Chapter 12. The New CMO

• Why must the CMO become a marketing technologist and integrate brand experience into enterprise operations?

• How can IT create greater brand value?

• How can IT build and leverage global B2B accounts?

• How can IT provide consumers with “benefits on demand”?

The Marketing and IT Functions Merge: Chief Marketing Officer

Chief Marketing Officer (CMO) is a relatively new title in the C-Suite. The definition and job content vary in different companies. There are no accepted industry standards.

We observe there is a correlation between the defined role of the CMO and the organization’s perception of the role of marketing.

If we think of the range of CMO styles as a continuum, there are two anchor points:

• Marketing activation CMOs actually “do” marketing, commanding large budgets and leading large program development and executional teams who report directly to them. They often provide a sales support function. These CMOs focus on current-year execution of research/analytics/insight-gathering and reporting, and on current-year implementation of marketing communications (advertising, promotion, and public relations). Their role is typically to

• Drive revenue via marketing programs.

• Achieve both customer acquisition and customer retention.

• Build brand health through marketing communications. For the type of organization in which this CMO operates, this is often expressed as “brand awareness” generation.

• Marketing capability-building CMOs focus on building marketing capability rather than “doing” marketing. They sit at the center of the enterprise to design and build marketing capability so that it can be deployed in the business units that build brands. As part of a matrix organization, the CMOs lead via a high span of influence but a low span of control. They do not command large staffs or budgets. Their role is to

• Develop best practices, processes, methods, and tools.

• Identify the talent needs of the marketing function and make sure that the right talent is recruited, trained, and deployed to support the enterprise’s growth needs.

• Apply analytics and learning techniques to create insights and new success models that drive innovation.

• Design and oversee the technology infrastructure to support marketing and make marketing operations more efficient.

• Provide shared marketing services to business units where enterprise scale and the benefits of an enterprise standard can make a meaningful difference.

We observe that CMO capability building is the emerging trend. However, the true C-Suite recognition for marketing has not yet become prevalent. The typical duration of CMO tenure is two years or less, demonstrating that expectations for this role are either poorly defined or impossible to meet.

However, we believe more CMOs will continue to evolve toward capability building, and that capability building will subsume the activation role. The new CMO will build capability and exercise that capability in brand activation. How can this be achieved? By integrating the marketing process with marketing technology, enabling one CMO to play both the capability building role and the activation role.

We can call this future CMO a “marketer-technologist.” Here’s the rationale:

• The CMO must drive the enterprise’s growth. He or she will do so in collaboration with the Chief Strategy Officer, the Chief Innovation Officer, and the heads of the business units and regions. More frequently, the CEO will turn to marketing to fuel and accelerate the engines of growth. The CMO therefore will take responsibility for the relationship with the customer—defined as the customer’s attitudes (satisfaction, trust, and love, defined via brand equity scores) that drive high revenue and high-profit customer behavior (loyalty and repeat purchases over time, the willingness to buy new offerings from the brand and to pay premium prices).

• The drivers of customer attitude and customer behavior can usually be grouped into three key areas:

• Innovation: Does the customer perceive that the brand continually delivers effective new solutions to his or her needs and is always on the leading edge of what’s available in the category?

• Communication: Does the brand communicate in ways that are relevant, at the right time and via the right medium—via e-mail, website interface, streaming video, podcasts, sponsored events, word-of-mouth recommendation, or any of the myriad digital and nondigital channels and vehicles that customers use?

• Brand experience: Does the consumer, in the experience of consuming the product or service, perceive that the brand delivers what it promises? Does it consistently meet the expectations it creates? Does it consistently meet the customer’s evolving needs?

• To deliver consistent customer experiences, the brand must be fully integrated into the enterprise’s operating system. This includes every call center operator at his or her console, every shipping clerk entering data into the logistics system to ensure timely and accurate delivery, and every IT and operations employee who affects whether systems properly support brand performance.

• To an ever-increasing extent, this requires consistency and integration between the CMO and the IT system. The CMO must become a marketer-technologist and understand how technology can support the processes that enable brand building to succeed. Increasingly, the CMO must be able to command the IT assets that can advance the breakthrough enterprise marketing management systems designed to maximize the productivity and effective use of brand assets.

Focus on Hyatt: Tom O’Toole

In some leadership companies in some industries, the marketer-technologist CMO is already in place. Tom O’Toole, Senior VP of Strategy and Systems for Global Hyatt Corporation, is one of the best role models for this leadership transformation. We asked him for his perspective.

Tom’s professional background illustrates the transition from old to new marketing. He began his career as a research analyst at an advertising agency in the narrow field of communications research methodology. He worked at the Wyse Agency, moving up to managing director for the Stouffer Hotel Company account. Stouffer recruited Tom to direct its marketing; subsequently, Renaissance Hotels acquired Stouffer. Tom became VP of Marketing of the Americas for Renaissance. He was recruited by Hyatt Corporation in 1995, where he has pioneered merging brand strategy, marketing, and technology into a new CMO role.

Tom initially experienced the classic VP of Marketing function, focused on marketing communications. But his career path changed when he became director of the Central Reservation function at Hyatt, which is really the central nervous system of the company worldwide. In 2000, he assumed leadership of IT. Under Tom’s direction, the CMO and CIO functions merged for the North America business. In April 2003, the Global Hyatt Corporation was formed, and this subsumed all the various operating companies. This includes 215 Hyatt hotels and resorts (more than 90,000 rooms) in 43 countries. This new Hyatt structure is responsible for all the operating companies and respective brands addressing the distribution chain between Hyatt Corporation and the client. In the hotel industry electronic distribution channels have a long history of being the critical link to the customer.

The travel industry as a whole, including the hotel industry, has for many years based its customer relationship on electronic distribution systems more than most other industries. The Sabre reservation system developed by the airline industry in the mid-1980s was one of the largest private telecommunications networks in the world. Electronic networks became the industry’s basic operating infrastructure. Hotels have very accurate transaction data; the capability to maintain this data by individual customer enabled the hotel industry to become a leader in database marketing.

This technology leadership put the industry in a position to take advantage of the emergence of the Internet. Internet distribution has restructured the travel industry in many ways. Hyatt was already doing most of its business electronically and was well placed to leverage IT. Tom’s challenge was to incorporate Internet distribution into the existing electronic distribution channels. So it is no accident that he came to be at the forefront of integrating IT into the core of the new CMO job function; the travel industry is the perfect laboratory to merge marketing and IT.

Here are Tom’s views on the new role of the CMO; the merging of brand strategy, marketing, and IT; and some examples from the Global Hyatt Corporation of how these principles can be implemented now and in the future.

The IT Evolution in the Travel Industry

As Tom describes it, historically in the travel industry, marketing was just the brand communications and promotion function. It focused on marketing communication through mass-media advertising, with a special expertise in “frequent flyer” programs. Marketing had no connection to the revenue-generating function of the reservation center—it was an activity in a vacuum. Only when marketing became Internet-enabled could it escape its silo and reconnect with the rest of the enterprise functions.

“Here is a simple way to view this. Circa 2000, we started running a banner ad on Yahoo!. It was linked into our central reservation system for a promotion offer with a special rate and limited inventory of rooms attached to it. So in that example, one could ask, ‘Is that marketing? Or is that management? Or is that central reservations?’ Well, it’s all three. The line crosses the conventional, functional definitions. By the late 1990s it became obvious that these were becoming arbitrary distinctions among the respective functions. Today if you were reading about business intelligence analytics, you could find it in a marketing publication or in an IT publication. The distinction ceases to exist.”

It was the integrative dynamics of real-world business systems—not some theory or ideal—that drove the transition of the CMO job at Hyatt. The historic flash point was the development of branded Internet sites that could accept reservations. As soon as the brand started to generate tens of billions of dollars worth of business through high-tech communications, the synthesis became an imperative. IT and marketing together drive the traffic to the website, and IT and marketing together ensure that the entire customer experience is seamless through to the back end of operational delivery at the hotel location itself.

“When I was interviewing candidates for a Chief Technical Officer position a while ago, I would ask every candidate, ‘In your company, where does brand strategy reside? Is it under marketing or under IT?’ And the answers were about 50/50, which indicates to me that different companies hadn’t really figured it out and were doing it different ways.”

IT Can Create Greater Brand Value

Frequent guest programs have been around for a long time, entirely IT-enabled. These programs are cornerstones of Hyatt’s brand equity because they affect the attitudes and loyal behavior of the most valuable customers. As befits a premium brand, Hyatt’s most focused efforts are promotions directed at more affluent customers. Affluent customers are more demanding and are greater seekers of personalization. The relationship programs are maintained and executed through database management and database marketing. So customer relationship management (CRM) is about personalization and customization of the guest experience, knowing guest preferences and enabling their delivery through the property management system, which is the property’s information infrastructure. True integration in marketing and IT really means that the property management system (technology-enabled operations) needs the functionality to deliver on the guest preferences that are captured by the CRM system (technology-enabled marketing).

The quality and capability of marketing-IT integration are directly related to the creation and enhancement of brand value. The advances in integration between CRM and the property management system deliver competitive advantage for Hyatt in the hotel industry.

“Several years ago we developed the capability for guests to identify specific interests that they had, or specific destinations that they’re interested in, and to receive specific offers from us through our e-mail programs on Hyatt.com. The customers personalized our marketing to themselves. We held an advantage for a while, but the industry moves fast, and today this has become relatively typical for most hotel chains.

“So we have just now taken our capability to a new level. It is called e-concierge. The customer can now go online and do all the things they would normally do with the concierge at the hotel: book a restaurant reservation, reserve a tee-off golfing time, whatever it may be, and do so online before checking in. Now we combine that with a PDA (personal digital assistant) or a self-service kiosk that’s in a lobby. The self-service kiosk has all the functionality that the behind-the-desk property management system has. So when we combine Internet self-service with a PDA, or a Wi-Fi-enabled device, there are actually a lot of cool things we can do to let our guests prearrange their settings and maximize the sense of customization that they feel. We’ve seen fast adoption of e-concierge services; our customers like them” (see Figure 12.1).

Figure 12.1. Hyatt’s advertising campaign.

Provided with permission by Global Hyatt Corporation

Marketing-Technology Integration Drives Continuous Brand Growth

Tom leads a relentless drive for continuous improvement in the linking of marketing and operations through technology.

“I would say we have become advanced in linking marketing activities to include rate management, inventory management, as well as conventional marketing activities. We are linking those to operating and financial results through Hyperion—our enterprise, financial, tracking, and reporting system. This gives us a global, enterprise-wide platform that we can use to discern relationships between marketing expenditures, marketing activities, and operating performance and financial results.

“We have multiple brands: Park Hyatt, Grand Hyatt, Hyatt Regency, and so on. We can correlate marketing expenditure by brand to operating margin by brand, and revenue by brand—all the metrics one would want to look at by brand worldwide, both from a marketing and operating point of view. That is something that we couldn’t do two years ago. So now we can use IT-enabled systems to guide brand strategy in real time.”

IT Enables the Details of an Individual Customer’s Experience

Tom ensures that the marketing-IT integration is driven by the principles of customer insights. One of those insights is that a hotel guest’s perception of the customer experience can revolve around the tiniest detail. A lot of details done right add up to a good experience; a single detail done wrong can mar the perception of an entire hotel stay. For example, consider the new technology-enabled world of checking in online and customizing your preferences online and never having to go to the check-in desk in the lobby. How does the guest obtain his or her room key?

“A guest can actually check into the hotel now through an Internet terminal access or web-enabled PDA. We call it ‘web check-in’ (see Figure 12.2). And with the new self-service terminals, whose inner workings have come a long way, we now can easily and quickly dispense the key. The guest can go to the web, check in, come to the hotel, punch into the self-service terminal, it ‘spits out’ their key, and they’re in. It has become very popular. The most basic measure when we introduce a new capability is, do guests use it? Both the web check-in and e-concierge usage are really ahead of our expectations.”

Figure 12.2. Hyatt Place self-service: high touch and high tech.

Provided with permission by Global Hyatt Corporation

Global B2B Account Relationships

A hotel chain’s marketing task is simultaneously business-to-consumer (B2C)—enabling an optimum experience for the individual—and business-to-business (B2B)—enabling a global customer relationship with the largest corporations and their legions of traveling executives. Hyatt’s marketing and sales automation systems for global accounts must scale to the largest customers as well as handle the needs of individuals. Hyatt’s marketing must be geared to generate insights about these corporate customers’ needs and then meet those needs superbly through the same principles of marketing-IT integration.

Tom gives an example of how the system must be enabled for the corporate customer experience.

“We do business with IBM, and they want to operate their corporate travel program through our hotels. Let’s say they want to plan a conference meeting in Atlanta. We need a system in place to enable IBM to directly access the Hyatt in Atlanta. They can access the inventory and the rates of inventory and make a booking. The ability for an IBM sales manager in Germany to book a meeting or check for availability of meeting space in Atlanta is something important we can offer our global accounts.

“Similarly, the system provides the CRM data for us to manage the relationship. If we want to know how much business the account did with every other Hyatt hotel around the world, the same global account management system can monitor and present the data and the trends. This is one of the features we’re in the process of putting into place right now. About half our sales in North America are groups and meetings; they are a mainstay of our business. So the system must serve both the individual guest and the global corporation.”

Technology Drives Brand Differentiation and Premium Margins

Brand building in the hotel industry is becoming more challenging as it becomes more fundamental to compete and win a share of the lodging wallet. Brand owners are operating portfolios of brands. This requires expertise in customer segmentation and the tailoring of the customer experience for each of the target segments, while also managing premium pricing and enhancing margins. It’s a tall order. But as Mark McCallum, Chief Brands Officer for Brown-Forman’s spirits brand portfolio, explained in Chapter 9, “Growth Through Brand Portfolio and Risk Management,” the sophisticated financial management of the brand portfolio is increasingly the job of the CMO. Tom O’Toole concurs:

“Brand differentiation is the most fundamental issue in our category, because it enables our top priority: enhance the brand premium. Ultimately, we’re talking about innovations such as the e-concierge and the web check-in to really create some brand differentiation and, at least for as long as it’s sustainable, a competitive advantage.

“Imagine when you go to the hotel reception desk and the desk staff is typing away behind the screen because they’re checking in a large group; perhaps a line begins to form. It’s a turnoff. Well, a couple of years ago we started working with a technology to put the property management system access on a handheld device. With that handheld device, we were able to move check-in away from the front desk. When a big group is checking in, rather than having them line up to the front desk, we can create a separate check-in space for them. It’s all part of enhancing the brand experience and therefore the brand differentiation.

“Technology also enables us to create new and better brand experiences from scratch. We are introducing a new brand called Hyatt Place that will be our competitor in the suites category. We bought a chain of hotels named Merit Suites, and we’re doing an extreme makeover to reemerge as Hyatt Place. We are designing this experience to be state of the art, maximizing the use of the technology to offer customer benefits while at the same time reducing operating costs. So the front desk has been designed from scratch to feature self-service terminals. The food-and-beverage in the lobby is all designed around a self-service point-of-sales system. This is the first time that one could design a hotel from scratch using the latest in digital media.”

The Future of IT and Marketing

Tom sees a world—certainly in the hotel business, and more broadly in the travel industry—in which IT and marketing will become ever more interrelated and the customer experience will become ever more IT-enabled. Brand-differentiating features will be created and enabled using IT. The marketing and IT functions will move ever closer together.

To illustrate this thinking, consider distribution management and inventory management. Companies such as Hyatt are coming closer to real-time automated decision making concerning rate and inventory decisions across distribution channels. Tom explains:

“It is not a complicated technical undertaking; we’re rapidly on the way there.

“Let’s say you click on Hyatt.com and want to book a room for a Thursday in January in New York. But you only want a one-night stay, and somebody else books the hotel for a three-night stay through a different distribution channel. We have one rate, and we accept each of those bookings. Now how do we take into consideration your value as a customer? If one reservation is from a high-value Hyatt customer who gives us thousands of dollars in business each year and is booking a one-night stay, and the other is a new or potential customer who wants to book a three-night stay, which one does Hyatt take, and at what rate? How do we marry CRM with revenue management and distribution channel management? That is where we are headed; in terms of business processes it’s a complex dynamic undertaking. But if we can figure it out from a process perspective, we can implement it from a technical perspective.”

IT Could Enable “Benefits on Demand” for Individual Customers

Hyatt management focuses on what they can offer their customers—particularly, recognition for their high-value, most loyal customers. It’s a competitive and dynamic industry, and initiatives such as room upgrades are quickly matched by competitors. Customer-driven customization is the answer. What the customer wants is unique to him or her, and the hotel chain that can respond to those customer needs on demand will be viewed as unique.

Here is Tom’s view:

“Why don’t we just let people tell us? If IT could deliver to the general manager of a hotel the information about what this particular customer really wants—a nice-looking room, three bananas, an orange, and a bottle of water whenever he walks in, for example—the general manager would say, ‘Sure, I can do that. That’s easy. All you’ve got to do is just tell me.’ So we have to build a systematic way to do that. Instead of us driving CRM from our side, why can’t we let the customer drive it?

“Once we have this connection of Hyatt. com to the handheld device, to the check-in kiosk, and it’s all connected into our systems, there’re lots of cool things we can do.”

How the CEO Should Think About Marketing

Obviously, much vision, competitive strategy, and capital investment are required to integrate marketing and IT to seamlessly link the customer interface to operations. Although a visionary and qualified CMO such as Tom O’Toole can provide capable leadership, he and the new band of marketer-technologists will need unwavering support from the boardroom and from the Chief Executive Officer.

The CMO must help educate the CEO to think differently about marketing capabilities. There is a critical difference between the “old way”—marketing as a communication function—and the “new way”—marketing as a business function.

“I think the communications function is where a lot of CEOs, perhaps even the majority, view marketing. The way that I look at marketing, it spans not just the conventional brand communication functions, but also really anything that joins our customers and us. This view has some very, very consequential business outcomes. If you want to talk to a CEO about advertising, will they pay attention? Maybe—to a point. If you talk to them about rate premiums, you’ve got their attention. Why? Because this is how the new marketing translates directly into operating profit.

“Now, if I was going to talk to CMOs, I would tell them, ‘You need to take on the business operations side and the IT infrastructure side of the customer relationship and revenue and profit generation equation. You can’t just take on the traditional part, like research and communications. You have to be responsible for the data center and all the other subjects and challenges that go with it.’ This calls for a much broader definition than ever before of the marketing role, of recruiting for marketing, of training, education and qualifications for marketing, and the entire career path for marketers.”

The Hyatt Corporation is leading the industry in providing both customer value and internal operational congruence to deliver that value through the convergence of marketing and IT. Tom O’Toole is a pioneer who is showing the way for marketing to reengineer itself to sustain top-line growth in a very competitive industry.