Even Chocolate Has to Adapt to the Digital Age

Snack purveyors like Hershey traditionally depend on convenience stores and grocery checkout aisles to get their products in front of customers. But with digital giants like Amazon radically changing the retail landscape, how can these businesses adapt to changing customer shopping behaviors? In this episode of Mastering Innovation on SiriusXM Channel 132, Business Radio Powered by The Wharton School, Doug Straton, Chief Digital Commerce Officer, discusses The Hershey Company’s strategies for connecting with consumers, addressing their needs, and analyzing data to create a closer customer relationship.

As businesses continue to evolve with the digital marketplace, it’s increasingly important to connect with customers over a broad array of channels. After joining the company at the end of last year, Straton made an effort to collect and analyze consumer data to create more efficient systems internally and externally with targeted consumer outreach. He explains the strategies and potential problems that can arise when balancing the relationship between consumers and retailers.

An excerpt of the interview is transcribed below. Listen to more episodes here.

Transcript

Doug Straton (Chief Digital Commerce Officer, The Hershey Company)

Nicolaj Siggelkow: Hershey is a $7.5 billion manufacturer of chocolates, cookies and snacks. At first glance, one might wonder why it needs a digital strategy. I really hope that my chocolate will not come digitally to me; I want to have it in my mouth. Of course, the moment you start thinking about how our shopping behavior has changed in the last couple of years, it comes obvious that all firms need some digital strategy to connect to their customers.

My colleague Christian Terwiesch and I have been working on this topic for quite a while, so I want to start our conversation around what Christian and I have been calling the “recognize, request, respond, and repeat” loop. Customers have needs, but sometimes they don’t know what their needs are. Their needs are somewhat latent. So how does Hershey help their customers recognize what their needs are? For instance, there is no chocolate in the house. (That would actually be a crisis in my household.) Doug, how do you help us recognize our needs?

Doug Straton: The first thing is the loop that you’re referring to. We have a similar kind of a virtuous circle here at Hershey. We put consumers at the center of the loop. That’s about understanding what the consumers’ needs are at a very basic level and then understanding their behaviors across what we call the shopping journey, whether it’s online or offline.

Once you can identify that, then you can start to tailor how you are going to connect to those people, whether it’s through media or directly through email, and then how you engage with those folks, how you get them to buy your product. How do you then close the loop by engaging with them again? We call it the five Cs. It would be consumers at the middle, then connections such as traditional and digital media.

The content piece would be the third pillar, which is what we talk about as “being brilliant,” whereas the connections piece is about “being found.” Content is more about the digital aspects or the digital manifestation of physical pack and the store world.

Then what we call a convert is the most obvious one: how do you sell? The key difference now is that a few years back you would have thought, “I’m going to buy something; I’m going to go to the store.” That is still the predominant place where people buy, but there’s at least four other big buckets of fulfillment models that retailers need to use to enable people to get the product and consume the product. We can talk a little bit more about why that convert is so important, particularly as it relates to data and algorithms.

The final piece of the five Cs is what we call community, which is about building relationships with our consumers directly, as opposed to having retail and intermediaries. It’s a bit like your loop, but obviously tailored for our business needs.

”The store is still the predominant place where people buy, but there’s at least four other big buckets of fulfillment models that retailers need to use.” – Doug Straton

Siggelkow: To understand the customer more deeply — which is what needs they have, what they would respond to — how are you using data in that field? We just had a conversation about AI, trying to get data from customers and understand patterns or different customer segments more finely. What are some of the activities that you are engaging in in that arena?

Straton: Hershey had, from a consumer packaged goods perspective, an early lead in terms of the use of data and data science. We have a robust and large data scientist team underpinned by information services and a technology group that maintains the data storage, the health of the data, and then the use of the data at some level — essentially the accessibility of the data by the broader organization.

We’ve been doing this for a couple of years. Where we really started at that point was with the data that we had. The data was the internal data, some enterprise data, some syndicated sources, and some retailer data. A lot of our work in terms of data and understanding the consumer was coming in at a more macro level where we couldn’t really get down to the deep nitty-gritty of what was driving the behavior that we were seeing from a point-of-sale perspective.

What we’ve done in terms of that five Cs strategy is we’ve looked at how we’re treating data and what our focus has been on. We will continue to do with data from an enterprise perspective what we need to do from an automation and efficiency perspective. We’ll use data to get sharp in terms of how we run our business, but also start to apply the data and new sources of data to really understand the consumer better.

There’s a huge effort underway right now in terms of exploiting the breadth of interactions with our consumers, which is both from websites but also physical store locations and other digital and physical engagement. We’re grabbing that data, understanding what that data really means, and then reapplying that data in several different ways. One would be through insights. Understanding the consumers themselves would be trend-spotting.

The third thing would be using that data to more efficiently target people through media, and make sure that whatever we’re serving that person from a content perspective is relevant to that person, understanding that they like Reese’s versus some other some brand.

Siggelkow: You mentioned that casually, but it’s a hard problem to keep track of a particular customer as you have multiple touch points with that customer, be it online, offline, different types of online, different types of offline. I could imagine that it is not an easy problem to create that consistency of customer identity there.

“If you can get that data, you have to make sure that you have the technology infrastructure to connect those dots.” – Doug Straton

Straton: Well, it goes right back to data. What we’ve done across those five Cs is we’ve identified 27 primary KPIs, which are frankly just data points. Those data points represent those different areas, whether it’s connections, content, conversion, or the community piece. Those are indicators that we’re doing the right things. Obviously, when you collect those data points and start lining them up against each other, what you can start to see is if you pull one lever in one quadrant or one pillar, what’s the effect you’re going to have on some of the other quadrants or KPIs?

Number one, you need to know what you want to measure first, then make sure that you can get at that data. If you can get that data, you have to make sure that you have the technology infrastructure to connect those dots. Then you must figure out a way to clearly convey what that data means to the entire organization, as opposed to just a few specialized folks.

About Our Guest

Doug Straton is the Chief Digital Commerce Officer for The Hershey Company. In this role, he manages the strategic development of the digital commerce business unit and P&L. Reporting directly to Todd Tillemans, President of Hershey’s U.S. business, he is charged with driving the development and best practices in digital commerce, digital marketing, SEO/SEM, digital content curation and management, merchandising, online category management, marketing and Digital Commerce insights and analytics.

Prior to joining Hershey in November 2017, Straton spent nearly 16 years at Unilever. Most recently, he served as NA’s Vice-President of Digital, eCommerce and Data at Unilever. In this role, he led a number of multi-functional teams responsible for managing and driving pure play and omnichannel eCommerce customers, working on new revenue streams including venture-backed start-ups, DTC and acquisitions. He was also responsible for leading the Digital-eCommerce Center of Excellence, which focuses on digital marketing, shopper insights, capability and product innovation.

Straton attended Michigan State University and currently resides in Central Pennsylvania with his family.

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