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In the second episode of Marketing Futures, that we’ve produced in partnership with SAP, we discuss the role of MarTech in the growth of e-commerce and bring you the latest insights from industry experts.
We focus on MarTech innovation and efficiency, the challenges that brands face to engage the customers of today and the tools and strategies needed to retain the customers of tomorrow.
The engagement between customer and company, whether B2B or B2C, is a key reason why companies spent $1.4tn on digital transformation efforts in 2020, according to IDC’s Worldwide Digital Transformation Spending Guide.
Graham Barrett was joined online by Joe Harper, E-commerce Marketing Manager, Western Europe at Kellogg Company, Shekhar Sharan Mishra, Head of E-commerce, SPAR, India, and Sara Richter, CMO at Emarsys, part of SAP.
Joe began by explaining that turning a box of Crunchy Nut Cornflakes from the supermarket shelf onto a digital shelf, is complex. He said they’re great at making food, designing brands and packaging, plus they can get a case of food delivered to a supermarket distribution centre, ready for the start of shipments and that there are essentially three elements within that, but when digitalising the product, it becomes more like 200 elements. Each from a different source within the business. The growth of e-commerce and sophistication of their retailers is increasing the volume of those elements, and the veracity and speed in which they need them to be organised and ready for shipment. Throw in the fact that every market in Europe needs their own version of that data, and has their own route to the retailer’s website, and it becomes an incredibly complex and recourse-heavy project. However, despite that being one of the most complex projects he’s worked on, it’s probably his most enjoyable one too, because it includes and involves so many different stakeholders from around the Kellogg’s business. Joe said that’s the key to e-commerce. ‘It’s no longer a silo, it’s no longer a bolt on. It involves everyone within this great big company.’ He added that digital shelf syndication is the most important project for that, and he really enjoys it.
Challenges for SPAR India
Shekhar added that he too thinks it’s complex. He said e-commerce is definitely not working in a silo, it’s a part of the integrated strategy of the central management. Specifically in India, talking about e-commerce, things have changed post-COVID, especially from the 20th of March 2020. When the pandemic hit them, they saw a tremendous change in the customer behaviour. People have migrated from offline shopping to more online or omni shopping. This means more repeats for brands because generally in e-commerce, the frequency is higher as compared to that of offline. There are a number of challenges they’re facing:
The change of customer expectations
Shekhar explained that customers are currently spoilt for choice and want everything now. ‘What earlier was maybe luxury has become hygiene right now’. Looking specifically at his market, quality aligned with value for money, is something that customers want, and expect to be connected across all touchpoints. For example, if somebody has shopped online and you have an offline store, customers expect the offline store to also have data about the online behaviour they have. Such as best prices, best quality, best packaging. They want the fastest delivery times, and there’s a rise of q-commerce in India in the likes of Zepto and recently Blinkit, where people are getting deliveries within 10 minutes. They spend around two minutes packaging and eight minutes delivering on an average. There is also a separate segment, which is money for value, which is more convenience-based and not priced-focused. They are ready to pay that price in order to buy that convenience and that value can range from quality to delivery time to maybe packaging and the entire experience.
Challenges for marketers
Sara thinks there are a multitude of challenges facing marketers, with it being an exciting and challenging time to be in marketing. One of the things that illuminates it for her, relates to some stats released by Gartner recently, which shows that the average marketing budget has dropped since 2020. In 2020, it was an average of 11% of revenue. In 2021, it’s down to 6% of revenue, a record low. She said much like Joe and Shekhar alluded to, that hasn’t changed workloads. Workloads have actually gone up, there’s more work come in house, and Joe talked about things being resource intensive. There’s more pressure on marketing teams to deliver business results as customers have pivoted to the different ways of shopping that Shekhar was referring too. She said Shekhar also touched on the challenges, marketers are also expected not just to be marketers, they’re also expected to understand the customer journey, the customer experience and activate all the data that goes with that. So, there’s a lot of pressure on marketers to do a lot of creative and important things at the moment.
She explained that all of these challenges sum up in one way. Time is the thing that becomes critical. All of these MarTech systems are making marketers time so much more valuable because they have so much less of it. So, where MarTech comes in to play, it can empower you. It can empower them by freeing up their time and have a real business impact. But this only works when used correctly. She said that they did some research recently that showed that 41% of marketers actually lose time because they’re switching frantically between different MarTech systems, and 35% sadly feel they’re just wasting time with this technology that could be their saviour when they’re time and resource crunched, or they’ve got MarTech that’s not fit for purpose. Sara highlighted that the key is balance, using the right MarTech in the right way. If the wrong things are thrown at the problem, the goals won’t be achieved. So, when thinking about MarTech, it’s important to think about systems that will tie back to business outcomes and tie back to value. Ask yourself that question ‘How is this going to empower me to engage better with my customers over time?’. If the technology meets those criteria, then you should be embracing it.
The importance of technology as a business
Joe explained he had so many reflections on what Shekhar, and Sara discussed. He said that he loved that quote about, “Luxury has become hygiene”. He said they’ve learned that their approach needs to be tailored accordingly based on their product inventory, which is generally split into three portfolios, cereal, cereal snacks and salty snacking. He thinks that’s the governing and driving principle of where technology can help them. They could go off in so many different directions here, but specifically thinking about MarTech, for them at the moment, they generally conduct their business through retail partner platforms. Through the likes of Dunnhumby, they can obviously see target segments and consumers with specific offerings and messaging based on what they know they’re looking for. But they do generally tend to not own that direct relationship with the consumers, not yet anyway. He highlighted that some fantastic comments had been made by Sara about saving time, as it’s often not the sexiest element of MarTech, but it’s the reality. Resource and allowing technology to do jobs or elements of those jobs, is critically important to them. They do have a D2C roadmap, which is in its infant stages at present, he said he had some involvement in the first launch there. He noted that it’s fascinating to see the potential to create a curated user experience once you have your own platform and more visibility on the user journey. Right now, and for his role specifically, MarTech would generally cover, as discussed, the tools that they’ve used to create and syndicate content. Then secondly, the ability to measure how that content performs on their retailer websites, so they’ve massively ramped up their focus in these two areas last year. In the UK, they created a culture of tracking the detail from their digital shelf hub from share of search to content compliance ratings and reviews health. The ability to centralise this data into one reporting model via one platform completely opened up a range of possibilities for them to engage in broader business stakeholders on the channel throughout the org chart. He said, imagine if they had eight or nine top retailers in the UK, that they sold through their online platforms. Actually, pulling their share of search for each of those retailers into one platform that they can analyse, view and contrast, is incredibly difficult to do without a tool that does it for them. It really opened their eyes as they’re quite difficult to maintain, and they have to ensure the data they put in and the tracking of the right products is up to date. But once they had that view, it revolutionised the way they could report and evaluate the work they’d been doing, in ratings and reviews specifically. It helped them see how consumers rate and rank their products. They’ve used reports to inform their innovation teams in real-time, on the qualitative and quantitative consumer feedback that’s coming back from the new products they’ve launched. Which is incredibly useful, and often quite difficult for companies like us to get and share voice tracking. Again, historically challenging, as how can they ensure that they are sufficient at retailer level per initiative in terms of their share voice versus their competition? They’re now able to see a breakdown of the media placements that they’ve got by vehicle for both their own and competitive media placements on the channel. This was a real eye opener for them in that they saw, as an example, that within some retailers, their investment into media placements is scattered across a variety of different sections and parts of the website, whereas their competition had significantly different patterns to theirs. It’s insightful for them as a business to view the various strategic priorities across their competitive set. It’s also really insightful to help them understand where their investments are working and potentially save resource and focus their investment into the channels they know are working. So Joe said that it’s been evolutionary and there’s a long way to go, but it’s the future for sure.
Sara explained that real-time engagement with customers, is a tricky thing to grasp and that came across as Joe was talking about it. Often, real-time is simply just reaching people at the right moment. But it’s not quite that straightforward because those people need to be engaged, not just at the right time, but through the right channel, because we live in an omnichannel world. What is the channel that a customer wants to engage with you? And what content do they want to consume? What’s going to delight them? So, it’s not just about catching them at the moment, there needs to be a true one to one experience, one to one engagement, a connection, a human to human connection, with all of those pieces pulled into it. Much like Joe mentioned, the thing that drives it all, is data. The data needs to be unified, and it needs to be connected. To have a wonderful 360-degree view of the customers, means we can power that data for those connections. Which goes straight back to what Shekhar said earlier, about customers expecting that as they move from online to offline stores, that they can find the same things and they expect you to know their data and recognise you as the same customer. So, the data is crucial, and going back to MarTech, it’s important to have software that’s going to allow you to adapt to those customer preferences across the channels and get the right messages across at the right time, with the right content, when your customer wants it.
Shekhar said the customer journey has gone through a tremendous transformation. Just taking SPAR as an example, they had offline stores and the journey was that customers entered the offline store, shopped, and checked out, and they had a humongous tonne of data in the database at the backend, literally, outlining the last 40 years of the customer. But now with online and with the MarTech tools, which Sara pointed out, there are MarTech tools in the right place at the right time, with the right MarTech tool, to analyse data. To really find out what customers are clicking, and from which area your customer is going, and what is popular in that area. The beauty of it is that through the collated databases that they have, in which they run the marketing channels, it’s possible to filter out the insights. Tweak with the marketing campaign as Joe said, you have life data in front of you and live results in front of you. Meaning all the testing done, bears fruit immediately, leading to them being able to adapt more quickly, and at the same time, being more cost effective. Secondly, another major chunk which has happened especially post online taking off, is offline marketing and online marketing are complimenting each other. He said, as Sara mentioned, marketing budgets have been cut down, but in India specifically, when you talk about the offline space, that’s largely true. But when talking about the online space, it has shot up by 80%, so they’re complimenting each other in a way in which offline business is used to have online activations of the customer to form a long-term relationship. While online business is used to drive the customers to the stores. At the end of the day, what you have is an architectural brand wherein customer identify the brand, and that brand is communicating the same thing offline as well as online. The third point is around the data and data is the king. With the data of a customer, targeting becomes possible. As they’re able to reach them with the right products and convert more. They’re able to be more specific to convert a customer to a final transaction and know exactly what is bothering the customer. The customer is waiting at the checkout or just browsing between multiple categories, and they know the data, to softly pitch to them, and eventually turn that into a converted customer. So, these are three levers, which has shown significant change specifically, in this transaction from offline to online.
Sara explains, that when it comes to brands convincing customers that it’s worth them sharing their data, it’s not just their data, it’s the first party data. Which is what the crux of the argument is around, and the crux of the pain that many marketers are feeling. It boils down to something actually quite simple. Marketers have to think about acquiring first party data from their customers as a value exchange. There is some to give and some to take, and that means sometimes they have to drop that transactional mindset of every interaction with your customer is going to result in a transaction. Sometimes it’s just about building the relationship, that each engagement and each interaction is building up to an overall relationship. Some of those are going to be transactional in nature, and some of them aren’t. She said, ‘let me ask you to think a little bit more holistically about what you’re doing online’ and it can’t just be ‘I’m going to sell you something today’. She said things to think about are loyalty schemes, VIP access, building clubs and communities, and really trying to give your customers every excuse to engage in a positive way with your brand. And of course, for every engagement along the way, to share a little piece of data that helps a brand, know their customer better, and then market to them and provide the right details better. All through that, marketers are no longer just acting as a marketer, they’re providing experiences that are memorable. Building that customer experience, and in the end, that’s not just going to be about building data for you. It’s actually going to be about building customer loyalty, in the current world, customer retention is also becoming more and more important. This is the way to think about building that customer retention, by building that relationship, by making it more and more likely that your customer is going to come back to over and over to use the brand. Because they feel that connection with you rather than shopping, perhaps, juts based on price.
Joe added, that whilst Kellogg’s does have a D2C roadmap, their use of data does have to come through their customers, at the moment in terms of where their heartland e-comm business lies, with their big retailers in Europe. He said he looks at a hybrid of what Shekhar and Sara were talking about. They’ve generally seen that the Kellogg’s business has bought into overinvesting on e-commerce and seeing it as the future. So, they’re potentially seeing an increase on investment into the channel at European level, year on year, which is great. But as the online space grows, the number of options available for them as a supplier to invest into is increasing every day. The reality is, there’s probably far too many of them to take advantage of every single one up front, and they want to be smarter with investment, ‘making hay while the sun shines’. He said, whilst they’ve got this big investment from the business, and they’re scattering their investment across everything and hoping that it all sticks. So, they have to be smart and then that manifests itself into that brand or portfolio specific strategy approach. But other elements are critical, for example, opportunities should only be considered when they’re comfortable with the measurement methodology, which is available on evaluation, which sounds like a given. But he thinks the reality is that most of their retail platforms or a lot of them, still have work to do, to provide that right level of data to them, as the third party, to support our investment opportunities. That doesn’t necessarily need to be the first party data element. It could be as simple as website mapping, heat mapping, allowing them the ability to do A B testing, giving them visibility on metrics beyond just sales and conversion to help them truly understand the journey of the shopper. Remembering, they don’t own this platform, so they rely on that visibility from the retailers, and that should be one of the major benefits of investing into the online channel, versus more traditional retail. Making sure the platforms obviously mean they have the capacity to allow wide ranging measurement. They just need to partner with them on that, and there’s a retailer they’re working with in the UK and the wholesale space at the moment is really open to this. As a result, they’re going to have to invest more with them because they’ve got visibility on the full circle. Having that approach isn’t only critical to their growth ambition, but also ensures that they can make solid recommendations, back to the broader business stakeholders who are starting to take more accountability for planning and executing online initiatives.
Shekhar agreed with Joe, in that they have more visibility, especially the retailers, have more visibility into the preferences of the customer, and they use it smartly to negotiate with the brands. This is market research they do and get to know about the trends which they generally share with the brands themselves. He said, it’s more about what Sara was saying, and he looks at it from that angle, specifically the MarTech engine itself. So, when they are building retention, what they’re essentially doing is building the lifetime value of the customer, and looking at it, there are two angles to it. One is the profitability angle, which basically means that your lifetime value of a customer should be greater than the customer acquisition cost. The second one, which is more important right now, is the personalisation and the experience angle. So as Joe was saying, if he’s browsing something, how can we make the recommendation so perfect that ‘it’s just an aha moment for him?’ The first time he comes onto the website, he just finds whatever he’s looking for without transgressing the boundaries of privacy and data sharing. He looks at it as a closed ecosystem, which is limited to the retailer and the customer, for the customer to make his life easier in a space where he safe, and he feels connected with the brand rather than being threatened with the brand.
AI in marketing
Sara said, AI is a way to empower marketers and a way to empower marketers to personalise. There are a surprising number of marketers out there that are scared of personalisation, because they look at this wealth of data that they have, but they can’t put it to work for them. They can’t segment effectively. They can’t act on the data as quickly, even sometimes, perhaps as it’s coming in. And AI in MarTech and in marketing is just an amazing tool at this point, it can do the heavy lifting. Think about it like adding the whole team to your department, this wonderful virtual team that’s doing all of this for you. It can be your customer analyst, do the segmentation for you in that real time, one to one marketer that you need. It’s going to take so much of the guesswork and the uncertainty out of it and help you to predict what customers are going to do. But in a way that’s going to leave those customers feeling good about the brand. There is a balance of personalisation, there’s a balance of using that data and AI helps you achieve that balance. So that the customer feels warm about the relationship, but they don’t feel that their privacy has been infringed upon and that as a brand, you aren’t seen as big brother. That’s not the intention of personalisation. Personalisation is about being the brand that’s your best friend. And there is a there is a big difference there. She said she really believes AI helps brands take all of the data you have incumbent on you as a retailer and allows you to do that.
Shekhar said the journey of q-commerce has been really interesting in India. First, it’s important to understand the grocery world. Initially grocery, most of the players were actually listing their categories online to drive sales. Then came the price war, which is deep discounting to gain market share right. After that came quality as a USP, and now all of these have become hygiene. The customer expects the best price, the customer expects the best quality along with the best packaging. The next big thing is faster delivery, and that’s basically what q-commerce is centred around. He said it’s a very tricky model to scale. Primarily because of the high logistics cost involved in this area. Looking at India now, there are very few players emerging like Zepto. There’s a company called Grofers, which has revamped strategy entirely to just become focused on q-commerce. It’s now called BlinkIt. And why they are doing that? Because there’s huge money from the investors into this business because they think that this can scale. How do they do this? It’s basically a hub and spoke model wherein they have multiple hubs closer to the delivery radius, and they just serve two to three kilometres radius around the hub. They take approximately two minutes to pack and the rest eight minutes goes into delivery. What this does, is that at the end of the day, it creates a customer habit. It creates a customer behaviour. ‘Is it something related to convenience? I would say no, it’s a delight, right?’ They just get the customer hooked to the platform so that they can create. that repeat so that that LTV to CAC ratio builds in. And apart from that, they also have an opportunity to be different because it’s not easy to replicate the cost. The barriers to entry are really high in terms of moving to this kind of a business model. The third thing is this is not happening right now, but in the long run, it’s possible to charge a premium for this service which a certain segment of customers would definitely be willing to pay. Especially in tier one cities. Looking at it in India, the disposable income is high, and they value convenience much over that the price value. So, it’s a catered customer segment. He said he sees three challenges around this entire opportunity. The first being profitability, rental costs would be higher. The logistics cost is difficult to sustain, along with the delivery cost and the manpower cost. The second is range, when talking about a 10-minute delivery, they need to be focused on a set of clear skills, that they’re comfortable in, which can be sourced easily and can be available on the platform. Otherwise, there will be stock out issues, leading to bad customer experience, and goes against principles of offering customer convenience. The third thing, as of now, would be competition. There are too many players post investor money coming in, so he expects consolidation panning out sometime in the future, and in his view, they’ll just be one or two big players, which eventually be left, and will take the lion’s share of the market, along with the customers.
Joe thinks there are so many reflections on what Shekhar said, immediacy and quick commerce is one that’s on their roadmap. He mentioned they have a portfolio mainly split by three categories, their cereal, cereal snacks and their Pringles brand, within salty snacking, as they call it. Although they’ve just got one brand in there. To reflect on that, cereal as a category, is generally quite a planned purchase, and therefore because of the nature of online shopping, maybe over indexes in grocery retail and the fact that people have got it in their favourites, they know that they’re buying that every time as one of their big stock-up shops. Whereas Pringles, their biggest brand, is far more impulse driven and therefore perhaps, under indexes on e-commerce for the same reasons. Because it’s something that people pick up when they see it on an end of isle gondola in store. However, because of that impulse nature of the brand, perhaps it is more suitable to push Pringles within the quick commerce environment. Compared to the future of the likes of Deliveroo and UberEATS in the UK, along with the new players getir and Gorillas. They don’t take a general approach within the business to think okay ‘quick commerce is great, let’s get after it on every single brand’. Let’s think specifically about the right channel and the right brand approach. Kellogg’s historically tries to work in an omni-channel approach, and that’s one of the big messages they’re getting from the businesses. Apply an omni channel lens as much as possible for your ecomm plans. But their reality is they don’t necessarily think that will always be the case with their portfolio, because of the different nature of the different categories. So, that’s a key reflection Joe added. In specific relation to MarTech and the conversations around personalisation, again for them it’s exciting to think about what D2C and owning their own platforms will mean for them in the future. The reality is their price point is obviously much lower than some of the brands that you more likely buy in a one-off purchase if you were targeted by an advert on a social platform. The likes of Adidas and fashion retailers are more likely to target, re target and re personalise ads, based on consumer footprints on their website. But for Kellogg’s, that’s not the case, as Joe said, ‘nobody’s going to buy a one off tube of Pringles, having seen an advert from a Pringles.com website, because they’ll pay more for delivery than they will for the actual tube itself. Which raises a couple of interesting questions around their supply chain and portfolio. Can they start to create new formats of packs, multi-packs? Possibly even include personalisation and pay a premium for that personalisation experience. Can they bring out new personalised flavours, and special artwork and limited-edition packs with names on, for people’s birthdays and Christmas. Which is where a lot of their FMCG brands have gone with D2C in the past and all of the opportunities that come with that. When they have their own D2C platforms and look to explore their existing brands within these platforms. These are all questions that come up and get the likes of Klaviyo and other CRM platforms and tools that allow them to tailor their messaging and engage consumers throughout the day, based on what they know, and what they’re going to be looking for. A lot of their marketing is based on occasions and seasonal triggers. Football competitions for example and at Christmas are the two big occasions that they sell so many tubes of Pringles, so how do they tailor their content. Historically, with Kellogg’s they’ve separated above and below the line communication and kept them quite separate in terms of stakeholders. But in e-commerce it represents the opportunity to go between. So can they target people with above the line marketing and content with an actual shoppable link within it. That’s kind of the next step for them. And obviously technology will be critical to help them achieve and deliver it.
Sara said she lives and breathes MarTech and has done for a number of years. She jokingly said she wouldn’t admit how many, but that she’s constantly excited by how it evolves and how the market is evolving. With all the challenges the last few years have brought, one of the exciting things has been to watch how the online digital has completely changes and how it’s continuing to change businesses. She highlighted Joe’s point regarding Kellogg’s changing as a business and noted that ‘it’s changing mindsets. Plus, it’s exciting, and moving in directions that will change their business, and rely heavily on the data that’s been discussed. Marketing technology will absolutely, allow them to have those interactions, take the above line, below the line, face to face interactions and mimic them as much as possible, in a digital experience. She explained that she finds that endlessly exciting, and for every cycle they go through there’s another way of thinking about using the data. There’s a new channel that they have to communicate, a different way of chatting with their customers, and the exciting thing is to bring the innovation to that and bring the innovation to their engagements with their customers.