Brands Must Grasp the Digitally Driven Consumer Journey or Risk Becoming Prey

Face it, you're now a technology company

This year, Levi's has hosted hackathons, designed an internet-connected jacket with Google and used artificial intelligence. Levi's
Headshot of Marty Swant

When Jacob Davis and Levi Strauss received the first patent for their blue jeans in 1873, their headquarters in San Francisco was nowhere near being the hub of innovation that the city is today. Over the past three years, however, Levi’s has ingested the ways of Silicon Valley into how it runs its business—leading the iconic fashion brand to hire not just designers of denim, but designers of digital products and other technologists to bring the brand beyond selling through retailers and into the burgeoning era of ecommerce.

That mindset has led Levi’s on a path of digital transformation that doesn’t just change how it advertises, but also how it sells, styles and otherwise services customers. This year, it’s hosted hackathons, designed an internet-connected jacket with Google and used artificial intelligence to understand and personalize the shopping experience.

Anne Bologna

“If we only focus on foundation, we know we’re going to wake up and have basically caught up to a moving target and we need to use innovation to really leapfrog and drive ahead,” said Marc Rosen, Levi’s evp of global ecommerce.

Because jeans aren’t always the easiest product to buy without first trying on, Levi’s wanted to create a digital shopping channel that would both increase sales and decrease returns. This summer, it launched its first chatbot, using AI to guide customers through the journey of jeans they might get if they visited an actual store. (Early results have shown those that use the bot are more likely to buy than those that don’t.)

Overall ecommerce sales are up, growing 22 percent in the last quarter, Rosen said. That’s largely due in part to data via the Oracle Marketing Cloud. Using Oracle’s data management platform, Levi’s has been able to better target audiences based on who might want premium products or who might want a discount. However, at its core is a shift to integrating business and technology teams, Rosen said.

“As we continue to evolve, as the world continues to evolve, it’s hard to imagine somebody on the business side who isn’t close to technology and working closely with that,” Rosen noted. “And it’s hard to imagine technology leaders that don’t understand the consumer.”

Levi’s is one of many legacy brands grappling with how to harness technology without being controlled by it, turning those efforts into revenue rather than rabbit holes. And while that includes new products and services, the core question is: how do marketers reprioritize their businesses to rethink the customer experience to avoid death by a thousand revenue streams?

“Digital transformation has shifted from the back room to the front room,” said Anne Bologna, chief strategy officer at iCrossing. “And the front room is about user experience.”

Digital transformation is increasingly an area of focus for executives in every industry. And yet, many don’t feel confident in their company’s ability to understand the potential for change. After conducting a survey of 400 executives at companies of more than 250 people, a 2015 Forrester report revealed that just 26 percent of respondents felt confident that their CEO had a “clear vision” for the company’s digital future. Meanwhile, just 21 percent said they had the right culture, while the same percentage said they had the right people.

"Digital transformation has shifted from the back room to the front room. And the front room is about user experience."
Anne Bologna, Chief Strategy Officer, iCrossing

According to Nigel Fenwick, the Forrester analyst that conducted the study, too often executives have a narrow view of  “digital transformation”—stopping at the marketing or the media side of the operation. He said building a mobile app is no longer enough.

Fenwick, who has spent the past five years examining how companies navigate digital transformation, said CEOs often don’t understand until it’s too late or they wait too long and have to spend more than they would have. Part of the problem is managing existing revenue streams while also disrupting them.

“I used to describe it as digital predators and digital prey,” Fenwick said. “You kind of want to be on the predator side—not the prey.”

T-Mobile is another company betting on the future of conversational commerce. According to Nick Drake, evp of marketing and experience at T-Mobile, more than 500,000 people have tried its Facebook Messenger chatbot, which it used to drive sales of the iPhone 8. Users were three times more likely to interact with a bot than with email, with the majority of interactions happening between 5 p.m. and 5 a.m. Eastern time.

“It’s not going to be a singular relationship to a handset,” Drake said. “It’s going to be a multitude of relationships to a multitude of different things. We couldn’t do any of that unless we’d broken the back of our transformation and realigned where we bring things to life.”

Drake said companies tend to overlook people and process, explaining that every idea gets built on three foundational questions: How does it help understand the consumer? How does it serve the consumer? How does it evolve with the consumer? “If you get the experience right, all the financial metrics you’re after will follow,” he said. “But don’t start off with financial metrics.”

That seems to be the case for Marriott, which has built up its data-driven customer loyalty program as a way of keeping travelers from switching to the likes of Airbnb. According to CMO Karin Timpone, the hotelier uses machine learning to merge data from the company’s 30 brands to create better personalized messaging and rewards offers. As a result, she said, members stay more on average and still pay rates that turn a profit. “You can try more in the short term if you have your long game thought out well,” she said.

One of the leading brands seeking to change from the inside out is Mastercard. For the past couple of years, it has labeled itself a tech firm, not a credit card company.

As a way of fostering innovation within the firm, CMO Raja Rajamannar instituted an annual review plan for every project and partnership used by Mastercard. The first one, which took place five years ago and lasted three months, helped the brand whittle its total platforms used from 168 to four distinct “internal buckets.” Rajamannar said it helps his team more properly vet “shiny pennies.”

“We look at the penny,” he said. “ We don’t reject it just because the penny by itself doesn’t fit our model. We try to explore that very rapidly seeing various combinations.”

This fall, those pennies Mastercard has chosen to bet on have included further investment in ecommerce via virtual reality and augmented reality. In September, it partnered with Swarovski, letting people tour a VR home filled with designs from famous designers and artists. After seeing and learning about the products, they’re able to buy them via a Mastercard account—all while still in VR. Mastercard also teamed with Marie Claire on a pop-up concept shop that used smart mirrors  to test products. And while they might sound like one-off stunts, the next question is how might Mastercard extend the technology to other partners and scenarios. “We say that every connected device is a device for commerce,” said Rajamannar.

Marie Claire

Jim Stengel, CMO of Procter & Gamble from 2001 to 2008 and now CEO of Jim Stengel Co., said CMOs need to be part marketer, part “business model innovator.”

“They’re thinking about it much more like a venture capitalist would think about their portfolio,” he said. “We have to have a lot more bets, a lot more ideas, with a small amount of money behind them.”

For his new book, Unleashing the Innovators, Stengel commissioned a study by OgilvyRED to better understand what works and what hasn’t worked within brands trying to transform. The survey of 100 legacy companies and 101 startups found that firms with successful relationships with startups were three times more likely to integrate that mentality within the legacy business than those that didn’t.

“We all talk about the failure rate of startups,” he noted. “But the failure rate of big companies is on the rise.”

Saneel Radia, evp and global head of consulting at R/GA, said companies need to increase their appetite for risk if they’re going to stay ahead of the curve. However, they’re almost always measured based on what kind of assets a brand is dealing with.

That’s especially true when the brand is the biggest asset itself. A common theme for R/GA’s clients, according to Radia, is that they’re often competing against companies that don’t look like competition of the past. He cited Walmart, which hired the agency to help it understand the modern-day digital shopping landscape in which Amazon already dominates. Walmart also has another handicap that rivals like Amazon don’t need to deal with as much—corporate income taxes. Since 2008, Walmart has paid $64 billion, while Amazon has shelled out a mere $1.4 billion.

Radia wouldn’t disclose what the agency is doing for Walmart. However, it’s clear the retailer has been trying to move fast. Recently, it’s offered free shipping for online orders over $35 and announced a partnership with Google in which the firms will share data and also enable orders via the Google Home smart speaker—the main competitor to Amazon’s Echo.

“I don’t know if there is a culture in the world that doesn’t have their equivalent of the tortoise and the hare analogy,” Radia said. “You better start whether you feel like it or not, because your competitors are being measured on the longer term.”

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This story first appeared in the Oct. 30, 2017, issue of Adweek magazine. Click here to subscribe.

@martyswant Marty Swant is a former technology staff writer for Adweek.