Despite vehement denials to the contrary, retailers often unwittingly create silos within the corporate structure that at times foster more of a competitive rather than a cooperative environment between departments and business units. For those of us that have spent time behind the desk at a retailer, we can likely come up with a few our own examples of structural or even compensation-related situations that prevented internal cooperation. More often than not, each department has their own goals and objectives and very rarely do any of these involve partnering or sharing the limelight with another department.
In my experience, Marketing and Merchandising are two internal disciplines that often find themselves in adversarial positions. It is not as if this situation has gone unnoticed. As one remedy, some retailers of sufficient size and demeanor have positioned a Chief Marketing Officer (CMO) in the C-Suite that governs both. Quelling these inter-departmental skirmishes should be one of the key initiatives in a CMO’s annual business plan. But more than peacemaking, coordinating the efforts of these two vital arms of the retailer is becoming a necessity to remain competitive.
Merchandising has traditionally driven the content of the weekly circular, the products and placement of products on the shelf and the all-important relationships with the CPG brands. Most merchandising departments are organized by defining the business in clusters of departments and with further granularity in categories. Within the management of these categories, the brand relationships are particularly coveted as brands still come calling each year with a pocket full of money to promote and discount their products within the retailer’s merchandising calendar.
Marketing, on the other hand, typically is charged with public relations, advertising, and shopper marketing and loyalty promotions. Promotions typically involve accessing customer data, targeting and managing a loyalty program if one exists. Often, marketing has their own promotional budget, but is menial compared to the dollars that flow from the brands to their brethren in merchandising. It is this area of promotions and shopper marketing that is often a major disconnect, not just for the retailer, but for the consumer as well.
The adage, “one hand does not know what the other is doing”, is hardly an overstatement when it comes to the bifurcated approach to the business that merchandising and marketing departments often practice. The result often leads to ad hoc promotions from the marketing department that have little or nothing to do with the priority category imperatives of the merchandising department. Merchants often dictate pricing and promotion strategies with no regard for the targeted programs and loyalty rewards that originate from the Marketing team.
CPG brands complicate the matter even further. They are looking for customer data and post hoc analytics from the retailer, which is typically not found in the merchandising department where their trade dollars flow, but rather marketing. If there is little or no cooperation and synergies between those the merchants and the marketers, brands can become frustrated and often take their “incremental” funds to a retailer that has figured out the process.
For those that remain mired in the traditional un-integrated approach, I offer a few suggestions as to how to begin to establish the important link between these two areas.
1. Marketing should be knowledgeable of merchandising goals and category level priorities. Certainly understanding the “margin mix” process and the roles of categories is a first big step in aligning promotions with the priorities of the merchants.
2. Merchants should be asking for shopper level data or shopper segment information (if it exists), pertaining to their departments and categories. Driving category level pricing and promotions in a smart targeted approach is a fabulous way to involve the marketing team as well as becoming more appealing to brand funds, that require post hoc analytics.
3. Both Merchandising and Marketing should agree to measure success with common metrics. That implies that merchants should be knowledgeable of the shopper marketing metrics such as household spend, shopping frequency, and share of requirements. The marketing team in turn should become fluent in understanding department and category sales and margin objectives, pricing strategies, and the role of store brands in the merchandising mix.
4. Communicate with each other via weekly schedule meetings that focus on plans, promotions, and optimizing brand funds.
5. Having a common analytic team to insure that all parties are getting the same version of the data can further develop integration between Marketing and Merchandising. Surprisingly, this is often not the case among retailers with multiple databases.
As with any discussion topic, there are retailers that excel in integrating their merchandising and marketing efforts, however there are others that are still structured to promote unintended internal competition. Fixing silos within the organization will pay big dividends for the retailer, their shoppers and their brand partners.