This week on the Friday 15:
– Home Depot’s $18 billion purchase of roofing distributor SRS Distribution, and how that will impact Home Depot’s strategy moving forward.
– Who should own customer experience? Master B2B recently held an executive roundtable in Atlanta and asked this question and the answers were all over the map. The guys discuss where they think customer experience should live in an organization, and why that matters.
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Brian Beck: Welcome to Friday 15 with Master B2B. My name is Brian Beck and here with me – Very well dressed – is Andy Hoar. Welcome to Friday. You look very handsome today. You put a clean shirt on, though, man, for once. Here at the end of March, almost at the end of the month. We’re here for our weekly Friday 15. We got some great stuff to talk about today, including breaking news. Did you see this Andy? Home Depot acquired SRS distribution for $18 billion to attract pro customers. Couple quotes out of this article I want to highlight from this in USA Today, but it was all over the news this week. This strategic shift comes as Home Depot, which has about 2,300 stores, faces declining sales in its core retail business. Executives believe Home Depot can grow by winning over more pro business because the wholesale market is fractured, and many companies don’t have the advanced e-commerce sales that Home Depot has. Andy, what’s your reaction?
Andy Hoar: There’s so many layers to this story. First of all, these guys like Home Depot and Lowe’s are fairly similar in some regard. A few years ago they were crossing the 50% mark. And so when it says it faces declining sales in its core retail business, well, if it’s less than 50% is that the core business anymore? Also, are they running from something or to something? That’s what kind of comes to mind here. Is it because the retail business is struggling that you’re moving more into B2B or is it because you see genuine opportunity? Probably a little bit of both, but they are definitely right about the wholesale market. It is fractured. We’ve known that for a long time. This is kind of the first time I’ve heard somebody say the quiet thing out loud, which is, hey, we’re kind of better at e-commerce than the B2B companies are. And so maybe if we can roll those guys up underneath us, we’ll handle the e-commerce and the customer relationships. And it’s actually an interesting segue in our conversation here about who owns the customer. And you guys can handle the stuff we don’t know as well, which is the sales and the marketing, but it kind of does reduce the B2B company, like SRS, I hate to say this, but to a sales and marketing operation because even the fulfillment has become commoditized of late. But I don’t minimize that, but it’s kind of like, SRS knows these customers, they’re on the job sites, they live and breathe in this world, but we’re going to handle the front end of the website. I don’t know, I’d be a little concerned if I was a B2B company, if I was being reduced to this.
Brian Beck: Yeah, but I don’t know. I think it’s a really smart move, SRS, they’re a top five distributor in building products, they’re one of the leaders, thousands of locations, trucks, et cetera, and, actually, I think about 700 locations, but thousands of trucks, great fulfillment. But also, they target a different market. They bring, than Home Depot is traditionally targeted. They’re in with the contractors. I think there’s a lot of supply, synergy here, in terms of bringing folks together. And Home Depot, honestly, even with HD supply, is more of a consumer or residential play. This gets them into the other side of it. And yeah, I mean, the disruption is clear. HD Home Depot is fabulous with e-commerce. And so, to me, this is a great move for them, and we’ll see how it plays out.
Andy Hoar: Well, keep in mind, there’s one question I had about Home Depot in this is, we’ve seen this movie before. It’s not perfectly analogous, but there is a parallel here between this and HD supply. And if you know the history of HD supply, but it’s called HD supply. It’s Home Depot supply. So they owned them, they acquired them, they spun them off and they reacquired them again. I wonder if that’s going to be the fate here of SRS. It makes you wonder, why did they buy them, then sell them off and buy them again? I know one thing about it though, it’s keeping the private equity, the PE firms in good business.
Brian Beck: SRS was a roll-up in and of itself. So it does get into this really interesting topic today, which is who should own the digital customer experience in B2B? So this topic, Andy, came up last week. So I was in Atlanta last week for one of our Master B2B executive roundtables. It was a fantastic group. Everybody from Genuine Parts Company, to Cooper lighting, Kimberly Clark, a bunch of other folks were in the room. These were the ecom leaders. Even, by the way, Home Depot and HD Supply were both there also. So it was a fascinating group. And the question came up and it started where the question that Jason Abdo from HD Supply asked, which was all about who should own the experience, the digital customer experience in B2B? And when we field that it to the room, Andy, we got all kinds of different answers. Somebody said, hey, Chief Revenue Officer, they were standing on their laurels. This is the person who should definitely own it. We had other folks say, no, it should be the VP of e-commerce or the Chief Digital Officers. Others said, hey, no, it’s more of a product function. It should actually sit in the CTO’s organization or the VP of IT. Then the marketing executive came up. Somebody even said, hey, everyone should own it. Well, if everyone owns it, then nobody owns it. So it was a great conversation. We could have spent probably two hours talking about this through the afternoon. It was a great way to start. And so we decided we wanted to tackle this on a Friday 15. But I think it gets to if you think about what the customer experience is and those of you on the podcast listening to this, I’m showing a picture of the customer journey map. If you think about the B2B customer journey all the way from discovering and becoming aware all the way through buying, purchasing, researching, et cetera, and then coming back and loyalty, there are so many different functions that touch this: marketing, sales, fulfillment, management, reporting, accounting. So this digital experience from a customer perspective, it involves many different aspects of a company. I think one of the challenges we have here is defining what the heck is customer experience. And so we pulled up this definition.
Andy Hoar: Well, I find this interesting because my curiosity was when we first started talking about this, and when you told me about what happened in Atlanta, is – I thought, why is this a controversy? Why did this actually come up? And why is there so much disagreement about who should own it? Look, this happens in every business about who should own the customer, right? But on the B2C side of the house, I don’t hear this as much anymore. I’m sure we heard it years ago, you were in B2C. Remember when some companies had a separate division for their .com from the rest of the company, and there was all this controversy about who’s talking to whom. I bought something online. I took it back in the store. And gee, nobody owns me. But I think there’s a similar part. That’s part of the nature of just being early in this digital transition. But also that this is an inward/outward approach. They should be taking an outward/in approach. If you’re going to outward/in approach, it becomes a lot clearer who should own the customer. And I will say this, there’s no way in God’s green Earth with all due respect to our technical friends that it should be the CIO or the CTO…But again, I was joking about this earlier. I mean, if you talk to the car companies, and they say, who owns the customer, the drive experience? Nobody says the guys who build the car. The answer should be something that’s more customer-facing. And that’s why I said if it’s outward/in it becomes a lot clearer who isn’t in the running to own the customer experience.
Brian Beck: Let’s look at this definition here. And basically, in a nutshell, customer experience is how customers perceive their interactions with the brand or company at different stages of their customer journey and in various touch points. So your outward approach I think makes a lot of sense. You’re thinking about it from the customer’s perspective. Then I think it does become clearer, right? But think about the benefits, too. And how the benefits to the organization, how they translate– and that also can be a signal, I think, to where this should sit.
Andy Hoar: I think the controversy here is – is this a digital customer experience, or just a customer experience. Because if you just focus on digital, then what about the other channels? What about the interaction with the customer service group? What about the face-to-face interaction or the over-the-phone interaction with the salespeople? What about through partners? Do we just forfeit that and say, well, we got the digital stuff and we got the non-digital stuff? But I’m sorry. Customers don’t really see your company that way. When they interact with your company, either over the phone, buy fax, you name it, it’s just an experience. And so I think we’ve got to have a whole other conversation about whether digital is still the relevant definition here. But when you were talking about what happened in Atlanta, what came to mind was we put these metrics on screen, because somebody said Chief Revenue Officer. What do you mean by Chief Revenue Officer owning a customer experience? And as we talked about in a bit, you and I came to the conclusion that the people who will suggest that are probably being driven by the quantitative side of this. And they’re thinking, oh, whoever owns the revenue profit component of the relationship should really own the relationship. And I don’t know if I agree with that in any way, shape or form, because then the premium is placed on generating revenue and profitability, which may not be the best customer experience.
Brian Beck: I think the kinds of measures as you look at, for example, different metrics that drive the great customer experience. Certainly you’ve got revenue metrics. You’ve got a decreased cost. But you think about efficiencies and loyalty. And you talk about increasing customer satisfaction also as a metric to improve the customer experience. Well, frankly, that shows up in things like loyalty and repeat purchases. My favorite metric of all, share of wallet, things like that where you could argue – and I think that’s what David from KEH was arguing when he made that point (he’s a CIO, by the way) that these things show up in metrics, even if they’re soft, kind of measures of the customer experience. So that’s his argument. And you make it a part of the CRO’s responsibility, not just top line revenue, but also the profitability of the operation. And that helps to service that. But I don’t think you agree.
Andy Hoar: There’s another dimension of this too. I would imagine the CRO is more focused on short-term, right? OK. Quarterly, annual revenue, right? Profitability. We know that the digital customer experience, the customer experience, is something that is not a project. It’s a program. It requires continued investment. And if you don’t have somebody who is invested in that, I can see the CRO saying, ah, it sounds really expensive. Let’s do this on the cheap, because it’s generating cash. And over time, they fall farther and farther behind. The customer experience gets worse and worse. So you need somebody who’s interested in, like you said, retention, loyalty. And I just don’t think that’s part of the remit of the standard Chief Revenue Officer.
Brian Beck: So the question, then, we’re begging here is that where should the responsibility for the customer experience live? I have an org chart here, which shows kind of a typical chairperson, CEO, and then all the functions. And should it sit with the CMO? Should it sit up with the CRO, the CTO? And of course, you can’t forget about the Chief Digital Officer, because that’s a newer role that’s come into organizations. And with a VP of e-commerce or the SVP of e-commerce, sometimes they report to the CEO, for example. So where should it live? Andy, what do you think?
Andy Hoar: And you forgot the chief experience officer now. Some people have created that. Maybe it makes sense, but oftentimes it’s because they can’t settle the arguments. So they go, well, let’s just create a new office for this. But if they don’t have a P&L, like we had this discussion about Chief Digital Officer versus a VP of e-commerce, if you don’t have P&L responsibility, it turns into a center of excellence and standards. But you don’t have any real power. So to me, it’s going to depend on the organization. But I think the answer is by taking an outside/in approach. Now, there are good arguments for various people here, and we could go down the list. The CMO is responsible for acquiring and retaining customers. That gets kind of close there in a lot of organizations. The Chief Digital Officer is responsible for the digital component of this, and digital, not just online, but enablement in the call centers, et cetera. But that doesn’t really hit the mark, in my opinion, for a customer experience, which is, kind of, maybe beyond digital. We talked about the CRO. I think this Chief Experience Officer– again, it feels like a default. We can’t figure somebody else out. Who owns the customer experience in every other walk of life?
Brian Beck: I think it really does end up depending on how you structure the role. Ultimately, I think a CXO or Chief Experience Officer can work, but they have to have real organizational influence. It’s the same argument as a Chief Digital Officer. There has to be some real meat to them. Otherwise, they turn into the chief cheerleader. And they end up selling the whole time and have no real power to do anything. Whoever is in this role has to have power to do something. And whether you call it Chief Digital Officer or Chief Experience Officer, you put it under the remit of the revenue officer or the marketing officer, it’s almost less relevant or less important than the actual way that the organization is structured. But don’t you agree?
Andy Hoar: I do agree. But I think if you were looking for one thing that would drive your decision making, the one thing that occurs to me is whoever has access to the data about how customers are interacting with your company and has the authority to make changes. I’m thinking a lot. Who is it at Amazon? Well, I think Amazon would say, it’s the data. We believe the data. The data is the Chief Customer Experience Officer so to speak. But it’s not just the data because if you’ve got all the data in the world if people do not have the authority to make the changes, it is a culture at that company around using data to drive things. And I don’t think that’s in question. So maybe it doesn’t even matter at Amazon who does it? We seem to charge the customer experience because it’s just obvious from the data. Now, that does raise questions about long-term investments. So probably a combination of the data and an enlightened CEO.
Brian Beck: Andy, I think that at Amazon, the customer is God. It’s embedded in the culture. And it’s all the way down through the rank and file. You talk to anybody at Amazon. It is embedded in their DNA and their culture, how they speak, how they act, how they measure, how they do everything. So in the world of Amazon, it’s almost like the whole company. That’s a company where you can reasonably say, the Chief Customer Experience Officer is everybody, because they really have a culture that reflects that. It’s quite impressive. So we asked our LinkedIn community, Andy, what they thought. Who should own the digital customer experience in B2B? Now, we put up a poll. For everyone who’s listening here, most of our community is filled with VPs of e-commerce and Chief Digital Officers. We had four options here: VPs of sales are Chief Revenue Officer, Chief Marketing Officer, and VP of Marketing, or VP of e-commerce, Chief Digital Officer, or none of the above. 59% picked VP of e-commerce, Chief Digital Officer. A distant second was Chief Marketing Officer. It’s a self-fulfilling,
Andy Hoar: I think it depends on where you are. The maturity of the digital organization, the way things are changing so quickly, this reflects, I think, in B2B, how it’ll prepare a lot of B2B companies for digital transformation. So this makes sense because companies are in the digital transformation part of their development right now. I’d say in five years it should start shifting more to our CMO kind of role, because – I think we talked about this once before- I did a survey about this a couple of years ago, and I asked B2B companies, what percentage of them had a Chief Marketing Officer? Now, in the B2C space, it was like two thirds-ish. In the B2B space, one third. So, if you don’t have a CMO, then that’s a little bit later in your development, more companies will have that. They’ll be focused more on acquiring and retaining customers, as opposed to what a lot of CMOs are, I think, in B2B companies today, more aligned with partners, trade, trade shows, etc. branding. That’s a dimension of the CMO role, but it’s an advanced dimension of the CMO role.
Brian Beck: It also presents an opportunity, because people can structure the role in such a way that they’re effectively the customer experience officer, and builds in a lot of the things we’ve been talking about, and then puts the eCom function under that person amongst other functional areas.
