what the tool has noticed.
Maybe it notices that you have wrinkles, and we can help you with some anti wrinkling. Maybe it notices that you have some dark spots from sun damage, and it can offer you recommendations on products. So this has been a really great tool for us, where we're kind of combining a bit of play with the idea of solving a problem, and then adding personalized recommendations that are even split out based on price point, too, so going a layer deeper and trying to really get to a place that the customer, then, will convert and purchase those products.
WILSON RAJ: Right. I think, to me, what you've described, Kelly, is beyond hyper personalization, because you're right, makeup on the skin, you can certainly personalize that, but getting into individuals' skin tones, skin conditions, and then from there going from the inside out, that is a true audience of one person in the entire world. So to me, I think using things such as AI and data for that is such a cool thing.
Now, speaking of data, in your opinion, from a beauty brand perspective, are there other sources of data that has been maybe underutilized or maybe left uncaptured that could actually drive even more valuable insights?
KELLY MAHONEY: Yeah, definitely. I mean, I think we have a tremendous amount of data. So we have over 95% sales penetration, member sales penetration. So we know everything about what's going on with our members, what they're buying from us. The area that we've been focused on, and these tools like GLAMlab and skin analyzer really help us get underneath more about preferences, and browse data, and how customers are engaging with us.
Because in our business, we're not a every week purchase. We're a about three times a year, on average, type of frequency business. So the more access that we can get to that non-transactional data or that preferential data is really important to us. And that's why we've done some things like rate and reviews. And we are looking for feedback loop all the time in our personalized recommendation, to understand, are we getting it right?
I love-- and this is not an example of Ulta Beauty-- but I really love how Stitch Fix has their, it's almost gamified, way of learning about their customers' preferences. And I've found myself just waiting for a doctor appointment and running through the Stitch Fix app. We want to continue to create access to that type of data.
WILSON RAJ: Yeah, I love that example. And I think that's, I think really illustrative of not just the beauty brands but, I think, all retailers, in terms of creating those moments that stick. And it's not an opportunistic thing. It's something like, as you say, Kelly, of value. Can I make my skin more healthy and then how that linked to overall well-being.
So and I think even your brand, the new brand, beautiful possibilities, takes it from, should I say, the word skin deep to even something that's even broader, health, a lifestyle kind of thing. Are you finding that kind of reaction from your consumers?
KELLY MAHONEY: Yes, well, I would-- absolutely. I mean, beauty and wellness intersect. And we've really taken note of that. And so where we can step in and provide that guidance becomes very meaningful, very, very powerful. And that leads to what we like to call brand love. We're moving beyond the idea of just even loyalty to this concept of brand love. That's our ultimate goal, is we believe all the things that we're doing, all of the digital innovations that we've just talked about. The application of our data to create personalized experience is not to create loyalty, of course it is, but really the ultimate goal is love, an emotional connection.
WILSON RAJ: That's great. So I think this is a good point here to kind of do a little bit of crystal balling. I mean, you're already doing so many innovative things. I can't for the life of me, at least from where I'm sitting, think of like, wow, what's the next thing for beauty brands at large?
So from where you're sitting, and being right in the midst of this thing, what are some of the trends that you think are interesting or that might be more mainstream in a year, or two years, three years from now, or a business model that's changing, what's your take on that, Kelly?
KELLY MAHONEY: Yeah, I've thought a lot about this, obviously, in my role. And I know that industry-wise we've been talking about personalization for so many years, but honestly, I'm going to say it again. I think it's really about getting personalization at scale. That's what the trend is, and that's what's on the horizon. It's no longer these point-based solutions or these channel approaches to personalizing, but how do you integrate so that you're creating, in our case, a beauty journey that's personalized for the customer, wherever they are? And that's what's on the horizon. And I'm not sure we can point to any retailer that's really got that down pat, but that's certainly-- that is our focus.
WILSON RAJ: I love that, personalization at scale, certainly in the moment. And you're certainly employing all kinds of great technology, certainly AI, real time data, immersive tech, such as augmented reality, to help you do that but do so not just throwing some technology there, but I think you've got a much broader strategy in view. That was very clear from our conversation here.
KELLY MAHONEY: Well, thank you so much. It's definitely a-- takes a village. And we have an amazing team at Ulta Beauty. I couldn't be more proud to lead the customer marketing team and be a part of this amazing fast-growing brand.
WILSON RAJ: Thank you so much, Kelly. I think this is a great spot to wrap up this discussion. That's it for this week's episode of the Reimagine Marketing podcast. If you enjoyed today's show and content, be sure to head over to sas.com/experience2030 to join the conversation. You can certainly subscribe to more of the content on your favorite podcast platforms for show notes, and bonus content, and also hear previous episodes and guests. So thanks for listening. And I will see you on the next episode of the Reimagine Marketing podcast. Take care
Episode 2, Season 2: Experiential Tech: Happier Customers, Increased Profitability
JUSTIN THENG: Today's consumers not only expect a lot from brands, they also capitalize on AI, IoT, mixed reality, and other immersive and emerging tech. This puts tremendous pressure on marketing organizations to reinvent their operating models so that they can act in the moment. But if you think about today's consumer expectations, they're pretty hard to meet, and you haven't seen anything yet.
Tomorrow's level of customer experience and personalization will need to be even smarter, more immersive, and more trust enabling. The question is, are brands and consumers ready.
I'm Justin Theng. I'll be your host for today, and I'm joined by Professor Matt Kuperholz. Matt was trained as an actuary but has been practicing data science for the last 25 years, focused on AI for the last 20.
He's PWC Australia's chief data scientist and a partner in their consulting business. He was awarded by Australia's top analytics leader by their premier industry body, and one of Australia's top 100 knowledge workers by then prime Minister Malcolm Turnbull, and the Office of the Chief Scientist, and most recently, one of the global top 100 tech innovators. Matt, it's great to have you with us.
MATT KUPERHOLZ: Thanks, Justin. Thanks for having me.
JUSTIN THENG: Matt, could you for the sake of the audience, just-- I mean, I've given an outline. You've obviously had an illustrious career. Can you give us a bit about your journey to this point?
MATT KUPERHOLZ: Sure thing. I guess it started back in 1972 when I was born, at the same time as the first microprocessor was born on a chip from Intel. I don't think that was a coincidence. Instead of sleeping with teddy bears and stuffed toys, I slept with toasters and irons. I've always been a massive fiend for technology. I still remember when my relationship with computers started in the late 70s and has been a continuous love affair ever since.
As a child, when you're good at maths and you want to get into business, there's not too much choice back in the day. So, I became an actuary. But I also studied computer science, and I was looking for a way to bring those two disciplines-- or actually, three disciplines. That's maths, computer science, and complex problem solving-- together, which I guess is what we call data science nowadays. But when I was put through University by an actuarial firm in the early 90s, we didn't know it as data science.
It's just the direction my career took first with the actuarial firm. Then jumping into an AI startup company that I was a general manager for. I had my own web development company. And I then started my own consulting firm in data science after we sold the AI firm, but quickly found myself with one main client, that being Deloitte, and started a great adventure with them, building an analytics practice in the early 2000s around the world.
I've since left Deloitte where I joined PWC as a partner and have been on a similar journey with them. Obviously, the market has changed substantially. I still remember Justin talking to clients in the early 2000s and saying, this business problem you're having, it's quite possible we can solve this by using the data that you've collected in your operations. Could you imagine when that was a completely novel idea and no one was thinking that way, to then everyone thinking that way, but no one being able to do it?
Like shooting fish in a barrel, the golden age of data science consulting, to nowadays where it's taken as a given that we are collecting and working with ever-growing-- in fact, exponentially growing-- amounts of data. And our customers and citizens expect that we're using the evidence at our disposal to best service them. So that's kind of the journey. Lots of technology, lots of nerding out. It's been great.
JUSTIN THENG: Yeah, you've been an entrepreneur as well as a consultant. And it's interesting that you said you've been on this journey for 20 years. I wish the listeners could see this. There's a visual behind you. You've actually got motherboards-- it looks like motherboards-- in the background just up on the beams.
MATT KUPERHOLZ: Yeah, I do a little bit of art in my spare time. I love the creativity merging with technology. Incredible global events like Burning Man make me very excited where you see technology as art, and I think that's one of our crowning achievements is the miniaturization that goes into electronic computing, and I find it quite beautiful.
JUSTIN THENG: Incredible. Matt, are you reading any books or blogs at the moment? How do you stay up to date with such a fast-moving industry?
MATT KUPERHOLZ: Yeah, look, I usually have a couple of books on the go. I have a bunch of websites I read regularly. It's interesting with AI. The field is growing so incredibly quickly. I think I'm at the cusp of-- well, certainly I don't have my arms around all of the detail, but I just feel like I've got my arms around some rough idea of everything that's going on. But with its exponential growth, it's becoming even more challenging to do that.
However, books, I guess pretty different. I'm a big fan of science fiction, so I'm reading a book called "Cryptonomicon" By Neil Stephenson. My girlfriend's been a practicing Buddhist for over 10 years, and I've just started chanting with her, so I'm reading an introductory book called "The Buddha in Your Mirror." and I've been playing a bunch of chess through COVID and lock down, so I'm rereading a classic called "Lasker's Manual for Chess."
JUSTIN THENG: Incredible.
MATT KUPERHOLZ: And also, I read every year "How to Win Friends and Influence People" from Carnegie—
JUSTIN THENG: Dale Carnegie.
MATT KUPERHOLZ: Dale Carnegie.
JUSTIN THENG: Yeah, yeah. Good old Dale.
MATT KUPERHOLZ: It's a good reminder.
JUSTIN THENG: I saw a super chessboard the other day. Somebody posted it in one of the Discord channels that I'm in, and it's four rows of all the pieces. So black has 4 kings. White has 4 kings with 4 queens. And you have to checkmate all 4. That'd be incredible to play.
MATT KUPERHOLZ: Wow. Yeah, there's actually been this movement of chess computing getting so strong that instead you rearrange the pieces or try novel arrangements of boards to mix things up a bit.
JUSTIN THENG: Now that's actually quite an unintentional but quite a good analogy for what it's like to be in marketing at the moment, or even CX for that matter. Anywhere where you're touching customer data there are so many moving pieces, and the competition always seems to be talking about the best moves that they've got. And but in reality, when I speak to CX leaders and CMOs, the general feeling is that wow. We're really early on in the curve. To me though, it's a really exciting time to be a leader in marketing. What are your thoughts on that, Matt?
MATT KUPERHOLZ: Look, I agree. A theme that you'll see me coming back to quite a few times in this chat, Justin, is that of the exponential times we live in, which is not my idea. It comes from Singularity University, and Ray Kurzweil and Peter Diamandis, two futurists that run it. And just quickly, the background to that is acknowledging that computing power is growing exponentially. We know that with Moore's law. But also that many other things, the storage of data, the communications, AI, a whole bunch of technologies are actually exponential in terms of their performance per dollar.
And their third point is that all of these exponential technologies support and reinforce each other. So when you're able to interact with the real world through IoT which is exponential, and automation which is exponential, and gather exponential amounts of data and crunch it using exponential computing power, and then find the hidden patterns with exponential AI, and then service individuals through a combination of all these technologies, it very quickly means the ability to market, or more importantly, relate, with individuals automatically in a cluster of one that understands their needs, aims, wants, and desires, is incredibly powerful.
And it actually brings that kind of win-win situation. With exponential technology you don't have to be robbing Peter to pay Paul, but rather you can actually have happier customers and a more profitable company. And I think that's the trend that we're on. Although when you sort through all the hype, I would propose, especially in Australia, that marketers are underutilizing the technology at their disposal to really take advantage of what is possible in a data driven world with regard to servicing customers.
JUSTIN THENG: And Matt, with so much exponential opportunity, why do you think it is that marketers are underutilizing the technology at their disposal?
MATT KUPERHOLZ: So again, Justin, it's really complex to sort through all the hype. The skills of doing this are in high demand. It's usually not a single technology out of the box that will gather all of the data, but rather an experienced data science led approach that says, in your organization you have latent assets in your data. Those assets are your operational data sets about the customers or the market that you're facing into, the customers that you have, the customers that you've lost, every marketing campaign you've run, every physical point of presence or virtual point of presence, every product you've sold, every price you've changed, every product your competitors sold, and marketed, and discounted in the process they've offered.
And then you've got geospatial and temporal overlays as well as the opportunity to enrich with social data and external data. We're talking about a very complex environment. The most successful marketing analytics campaign I've ever run, which was still many, many years ago, has not been bettered in terms of the response and the value delivered was for a 200-year-old North American bank. It was the most successful campaign they'd ever run.
We used AI to consider 17,000 metrics for each of their 10 million customers. So, to actually find the right offer for the right customer, we were simultaneously considering 17,000 different things about them, which is an incredibly high dimensional data set. And it's challenging to find the signal in the noise in such a large number of dimensions, but my personal belief evidenced through years of practice is that generally the more data the better. The more I know about you and are able to compare what I know about you with someone else, the better.
Which is why also in a digital world, the ability to experiment and test many, many different permutations and combinations on subsets of our customer base and learn from what succeeds with different customers and double down, essentially A/B testing across the whole alphabet, is another way to generate and work with data and technology, but something that's also relatively nascent in most companies marketing operations.
JUSTIN THENG: With 17,000 data points I think it was that you said, how does a human trust that the outcomes, the decisions that are being made by the AI, are appropriate, that maybe the model that was used is appropriate? How do you go about that?
MATT KUPERHOLZ: So, let's not talk yet about my latest obsession being responsible use of AI, which is appropriately governed, ethically sound, and the performance is unbiased, fair, transparent, explainable, robust, and secure. Let's put that to one side. Imagine I have some black box, and in this case, it's an AI that has built a model looking at the interrelationship between 17,000 variables, and we're trying to predict an outcome, which is your response to a certain campaign through a certain channel.
A very old trick, and not just used with AI, is that idea of withhold testing and cross-validation. Which is if I randomly choose for my 10 million customers, 1 million customers that the model is not allowed to see when it learns. So let's say in this case, I learned from 9 million customers. And in the remaining 1 million customers, I have some known outcomes, campaigns they responded to positively or didn't respond to.
I then disguised that from the model, rewind carefully in time to what those customers looked like before that campaign, passed it across the model, see what the model thinks, and compare it to the known outcome. So, you can always use historical data, in a way, to test and validate the models you've trained on, as long as you're very careful and very scientific about avoiding something called information leakage. But essentially, to sum it up, you've got data where you know the outcome. You use that to test your model.
JUSTIN THENG: That's obviously more than just technology. That's a thinking process. How do you go about leading others, Matt, to think in this way? I mean, there is a balance, I believe, between this behavioral science gut instinct, knowing how people tick, knowing what to look for and what questions to ask. And then, like you said, the huge data sets. Now how do you go about leading a team, for example, your own, to thinking this way or thinking through a challenge?
MATT KUPERHOLZ: It's not just our team. We actually have a service now that most of our clients have analytic teams, which is uplifting their analytics maturity as well. And all of this is very technology independent, Justin. It's not about a particular approach, or piece of kit, or even data set, or industry or problem domain. The answer is, you have a standard yet flexible process, an analytics process, and we use one that's actually over 20 years old.
But whichever one you use; you'll find that the good ones all have the following in common. They don't start with an analytical problem, or a data problem, or a technology problem. They start with a very clearly defined business or societal problem. We need to know-- and you mentioned it in your question-- we need to be very clear on what the question is we're actually seeking an answer for. And then we need to be equally clear at the tail end of this whole process, and what are you going to do with the insight.
I often say, OK, so your question is, I have a problem with customer churn. I would like to know which customers are likely to leave me next. And I say, well, OK. Here is a magic wand, and this magic wand represents everything in the middle of that process. Finding the data, engineering the data, running the models, running the predictions, tuning the models, et cetera. This magic wand is now predicting with 100 percent accuracy, sensitivity, and specificity exactly which customer is going to leave you next month.
How do you bank that money, Justin? What do you do next? Then you have to realize that your question was different. Which customers am I able to save with the offers at my disposal at the right investment in terms of their potential lifetime value if saved? My question is not about who churns. My question is about profit maximization through savability. So, you realize that when I put it to you that the analytics is not the hardest part, that I will give you-- if I give you this magic wand, you still are miles away from banking the money.
You've got cultural changes. You've got marketing execution challenges. You've got possibly legal, ethical, or moral challenges. You've got staff challenges. You've got all kinds of different things that mean it's much greater than simply analytics. But nevertheless, the answer to the question is, this whole thing starts with a process of getting the question right and at the tail end knowing what you're going to do with the answer. And in the middle, there's a very structured way of thinking about taking data on a journey from the operational systems to an analytic data map, choosing the right technique, applying that technique, rigorously testing it, for example, through the cross-validation I described earlier, and then deploying and executing.
JUSTIN THENG: In your experience, what is the level of-- I want to say data capability-- of the marketing people that you talk to? What level do you think that they're at? Because I know that from a more customer analytics background or data analytics background, the leaders tend to lean more into that. But you mentioned a lot of soft skills. What do you see out there in your conversations?
MATT KUPERHOLZ: So Justin, I'm a pretty harsh judge.
JUSTIN THENG: So am I.
MATT KUPERHOLZ: I don't score many companies in the world, or governments, as making full use of the incredible value of the data at their disposal because, in fact, the value from data is unbounded. The questions you can answer when you join it together and find patterns in the right way are theoretically unbounded, and practically levels of value that are very rarely attained. The best examples of attaining them are your AI first entities. Your Googles, your Facebooks, et cetera, that are built on a data and a data mining model.
Everyone else, in my opinion, is falling short. And that includes almost every Australian company that I look at them and I say, hey, whether you are digging stuff out of the ground, putting stuff on the shelf, or moving stuff from a to b, I can find you incredible efficiency simply by looking at this great asset of your data. So, I don't score anyone as doing anywhere near their full potential. Now within that harsh criticism, I must say that marketers are even further south of there. But that's OK because it is early days. It is comparatively early days.
But on the other side of the coin, your customers are very soon going to be overwhelmingly represented by digital natives and those that have grown up expecting treatment at an individual level-- relevant treatment at an individual level. I mean, I buy something online, and then I find from the cookies with that thing I keep seeing ads for the same thing for weeks afterwards. And I'm like, what a fail is that. I've just bought that set of, in this case, electric drums for my daughter. Why are you showing me ads for electric drums? You know, that's just a Mickey Mouse example of a technology getting it completely wrong.
JUSTIN THENG: Yeah, absolutely. There's an anecdote that one of our customers shares of his. And I won't say the brand because I don't want this to become a product demo. But his wife walked into his own stores, bought an iPhone, and left the store, and was being retargeted with iPhone ads. Exactly what you just described with the electric drums, and she actually complained to him and said, I just bought an iPhone. Why are you spamming me with-- and there is a role for that real time piece there. What's something in the last 12 months, Matt, that you think might help our listeners?
Now I want you to be completely honest because I'm going to be the black sheep here first. I don't like the phrase marketing as a standalone function, quite frankly. I have always seen marketing and sales as part of the revenue generation pathway, and now customer service is also a part of that because we're looking at customer lifetime value, or average order value, cut size, that kind of thing. So, when it comes to data-- and I'll let you answer the question in a second-- but when it comes to data, I think you've touched on it a couple of times now, it's a bit overwhelming.
And I feel like marketers, one, don't have access to the real tools that others might, like in predictive data analytics fields for example. And two, I think there's this kind of, I want to say, the legacy version of marketing, which is very gut feel, very what makes people tick anecdotes, that kind of thing. And three, the upcoming generation of marketeers, if I could call them that, who are data hungry, who are consumers themselves, they don't have as much of a feel for what makes people tick.
And we saw that during COVID. When all the data became difficult to use, more and more difficult to use, and things stop working. Funnel stopped working. Facebook stopped working. Google Ads stopped working. What do you do next? So, there's that skill gap there. So, what's something in the last 12 months that you think might help our spread of listeners?
MATT KUPERHOLZ: Yeah, I'm going to give you a couple of observations I've made because I think they are ultimately exciting and heading in the right direction. The first point is that end to end view not just of your customer, but of your position in market and your entire relationship not being about revenue maximization from marketing but being profit maximization across the whole value chain. From acquisition through to retention, it's actually about a present value of the lifetime profit, not the revenue, right? Because it's a tradeoff.
And you may actually realize that you have a different relationship with the household, not just the individual, and that you should consider the individual in their business context as well as in their personal context. So, all of these are-- it's important to look wider than that, than just marketing. But instead, the whole, as you said, get the provisioning right in the first place to stop complaints in customer service.
Build a relationship where they trust you and they want to interact with you, and then your marketing is a completely different proposition. In fact, it might be pulled and pushed in a different way. So that's one idea, and I've seen that greater sort of horizontal integration. I've seen a bunch of interesting AI first contact strategies where you start to build a relationship with an always on customer service AI agent that's starting to blur the lines between marketing service and just relationship building.
I've seen some really interesting advancements in what we call privacy enhancing technologies, which means if you're organization A, and there's organization B, let's say it's a Telco and a bank, and you would both benefit from sharing data about your mutual customers, and in fact your customers would benefit as well, but there are privacy constraints and other reasons why you can't simply hand over your customer data to each other, privacy enhancing technologies, which are relatively new, allow you to get the benefits of sharing that data without actually sharing it through things like home and morphic encryption and zero based proof.
So that's an exciting development because you remember my earlier remarks about the more data the better, even when you share it between organizations, especially with the right ethics and permission from your customers, that's even better. And the final advancement, which I think is hopefully a trend that will continue and will solve many of the challenges you were talking about, Justin, which is we've seen marketing being taken more seriously as we've seen CMO's join the boardroom table. What today's companies are going to massively benefit from is CDOs and CAOs, chief analytic officers and chief data officers, being elevated to that executive level and considered part of the most senior contribution to a company's ongoing livelihood.
When you take data seriously enough to elevate it to the board level, guess what? It's going to permeate through marketing, through service, through operations, through employee wellness and safety. By recognizing its relevance and putting it up at that senior executive level-- obviously I'm biased making this observation-- but you'll see a few major Australian companies going in this direction already, we will start to see the benefits more fulsomely captured.
JUSTIN THENG: And who owns the narrative, Matt? If a CDO or CAO gets elevated to the board level, who owns the narrative of what the data is saying?
MATT KUPERHOLZ: Well, they must be in tune with the needs of their fellow board members, right? So, what are the questions that the chief strategy officer needs to answer to pull the company in the direction of its strategy and purpose? What are the questions that the chief marketing officer needs answers for? What are the questions that the chief financial officer or the chief operating officer need answers for? The chief data and analytics officer is going to furnish them with answers to those questions, and there's only four types of questions we ask in the world, and in fact, in analytics, Justin, which is broadly, what has happened.
Help me accurately report on the past. What is happening? Help me segment, classify, and understand the present. What will happen? Help me forecast the future. And what should we do about it? Help me optimize between choices of scarce resources. And any and every business and societal question can be put in one or more of those four buckets. And any amazing analyst can answer the question with data.
JUSTIN THENG: Do you know what? In that short phrase, and I know you probably saved that silver bullet until last, that answers a ton of questions. If a marketer or-- well, let's say if anyone who's looking at what's best for the customer from a lens of profitability as well as customer satisfaction, those two together, if they were to just ask these four questions. What happened? What has happened? What is happening? What's going to happen? And how can I do something about it? That's brilliant. Matt, it's not-- sorry. Were you going to say something?
MATT KUPERHOLZ: No, no. Just to agree and to reinforce that all of those questions can have hard, and reliable, and verifiable answers when the right analytic technique or techniques are applied to data that's engineered in the right way.
JUSTIN THENG: Brilliant. And that's not necessarily the head of marketing's job, but the job of the head of marketing is to ask the right questions, know where to find the answers, and know how to get the answers.
And what to do with them. Ask questions that are actionable with that magic wand. Pretend you've got the magic wand, and now show me how you're going to bank the dollars.
JUSTIN THENG: And let go of all the vanity metrics. All the stuff that doesn't matter.
MATT KUPERHOLZ: 100%.
JUSTIN THENG: Now it's not every day that I get to talk to one of Australia's top 100 knowledge workers and the global top 100 innovators, so I have to ask your views on the future as we start to wrap up. Are there any industries or developments, big picture-- you even mentioned societal questions earlier. I'm very interested in that. Are there any developments that are inspiring you about the future?
MATT KUPERHOLZ: Yeah, absolutely. These exponential technologies when pointed in the right area, and I fundamentally believe humans are good, mean that we start generating even more value from even scarcer resources. So, look at the fact that we knocked out a vaccine in under a year. Look at the fact that AlphaGo, that was originally a Go playing computer using a new form of generative adversarial networks, has now solved protein folding. So just quickly, protein folding, a notoriously difficult NP complete problem.
And if you start to solve it using AI, that means you are going to make incredible leaps forward in drug discovery and personalized medicine. So, we're going to do away with horrible things like cancer. The leaps forward we're making in environmental sciences and renewable energy now just make good commercial sense, not just good moral sense. I'm incredibly excited about those technologies and what they offer the world. AI in general, I think, is one of our crowning achievements as a society if we step up to the plate and acknowledge that it brings with it a whole new risk profile which we need to address responsibly as well. But on the whole, I think it's a very bright future for us.
JUSTIN THENG: Brilliant, and I couldn't agree with you more. And what I love about our chat today, Matt-- and thank you for sharing your insights-- what I love is that we went very technical, but at the end of the day, technical in terms of process. Or at least for some of our listeners who maybe aren't data scientist, probably were like, wow. How do I achieve all of this and how do I get my head around all of this? But I mean, as you summarized it earlier, the four steps, the four questions, I think summed it up perfectly.
But it is true that the same advances that we're seeing in our technology for marketing is actually an overflow of the advances that we're seeing more broadly. And you're right, AI is a crowning achievement. It brings with it a whole bunch of questions that we need to answer at a societal level, and we need to answer at an organizational level. We also need to answer it at a personal level. What information am I willing to give over? So that's a very fascinating topic, and probably a podcast all of its own.
MATT KUPERHOLZ: Sure. Well, I've spent the last couple of years focused on that, so I'm happy to pick that up another time, Justin.
JUSTIN THENG: Great. Thanks for joining us today. Guys, thank you for listening and joining us on Reimagine Marketing. This has been Justin Theng. I've been joined with Matt Kuperholz, and I look forward to seeing you next time.
Episode 1, Season 2: Marketing Planning: An Objective Without a Plan is Just a Dream
SPEAKER 1: Hi there, and welcome to the second season of The Reimagine Marketing Podcast. My name is Steven Hofmans, and I will be your host for this episode. In today's sessions, we'll talk about marketing planning. We will try to answer questions, like can marketing planning and agility go hand in hand? What do you do when your marketing plan ends up in bad results.
And to find an answer to these difficult questions, I have invited the lovely Sandy Kirchhoff. Sandy holds a master of science in marketing and has held different marketing positions at Office Depot, from retention manager to head of campaigns and, today, senior manager of commercial marketing. She's always planning for an awesome customer experience and a good return on marketing investment, making her the perfect sparring partner for today's topic. Welcome to the podcast, Sandy.
SANDY KIRCHHOFF: Thank you, Steven. Glad to be here.
STEVEN HOFMANS: Oh, happy to have you here. So let's start with my favorite part of the show, which is your marketing quotes. Every time I invite a guest, I ask them about their quotes. So I'm very curious, what is the quote that you prepared for your audience today.
SANDY KIRCHHOFF: Well, it's not directly related to marketing, but it is related to what we're going to be talking about today, marketing planning. So my favorite quote-- probably my favorite quote life is from Benjamin Franklin. It's "by failing to prepare, you prepare to fail".
STEVEN HOFMANS: Wow. That's actually a good one for this session.
SANDY KIRCHHOFF: It is, isn't it?
STEVEN HOFMANS: If you don't plan, you don't know where you're going to. Oh, I love it. Thank you. Very surprising. Oh, it's great. I'm very excited to have you as a guest today. I'm really excited also about the topic marketing planning. It's not always a very fancy topic or sometimes the audience is looking at the topic of, OK, should we do marketing planning? Yes or no.
So really excited to have you here and also have you from your experience and your background from Office Depot. So just to allow the audience to get to know you, can you explain a bit your journey at Office Depot, where you started, and how you became the commercial marketing director at Office Depot.
SANDY KIRCHHOFF: Sure, Steven. No problem. Oh, gosh. I've been with Office Depot-- well, Office Depot Europe for about 10 years now. I started as a data quality executive that was looking after making sure all the different marketing teams were entering proper data into our campaign planning tool. And that wasn't an easy one because we were scattered across different locations, all the marketing teams were separated.
Some were looking after online, some were looking after offline. So it was just kind of making sure everybody's working in the right way in the same tool. And I think that really helped me in the role that I am today. And I think that's also why marketing planning is so close to my heart because I have been doing that since the beginning.
And I've kind of gone onto a journey over the last couple of years of just consolidating across Europe. So as part of Office Depot's history, we've been looking at creating more synergies and efficiencies by consolidating countries, consolidating channels. And I've always been part of that process and making sure everything's set up correctly and bringing all the different marketing teams together. And just having been there for the last 10 years and helping shape the Office Depot that it is today or the Viking that it is today, which is actually our e-commerce brand that we operate under in Europe, that's kind of brought me to my role today.
And I think my planning and being a little bit of a nerd when it comes to that has kind of helped me in my role today.
STEVEN HOFMANS: What I like is that you start at the foundation, right? It's all about it starts with data, having good quality data, gaining insight from that data. And then you can steer, I assume, your marketing plan. One of the things that I find very interesting is you talked about aligning different countries. You talked about making sure that we are all going in the same direction.
Having these diverse set of cultures, what are the challenges or what is the advice that you can give? How do you align the marketing organizations with those different backgrounds or different cultures and make sure that they still have their own local touch?
SANDY KIRCHHOFF: I think you just got to do it somehow. I mean, it's really important to be aware and to be conscious about the different cultures that are in the different countries, so really understanding the mindset that particular cultures have and some don't have. So I think with me being a German, I'm very aware of the fact that I can be very direct, I don't like to smooth things over.
But I know that's not appreciated in all the different countries. If it comes to more English-speaking countries, it's much more about being polite. So a little bit having more stereotypes in your head, but I think being open is probably the most important one. Being open to understanding that things are different at different countries and just, together, trying to manage through that. And I think it's about gaining the trust of everybody.
So it's not about forcing something from one culture from one country into another one but really doing it together as a team and by including everyone as well. So I think when we started doing this, it's about involving all the different countries from when we used to be separate by country, and then just looking at what's the best way forward and trying to get people to understand the benefits because it is more efficient to consolidate across the countries.
And I think, let's say, the more natural ones-- so for example, Germany, Austria, and Switzerland are much more natural to consolidate rather than trying to combine the German or the Dutch market. So I think just by taking it step by step but taking the learnings from that, that will help in coming to a European approach. But also never forget countries are different, customers are different in the different countries. So we have a lot of 80-20 rules in place, but probably the same applies here as well.
So on average, we can probably consolidate and combine 80% of all our activities, and then we can specialize for the 20% that's needed.
STEVEN HOFMANS: Yeah, it makes sense. I think also that the way you explained it is everybody needs to-- everybody has his own culture, but also the customer has his own culture. I remember you talking about having like-- is the French customer, is it the same customer as the German customer? Is it the same customer as the Dutch customer? Or do they all shop differently?
SANDY KIRCHHOFF: At least what we can see in our customer base is they're all kind of different. So we can see French customers, for example, they have a much higher affinity for free gifts and for things being more colorful when it comes to free gifts. So there, if we choose-- for a backpack, for example, we'll typically go for a colored one. Whereas in Germany, a black backpack would be working much better.
But we can also see the decision makers are quite different. So again, a typical situation that we have is the secretary will be placing the order in Germany, whereas in the UK it's much more the head of the business or one of the managers that will be placing orders. Also, the genders can differ quite a lot across the countries. The Dutch market, for example, is a very gender-neutral market where we have equal share.
So the customer is different in the way the customer likes to place orders, the way the customer likes to be incentivized. All of that needs to be taken into account into a marketing plan. And we'll make the adjustments and the adaptions that's needed across the different markets.
STEVEN HOFMANS: So, actually, when you look at the planning perspective, you have indeed a fixed amount 80-20, but actually what I'm hearing now is that that 20% can go very specific because every market has its very specific needs, you need to adapt your promotion strategy to every market. So probably customer journey, also, you have a very specific customer journey strategy per country as well as they shop differently in the different countries.
SANDY KIRCHHOFF: Yeah. So we'll standardize where we can. For example, we might be standardizing certain email campaigns, certain printed media, but then we push it out differently to the different segments depending on the market. So even though, within a channel, we can adapt to that specific country or to that specific customer, it doesn't mean the material cannot always be standardized. Or we might decide to do a promotion on paper, but what paper we promote might then, again, be different per country.
So it can go down to a very detailed level, but from a high level point of view we will standardize and then adapt. But it's true, so it can be in the channels, it can be in our promotions. So there's a lot of different angles that you can look at it from.
STEVEN HOFMANS: So every country can still have a number of freedom in how they implement their promotion budget or the promotion assets. Sometimes when I discuss with companies I hear that rigidity goes hand-in-hand with planning, while I think there should be room for agility. And I think, with COVID-- So we are in December 2019, your plan and budgets are ready. And then you kick off the first quarter and everything works fine, seems promising because you built that whole nice marketing plan based on your 80-20% rule.
You have a local strategy. But then, at some point, COVID kicks in. And you need to or you need not-- I don't know-- to adapt your whole marketing plan. How do you handle such a situation?
SANDY KIRCHHOFF: I think for us, we handled it very well. And I think this is where people sometimes get the wrong thought in their head. Just because we plan doesn't mean things are set in stone. And I think that's one of the first things that I'm hoping I can eliminate through the session today, is to get that out of people's mindset, is that planning doesn't mean you can't change anything. So what we'll do is, yes, we'll create a 12-month plan.
We'll create that ahead of time. And obviously, COVID was something nobody had foreseen or at the speed that it came up. But if it's not called COVID, it was called something else. It just might have been smaller or slower, but something will always come along that will make you adapt your plan. So we've handled it within our regular process which, again, brings back that 80-20 rule.
So we have a 80% fixed campaign plan or marketing plan where we leave 20% room for adjustment. But even when we talk about that 80% plan, it's quite high-level. And we'll go through refinement sessions throughout the year. So, even though I have a 12-month plan, I'll revise it and refine it every quarter to make it more specific. I'll do that again on a monthly basis.
And then I'll even break it down onto a weekly basis. And by going through those different refinement sessions, I'm much closer to the campaign goal. I have dates, and I can adapt either my target group, my offering, my promotion, whatever it is that needs to be altered for that specific period of time. So even though I have an 80% fixed plan, there's still a lot of room for us to change. And we've handled COVID that same way.
We've gone through those refinement sessions. We've just done them slightly more frequently or give a little bit more room for ad hoc than we would have previously done. But in general, our standard campaign planning cycle that we've implemented a couple of years ago-- and that's really been kind of trial and error proof-- we've been able to use during this time. And that's given us a tremendous amount of security.
So as much as I run or, within my department, have a marketing planning team that does all of that, that creates this huge marketing plans for the next 12 months, I think we're very agile and very flexible in the way that we're running our activities because we always leave room for doing this.
STEVEN HOFMANS: So the impact of COVID is more about the fact that, OK, the plan, you put in more agility and more flexibility in this case but you also increased the frequency of planning reviews, maybe, to adapt to the ever changing market. Because that's what I understand, is that the market is changing faster. So the frequency goes with it. The faster the market is changing, the more frequency you'll have reviews of your planning session in comparison to before COVID. Is that correct?
SANDY KIRCHHOFF: Yeah, absolutely. And I'm sure, as for the majority of retailers, we could really see product life cycles changing as well. So the demand in certain assortments that have been there before have decreased. At the same time, demand has come up for assortment that wasn't as big before or as popular or new assortments. For example, with those rapid tests that you can do at home, that's something that didn't exist before. How do you market that and make that available to your customers?
But I think for us, the most important thing as we have been able to rely on our existing processes that we have implemented over the last years as having planning a fundamental part of our business.
STEVEN HOFMANS: I found very interesting the fact-- and this is, I think, a reality that many retailers had during that COVID period. You said some demand was higher, and then the demand got lower for other products. So how do you handle that from a marketing perspective? Do you start promoting certain products that nobody wants anymore? How do you-- because you have that stock, so I'm very--
SANDY KIRCHHOFF: Yeah, obviously, I don't think anybody ever expected we were going to have a worldwide crisis and running out of toilet paper
STEVEN HOFMANS: Yeah, that's true. Nobody wants to starve without toilet paper.
SANDY KIRCHHOFF: Exactly.
STEVEN HOFMANS: That's funny. No, good. Interesting. Next, so you have the planning aspect. And then what comes in with planning is also being able to track marketing activities, being able to track in what state your campaigns are. How did people react to the fact that you could see, OK, we are in this planning stage, you need to spend this amount of time on campaign? We're going to track where you are on your marketing plan and we're going to evaluate.
How did you succeed in that specific change? I don't think it's something that you can do over a day. But how did that work? How did you go to that tracking perspective and being able to allow an evaluation of the things you're Doing?
SANDY KIRCHHOFF: When it comes to measuring our campaign success or our marketing success, overall, there's a lot of different things that we would be looking at. So whereas, historically, we've been much more focused on looking at product performance or looking at the performance within individual channels, as part of the transformation that we've been undergoing at Office Depot Europe to transform into an omnichannel business, which very much means breaking down the silos of looking at channels individually but looking at the customer and what the customer needs and, to a certain degree, not looking at the channels anymore. And I think by doing that as well during the last year, that has helped us understand the customer better and also what works and what doesn't work. Because it doesn't make any sense for us to measure, for example, catalog performance when we don't know if our catalogs are reaching our customers anymore because we're not sure if they're at home or if they're still going into the office because we're still sending most of our material into the offices. So it's really looking at it from a customer point of view and measuring the customer, not the channel, and then bench-marking ourselves against competition or against what the market is doing.
I don't think looking at traditional office supplies-- obviously, during COVID, they've been decreasing. So it's not only that they're decreasing with ourselves, but they're decreasing overall. So it's how do we benchmark against what's happening in the market, but what other categories can come in to compensate for this? Which is then perfectly fine because, if we can compensate our sales through new categories or through increasing things like disinfectants, toilet paper-- I think that's going to be one of my favorite examples out of COVID times, is the amount of toilet paper we sold.
No, but you're going to have to start counterbalancing your product sales by shifting your focus into categories that weren't as high on your radar as previously. And then, in terms of your campaigning or your channels, it's going to be different. We've had a tremendous amount of increase, obviously, on our website; customers coming more to our website than potentially calling in to our call centers, which has also been still quite popular in some of the countries. And it's understanding that shift that customers are going through, and then trying to make sense of it, and also accepting it, that this is the way that things are going and times are changing.
But by not looking at an isolated channel anymore, so potentially looking at certain call center KPIs, they just might not be relevant anymore. So as we've gone through this change and the customer changing and the market changing, it was really important for us to also change our KPIs and the way that we measure because some of the more traditional KPIs are just not as applicable anymore as they've been before. We've been testing quite a bit to see what works, what doesn't work.
STEVEN HOFMANS: So what I find very interesting here is that people behave like they're KPIs. I understand. So you went from maybe a less customer-centric organization if you look at KPIs because its channel performs, a lot of that amount of people that are coming on the website, amount of email opens. But if you start evaluating people in that way, I understand that what you're saying is then people start not thinking about the customer but thinking about the performance of their channels.
And you guys made a total shift to saying, OK, those channel performance, it's a negative. It's interesting to know, but what we actually want is we want to put the customer at the center of our organization and start working with customer-centric KPIs. Is that correct?
SANDY KIRCHHOFF: Correct.
STEVEN HOFMANS: Yes. So, from my perspective and from the audience perspective, what are good examples of customer-centric KPIs that you would track to allow to understand how good the customer is in relationship to Office Depot?
SANDY KIRCHHOFF: Well, two fundamental things for us that we're looking at is customer journey analytics; how many touch points, how is the customer interacted with before they place an order with us. Because that really gives us a good understanding of the combination of channels or touch points that are needed to get that conversion, the same as with attribution modeling. So really, how much of the final sale can we then attribute to those different touch points?
But then it's really looking at what percentage of customers are active and actively coming back to us. How many multi-buyers can we generate? How many of the new customers that we gain during this COVID time are staying loyal customers with us? Have we been able to increase the share of wallet of specific customers?
Breaking it down to the different customer segments or not looking at the entire customer base, but looking at the smaller customers or the larger customers. Do they behave differently? Because it's quite easy-- and I think this is the trap that a lot of people will fall into, especially on a more senior level, is they tend to look at the sales. How much sales do we generate? But sales is a product of different things coming together.
How frequently does your customer come? How high is the order value of that customer? That's what makes your sales. And those are the KPIs you should be a lot more focused on than just saying 'I want to grow my sales' or 'I want to do more'.
STEVEN HOFMANS: That makes sense. How do you measure brand awareness, for example, if you run brand awareness campaigns because you want to be top of mind. And you want to say, OK, give me two office suppliers. The first one should be Viking or Office Depot.
SANDY KIRCHHOFF: Of course, always.
STEVEN HOFMANS: From a marketing perspective, you need to invest but I understand that it potentially doesn't immediately generate a sale. So you need share of wallet. Very important, I understand. Amount of customer journey touch points, attribution modeling is very attractive. So those are techniques you would recommend to the audience to use to look at, really, from a customer journey perspective.
SANDY KIRCHHOFF: Absolutely.
STEVEN HOFMANS: I have another important questions there that I sometimes across. So the attribution modeling, it helps you-- which team helped to consolidate the sale or which channel or campaign contributed to a specific conversion. The question I often get is, how do you make the link to, OK, we have the attribution modeling, do you then use those results to adapt your marketing budgets in the different channels for each country? Because I can imagine that every attribution model in every country could be different.
Or how do you work with the results of your attribution modeling and journey KPIs? How does that get fed back into the marketing planning system?
SANDY KIRCHHOFF: Oh, I was already afraid you were going to ask me a very analytical question.
STEVEN HOFMANS: No, no, no.
SANDY KIRCHHOFF: Or you're going to get me into trouble with my data science guys on how they built the attribution model. No, but indeed. So we do look at attributed sales across the different countries, across the different channels, and how that shifts on a month-by-month basis. And then we will adjust our budgets accordingly. So we do very actively work with this.
So, again, we have a process in place of reviewing this on a regular basis and then looking at do we invest or not invest into specific channels. So we will adapt our budgets based on this, yes. And the same goes with our journey analytics. But it's been a process of getting to that point. It's not something that just happens from one day to another.
Everybody has to learn to work with the data differently because there's-- in the first instance, it seems like there's winners and losers because some channels will get more sales attributed, other channels will get less sales attributed. So there's a degree of change management that needs to go with this.
STEVEN HOFMANS: No, makes sense. But you talk about your 80-20 rule, and we've talked about it in the beginning about you set your marketing plan and your campaign planning 80-20. Then we talked about adapting agility, flexibility in your planning. It's also 80-20. So you have your marketing plan set 20. But then again, at the budget level, you're saying, again, every evaluation round or every time you sit together, you also there, I assume then that your budget is partly fixed but, based on the outputs of the attribution models, you start shifting your budget to get better conversion and results.
SANDY KIRCHHOFF: Yeah, absolutely. And I think, again, that's one of the major benefits that we have of being a centralized European organization, is we can not only shuffle and move our budgets around across the different channels, but we can also do this across the different countries because there's very few decision makers that come together for all of Europe. So we can really see how markets are shifting, how our sales are shifting across the different channels. Because there's going to be a lot of country-specific impacts, such as seasonality and holiday periods.
And we can-- constantly might be a little bit too much-- but on a regular basis, we can review the numbers. And then we can, together as a group, decide if we want to start shifting some of those budgets across. And that really makes us much stronger as a group. But here, again, the most important thing is I think we do this-- it's a joint decision. So we have the owners of the channels, we have different marketing teams coming together and kind of reviewing this together.
STEVEN HOFMANS: That makes sense. That makes a lot of sense. We talked a bit about evaluation attribution modeling is a way to evaluate your marketing efforts. Whenever you put in measurements in place, people are a bit scared. And then they ask you "we've been doing marketing for five years and we got good results, now you start measuring. What should I do when the results are bad?"
It's a hurdle that people are afraid of to take. They say, "but maybe I don't want to show you that I have bad results. So what do you do as a marketer when you have bad results, right? And how do you communicate that to your manager? And how should an organization look at that?
SANDY KIRCHHOFF: Well, it's a culture change. So you need to let your people know that it's OK to fail sometimes or to make mistakes sometimes. So I think, before you start changing those KPIs or also be aware that people might be afraid of, all of a sudden, you start measuring something you haven't done before, you start measuring things differently. Because, ultimately, you're trying to do something better for the company and trying to get better results for the customer.
So if somebody does deliver bad results or not as good as they have been previously, as long as you understand why they've changed or what didn't work and you then optimize and move on from there, there's no reason anybody should be worried about things being measured. Because you can obviously only improve and get better if you know what's gone wrong and if you can start measuring it but then also afterwards measure the success if you've done something right. So I don't think anybody ever needs to be afraid of putting those measurements in place.
But it's very much the responsibility, I think, of all the different management levels to let people it's OK for things to go wrong sometimes.
STEVEN HOFMANS: When you change that, when you communicate, when you allow people to have bad results, did you see an impact in the organization? Was there more experimentation, more creativity? Or do you see any benefits of having these type of cultures where you foster fail fast, actually, it's almost, right?
SANDY KIRCHHOFF: Yeah, it is. And we can see people are a lot more open, willing to share. But we have been testing quite a lot in all the different campaigns or channels, so we very much have an established test and learn culture. But again, that's taken time to grow. Somebody needs to take the first step and say 'it's OK, and I'm willing to do this.' But it also sometimes takes management to stand in front of the employees and say, you know, I've made a wrong decision or we've done something that wasn't right, but we've learned from it and we've moved on.
So I think if you lead by example as a manager, then your people will start to feel that. But also don't punish people. Don't tell them something's gone wrong or something's bad. But give them that comfort blanket of it's OK sometimes if things don't go as planned. And one will catch on from the other.
STEVEN HOFMANS: It makes sense. It's leading by example. I assume you, as a manager, also sometimes have bad results or take wrong decisions.
SANDY KIRCHHOFF: No, of course. And at least the way I like to manage my team is, or just the way that I am is you can hold me accountable for everything I do. if I've done something wrong or something didn't go as planned, I'll just say it as it is and move on from there. Don't dwell on the past, but look at the future. What can you do because you can't change anything that's happened in the past anyway?
STEVEN HOFMANS: No, that's true. You can learn and build together, I think. Build together on the roads to success. We're coming to the end of this episode. What can you say to organizations that are at the start of implementing marketing planning processes? And what are your best tips and tricks for those people that are starting that marketing planning journey?
SANDY KIRCHHOFF: Start small. Don't try to cover everything at once. Start off with one channel, one market depending on where you're coming from. And really find the best way for yourself of how to organize the different teams, and then start adding on.
Because if you try to do everything at once, it becomes overwhelming and it seems like an impossible task to do. But if you really start small with consolidating two countries, for example, then you'll start to see the natural and right next step. And don't have your mind set on planning means you need to fix things. Always make sure that you have enough head space to say there's flexibility and room to change things.
STEVEN HOFMANS: OK, interesting. So Sandy, I really learned a lot during these sessions about having customer journey KPIs, having your 80-20% rule is something I'm also taking home. And then the last one is don't try to eat the whale at once. Try to drop it in pieces.
SANDY KIRCHHOFF: Exactly.
STEVEN HOFMANS: Do it piece by piece. Thank you for joining this podcast. It was really fun for me. Thank you for that. And on this bombshell, we'll end this episode. Have a great day, everybody.
SANDY KIRCHHOFF: Thanks, Steve.