Argyle Conversation: David Zucker, Chief Marketing Officer, Gilt Groupe

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JEFF ROHRS: Can you provide an overview of the Gilt Groupe?

DAVID ZUCKER: Gilt Groupe is a website that provides high-end products for women, men, children, and your home, as well as experiences like behind-the-scenes access to shows or trips to Malaysia at special prices. We have four primary businesses: men, women, children, and home, and we have launched two new businesses in the last two years. One is Gilt City, a high-end experience website where you can get behind-the-scenes experiences that you can’t get anywhere else; some are at a value and some are more access related. Then there’s Jetsetter, a premium website experience for travel. We focus on luxury destination facilities that you sometimes can’t get access to; some are membership only, some are at a discount, and some are full price.

How does Gilt differentiate itself from the explosion of daily-deal sites, such as Groupon?

Historically the differentiation has been that Gilt has not been about offering daily deals in the way Groupon does—you know, buy $20 worth of things for $10. Gilt has been about getting discount product that you can’t get anywhere else. The other differentiation is that the products that Gilt has are different from Groupon’s. Groupon is usually offering things like spas, restaurants, teeth whitening—more services. Gilt is about clothing, home products, kitchen utensils, things like that. And again, the product is usually higher-end designer product at a discount. The one similarly between us and the daily-deal sites is the limited time window. You usually only have 36 hours to buy at Gilt.

How is your marketing organization structured, and where do you sit within the organization as a whole?

I’m the chief marketing officer. I report directly the CEO. The primary areas that fall under me are CRM, which encompasses our analytics group, made up of a couple of people who are based in New York and an off-shore team in India. Research also falls under CRM, as well as all of our paid acquisition, and referral programs and retention, which is primarily our email program. We also have an integrated marketing team. That team has leaders for each of our business units as well as our high-end customer group, Noir, which you have to be invited into. The integrated team acts as a liaison between the marketing channels, mobile, and merchandising. The real function of that team is to help develop the programs and then execute the programs. The difference between what that team is doing at Gilt versus other organizations is the velocity and volume. It’s so large because every day the site’s changing, with between 12 and 30 new sales. At a typical retailer, they have five or six seasonal changes.

The other large function within marketing is creative—all the visual creative on the site, all of the photography, design, what the models look like, etc. Our editorial, media, and advertising teams also fall under that organization. The other part of the organization is social and mobile, which we’re in the process right now of getting much deeper into. We have found that the ROI of adding additional staff is positive, especially on the mobile side.

Do social and mobile lie within the same marketing channel as the other areas?

Social and mobile are managed by the same person right now, and that’s a direct report into me. It will probably stay that way, at least for the time being. The question we’re addressing is: What do social and mobile actually do for us? Social, for example, has been very successful in communicating with our members at times outside of our 12 o’clock window. That’s a great form of non-traditional advertising for Gilt. We have a decent amount of fans right now on Facebook, about 270,000. We’re trying to figure out how to monetize them, how to work with Facebook for revenue as they get more sophisticated in the commerce area. There’s also a huge amount of effort around social in our product and tech organizations.

Mobile, on the other hand, is something that we definitely haven’t cracked the code on—but we have definitely found some significant improvements over where we were historically. Right now, between 15% and 20% of our revenue is generated on mobile devices. It will index a little higher, more towards 20%, on the weekends, which tells us a lot about how people are using mobile devices on the weekend versus weekday. Like everybody else out there, marketing is trying to figure out how to use mobile more effectively.

We have seen success with offering mobile-only deals. Especially in our men’s area—which is where things have worked quicker in mobile, so far—we often put up mobile-only sales. Typically, these things are selling out. We tried this about a year ago and we really didn’t have any success, but we started again about six months ago, and it’s just taken off. If we fast forward a year in mobile, everyone’s going to look back and say, “The first thing we did was take our website and put it on a mobile device.” But we know people don’t use mobile devices the same way they use their computers, so we have to think about how they do actually use these devices.

Have you been able to capture any data yet on mobile usage of Gilt?

The marketing team has generated a lot of demand into mobile devices. We have over 1.2 million downloads of our applications. That is a huge percentage of our membership—we have about 3.5 million members. When we’re finding things that are or are not successful, we’re asking, why? And trying to dig into the behavior to get the reasoning: How do we change things to have more successes? We’re looking more closely at mobile from both a structural and strategic standpoint.

Have you been able to quantify how much of mobile is truly incremental?

We haven’t actually gone through the exercise of quantifying it. We’ll see, for example, that X% of traffic to Gilt is coming from mobile devices on a weekly basis. Through customer research, we’re finding that people will be in meetings, going about their days, and checking their mobile devices for what’s going on at Gilt. But they tend to still be purchasing on their computers. We’re seeing some visitorship that’s not converting on the mobile devices—that’s where we think there’s an opportunity. It’s hard to get to your credit card on a mobile device, but that’s not a Gilt issue; that’s just a mobile-device issue that we need to find a solution to. We have to figure out ways around that, to take out any friction in the conversion process. Honestly, it doesn’t even matter how much of mobile is incremental at this point. We know we’re not doing enough in the space to generate enough revenue. And we know we need a better mobile experience, so we need to be looking harder at what that actually means.

What is occupying the bulk of your time as CMO these days?

I was recently promoted, so I’ve been in the position about six months. A lot of my time is spent on building the organization. Gilt is still only three years old, and we have grown remarkably fast. We’re almost 650 people, which is huge considering when I joined the company a year and a half ago, we were just over 200. We were doing roughly $150 million in revenue then, and we’re probably going to do close to $450 million this year. So, building the organization has been a big focus, not just the organization of marketing but building marketing within Gilt. The senior executives in the company are trying to figure out what’s most important for the company as we go forward. This affects how we look at hiring and how we structure ourselves, so we are starting to spend a great deal of time on our employees.

What kinds of employees tend to thrive at Gilt?

We’re changing the store out with 20-to-30 sales everyday, so it’s high volume and high stress. It’s an entrepreneurial environment so you’ve got to be player/coach no matter what level you’re at. You might be doing things that you were doing years ago in your career. You have to be willing to roll up your sleeves, do some calculations and build your own PowerPoint presentations. You don’t have a team that’s going to go do that for you. Because of the speed at which we operate, people don’t always have the luxury of doing all the analysis they want. They have to be comfortable with a little bit of ambiguity. You have to be comfortable with the 80/20 rule or the 60/40 rule. If seven of your 10 decisions turn out to be right, we’re headed in the right direction. If three turn out to be right, then we probably didn’t make the right hiring decision.

In addition to personnel, what are the other main areas where you spend your time?

Another area I spend a significant amount of time on is managing demand generation, driving people in the front door. If you look at Gilt traffic versus the traffic of our competitors, we don’t always have the highest traffic, but ours converts better. Some of that is because our price points are little higher—I have to be a little more careful in terms of a buying surge and how we use paid advertising. In addition to the traditional demand-generation platforms, things like mobile and social are new and different ways for us to generate demand.

The third bucket that I spend a lot of my time on is really understanding the customer. I come from a CRM background, so I come from understanding data. I’m an economist by training. Customer behavior, whether it’s mathematical or not, is something that I’ve always looked at. At Gilt, we do a significant amount of research on our customers. We do some of it ourselves. We do our own surveys; we do online focus groups. We really need to understand, when people interact with our company, what’s working and what’s not? Customer research is a very big focus, looking to understand not only where we are but where we should be headed based on the opportunities.

In CRM, what technology do you use to support the marketing-intelligence data?

The data is accessed by our internal team and our team in India through an SAS analytic platform. All the model building happens in that program. All of the data that we get from email goes into the database. In social, we interact directly with Facebook, so we’re using platforms that they have. Mobile is all homegrown; we built the technology ourselves. We have a couple of apps. We have an iPad app and Android apps. You also can access us directly through the website on a mobile device, and then we also have a mobile site that’s accessible through BlackBerry. For mobile, we use a company called Flurry that provides us with data about what’s going on in mobile. The tech team decided they were going to buy that capability, which gives us all the tracking that we need for mobile devices.

How do you think about customer segmentation and making sure your messages are relevant?

One way we think about segmentation is: acquiring customers, developing customers, and retaining customers. A second way we look at it is: using data to develop other segmentation based on browsing, demographic, and psychographic information. We also do value-based segmentation, which is across the whole company, then we do segmentations for each of our business units. If you’re a high-value customer—which is one of these segments you may fall into—that is an important distinction for us. I also look at needs-based segmentation, which is something that we haven’t done historically at Gilt. This is more something that you would look at when you’re doing broad-reach advertising. It’s more about thinking about a fashionista versus a grunge person. This type of data is collected through surveys because it’s a lot more emotional. You can’t tie this data to a specific person in a database unless they’ve answered the survey.

Can social technologies like Twitter and Facebook help provide this kind of emotional data?

Theoretically, yes. In practice, we haven’t seen or heard of it actually working. If you think about all the friends you have on Facebook, they’re not all technically savvy email people. In some of our focus groups, people have said that they’ve stopped posting certain things on Facebook, maybe because they’re friends with people they work with, for example. Now Facebook has developed the capability to create different groups, so it’s something that they understand has been an issue. So far, we’ve found that our referral network is more efficient for us.

Is that referral network mainly driven by email?

The referral is by far our most efficient channel. We have a great offering, so people want to tell their friends. Email is a big part of our referral network; it serves two primary purposes for us. First, it reminds people that a sale is starting. Most of the traffic on the site is driven by email. We’ve found that the subject line is critical, and brands are what drive people to the site. I came to Gilt and started testing subject lines, and what works is the brand. Brands are the reason people come to the site and the reason they don’t come to site. What we have to figure out now is, if you like Tom Ford and we’re not selling Tom Ford today, but we have Pink, that might be something you like too. You can’t capture that in a subject line. The second challenge is that while there’s a huge amount of opportunity in email, a lot of younger people don’t use email at all. They’re using Facebook. They’re texting. We need to effectively make those transitions.

What do you mean when you say “younger?”

Right now it’s mid 30s and below. These people tend to have distinct behavior, and they tend to buy different things. If you’re 35 or older, you might be largely communicating through email and a laptop. A younger person, on the other hand, might be really comfortable entering their credit card on mobile devices, or communicating via text. Most people outside the younger demographic are still thinking about the experience on a mobile device as a web experience, just with little pictures.

In closing, what are some of the most exciting things from a marketing perspective happening at Gilt right now?

The most exciting thing we’re looking at is the ability to use data to create a highly relevant customer experience. We are starting to highly personalize the Gilt experience. Almost 60% of our buyers are getting personalized emails everyday. We run them through two algorithms that identify the order that sales appear in the email, and we’re now starting to do the same thing on the website. This is really important for us because the experience of Gilt is different everyday—it’s an impulse. We have to get you in, show you something that’s relevant, and help you buy. Ultimately, this is going to really help satisfy the customer. The other thing it does is it helps me scale our marcom dollars. I’m much more likely to get a positive-margin ROI from a personalized customer communication than if I’m blasting things out based on less predictive data. The use of data to create a relevant experience is critical.