By Steve Rowen, emerging markets specialist, RSR Research
Marketing in retail has been on the front lines of omnichannel transformation the longest of any retail department. As the most customer-facing activity, marketing has quickly become the most obvious way to see whether a retailer is able to present one brand face to the customer or not. If gaps exist between channels, or if the retailer is stuck in siloed thinking, it is most apparent in the inconsistencies in brand promises made across channels.
Part of the challenge is organizational. Digital marketing organizations grew up under the umbrella of e-commerce activities and rapidly became a second voice to the customer. New communication channels tested retailers' ability to respond quickly to the new types of conversations happening around them. For marketers, the difficult question became, "How should we be organized?" Should these digital marketing organizations be allowed to continue within the e-commerce team, or should they be absorbed into the overall marketing organization?
In 2013, RSR explored exactly this question. We benchmarked retailers' marketing organizations to find out whether they were in the process of aligning their disparate marketing activities, whether they were absorbing digital marketing departments into corporate marketing, or if they even saw a problem at all.
What we found was a muddled mess. For those retailers who were absorbing digital into traditional organizations, digital innovation was suffering and traditional teams were being overwhelmed. Those not acting to align marketing activities were making "one face to the customer" a priority but weren't achieving anything remotely close to that result because they had no mechanisms in place to coordinate marketing activities across a proliferating base of communication channels.
Those retailers struggling with a matrix or alignment approach might have been making some progress in coordinating messages, but because so much of digital marketing is unexplored territory, it was too difficult to understand how to proceed.
With that context as backdrop, we decided to focus our 2014 report less on organizational alignment, and more on capabilities. Specifically, digital marketing capabilities. We wanted to understand how well retail marketing organizations, whether independent digital teams or merged corporate marketing teams, were formulating and executing against their digital marketing strategies, assuming they had them.
Value is in the Eye of the Beholder
We presented our retailer respondents with a rather long list of technology enablers and asked them to rate the value of each on a three-point scale: very valuable, somewhat valuable, or little to no value.
Overall responses are in Figure 1.
Typically, we find differences between what RSR terms "Retail Winners" and others across revenue bands, or sometimes across retail sub-verticals. It's rare for us to find the dramatic differences we can see across all of them in this study.
Winners vs. Others
Comparing Retail Winners and all other respondents we found that Retail Winners over-indexed in five high value technologies compared to all other retailers: marketing resource management, promotion planning, revenue attribution campaign ROI management, predictive analytics and customer segmentation software.
Retail Winners are consistently better able to predict the impact of pending price changes, while laggards are even challenged to retroactively determine the impact of price changes they have made. These differences provide additional insight into the source of these problems.
Larger vs. Smaller Retailers
Looking at small retailers (less than $250 million in annual revenue), mid-market retailers ($250 million - $1 billion in annual revenue) and large retailers (more than $1 billion in annual revenue) we also find some differences:
- Customer purchase analytics. A bell curve of 71 percent, 80 percent and 68 percent (small, mid-market and large retailers, respectively).
- Marketing resources management. The greatest interest was among the smallest retailers with 71 percent, 60 percent mid-market and a stunningly low 23 percent among the largest retailers.
- Predictive analytics. Also surprisingly, the greatest interest is among the smallest retailers (53 percent vs. 29 percent and 23 percent respectively).
- A bell curve for content management systems. Forty-seven percent, 14 percent and 27 percent for the largest retailers. We are very surprised over the mid-market's lack of interest.
While we're heartened to see strong technology interest among the smallest retailers, we have serious concerns about both the mid-market and the largest retailers. It's hard to imagine how a mid-market retailer can manage all their digital assets without a strong CMS, for example, and one would think customer purchase analytics would be most important to the largest retailers, who've often lost touch with their customers.
Differences Across Sub-Verticals
There are some unremarkable differences in perceived technology value across sub-verticals, but some that are clearly worth noting:
- Predictive analytics. Grocers are least likely to identify predictive analytics as very valuable, with only 22 percent citing it as such, vs. 43 percent of fashion and 50 percent of hardline retailers.
- Promotion planning. In today's hyper-promotional environment, we would have expected to see strong perceived value across the board. Instead, while 88 percent of hardline retailers find this technology very valuable, only 38 percent of fashion retailers and 57 percent of grocers say the same.
- Marketing resource management. Surprisingly, grocers assign far less value to marketing resource management than either fashion or hardline retailers. While grocers may not sell many products across digital channels, they certainly market their products across all social media and via various marketplaces. It's hard to understand how they manage their processes.
Implementation Patterns Also Vary Wildly
Just as their value perceptions differ, we find extraordinarily different implementation patterns across performance, revenue and retail verticals. We illustrate implementation of all technologies in Figures 2, 3 and 4.
Winners vs. Others
In general, we can see that Retail Winners have taken first mover status in virtually all digital marketing technologies. Others are aggressively planning to implement some technologies, like Content Management Systems, but even then, they will remain behind Retail Winners, who also continue rolling out those technologies (Figure 2).
Larger vs. Smaller Retailers
The largest retailers tend to have moved more quickly than their smaller counterparts in adopting digital marketing technologies (regardless of value perception). We are relieved to see the mid-market continuing to move forward, and the smallest retailers making plans to implement the other technologies they perceive as very valuable.
Differences across sub-verticals
When it comes to customer purchase analytics and promotions planning, grocers have put their money where their mouths are. This otherwise technology-challenged vertical has been a consistent leader in market basket analysis and at least somewhat ahead in promotional planning. It's interesting that other verticals (which may have ascribed more value to promotion planning) actually lag in technology adoption.
There's no doubt that retailers have a long way to go in getting their digital marketing strategies under control. They've made some significant technology investments and continue to budget for more. It strikes us that when it comes to digital marketing, challenges center more around organizational issues than either lack of budget or will-power to move forward with technology. To read those, please click here for the full report.