Thursday, August 20, 2009

Scott Cross (Office Depot) Talks Efficient Customer Response, Customer-Centric Marketing, and ROI

I recently interviewed Scott Cross for an upcoming issue of MarketBridge's client email newsletter (Minds Over Markets). Scott is Director of Strategic Campaigns at Office Depot. Scott's a super smart guy who's tried a lot of innovative things and has a firm grasp on the big picture of B2B Marketing.


AH: Talk a little about how customer data is being used to bring together vendors, manufacturers, retailers and distributors in a more customer focused strategy, and where that’s headed from a B2B perspective.

SC: The manufacturers don’t really understand who is making the decisions and what information is available within the network of their distributors and retailers. A lot of them aren’t set up to understand the information, and don’t have the capabilities to analyze it. So it’s really a green field, and that offers businesses the greatest upside today in the marketplace.

How can you get that data and marry it with the manufacturer? It’s critical because the manufacturer has the expertise when it comes to their products, customers’ behaviors and reactions to those products, and even customer trends when it comes to the features, benefits and requirements. What distributors and retailers have are customer data -- transactional and market basket data -- that completes the picture. So there is definitely room to grow there. For us, that’s where MarketBridge comes in: bringing the manufacturer together with the retailer. 

AH: How has customer insight evolved at Office Depot over the past few years?

SC: Obviously, the retail sector is important for us, but there has been a big insurgence in B2B. But when you look at our customer base, about 80 to 90 percent of our customers are actually businesses now. So we really started trying to understand what drives their buying behavior, and who the decision makers are. In the past we did a lot of qualitative research. Any type of quantitative research was based on surveys, but we didn’t do a lot with customer analytics, database mining, and market basket analysis on the delivery side of the business with our larger contract customers. Most of the market basket analysis was done with the retail customer data. 

So we’ve taken it to the next level by looking at the market basket information such as buying trends and behaviors, and looking at high value customers. Now much of our primary research is done with business customers rather than consumers. MarketBridge has played a big role in helping us understand that, and doing a lot of the modeling on our customer data set.

AH: As the manager around customer insight, what are the three most valuable reports that you receive or would like to receive? Which ones help you make better decisions about customers?

SC: I think ideally there are three reports managers want to see. First, a daily overall sales report that shows how you’re doing by product category and by channel is important, because every morning I can see whether we had a good day or a bad day and why, and the most effective channels from a product perspective. We’re also working to understand that at a customer level.

The ideal state is overall sales by product category and channel, and the second layer would be to look at that by customer segment. It’s the ability to drill into your sales vs. plan vs. last year, find out which categories are up and down, and in which customer segments. 

The third report would be how we are doing against campaigns: how a campaign is performing by product category, customer segment, and by channel. Then, taking it even further, how a campaign is doing at the sales rep level. It’s really measuring the performance at a high level down to product, channel, customer and sales rep levels.

And the next step would be to get this information in real-time, and I think we’re headed in that direction.

AH: Given that, we often talk about the three dimensions of account structure, product market basket and marketing effectiveness reporting. How much importance do you put on those three when you’re managing your business?

SC: Marketing effectiveness is certainly important. You want to understand what vehicles are working and which customer segments are responding to which vehicles. In today’s economy, knowing which customer segments are doing financially better and have a little more money to invest in our products is important. For example, the public sector is definitely a growth opportunity in the current state of the economy. 

Understanding the effectiveness of marketing to those segments is important, but just as critical is the product marketing basket and the account structure. For example, the product marketing basket allows us to understand that customers are buying ink, toner and paper, but they are no longer buying filing products, because budgets have been cut and they can reuse their file folders. So to understand how the product marketing basket changes by segment, by the cyclical nature of the economy and by the overall macroeconomic environment is important. 

And the account structure is equally important. Knowing the difference between a small single-office customer down the street and a multinational corporation with small branches all over the country is key. At the same time, how do these different accounts make buying decisions? Is it the owner of a small business vs. the administrator within a large company? When you are able to marry those three together, it’s really powerful information to use in effectively marketing to your customers.

AH: Who understands customers better, the marketing organization or the sales force, and why?
SC: The sales force understands the customer better when it comes to interacting and knowing the way they customers think. When it comes down to one-to-one relationships, the sales force is number one. That said, the marketing organization is more effective in taking that information and using it to segment the customers into similar groupings, so you can have the same type of effect as with the one-to-one sales effort. So in looking at the overall customer base, how to segment them and market to them, and also which product or offering is most relevant to the entire set of customers, marketing is the most effective.

AH: Switching gears, you’ve got a market research person on your team and plenty of analytics people that are dealing with your core systems. How can market researchers and data analytics people better integrate to drive customer insight? How do you take those two separate tools and merge them together?

SC: Our philosophy is that research and analytics should be in the same group, because data is just another view of the customers, so if you can understand the customer through market research, you are getting a better picture of what the customer looks like. So market research and analytics go hand in hand.

AH: With your CPG background, you saw efficient customer response take off with retail scanner data in the supermarket sector, for example. Now it’s finally happening for B2B, and Office Depot is a pioneer in that.

SC: I do think we’re on the cutting edge. You always feel like it can’t go fast enough, and you’re always feeling behind when you look at retailers and all the information they’ve shared for many years. But it makes you realize there’s a lot of opportunity.

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