Zena Arnold: I believe marketing must be a business growth driver. We've got to link it back to performance in the short term where you can, and that's important for sure, yet also investing in building what you stand for for the long term. Because ultimately a brand is something that lets you have pricing power over the long term, and that's the language the CFO wants to hear. And finding a way to show that the more clearly we can, the more we get the investment in marketing.

Greg Stuart: Welcome to Building Better CMOs, a podcast about how marketers can get stronger and smarter. I am Greg Stuart, the CEO of the nonprofit industry body, MMA Global. And that voice you heard at the top is Zena Arnold, the CMO of Sephora. Before her current role, she worked at GE, P&G, Kellogg's, Google, Kimberly-Clark, and Pepsi. Wow. And she has also joined the board of the MMA. Today on Building Better CMOs, Zena and I are going to talk about the unique challenges and opportunities of leading marketing for a traditional retailer with a robust online business. Now, Zena studied computer science in college and only later discovered that she had a knack for marketing and leadership.

She had one foot in the past and the other in the future, and the secret to her success has been adapting to learning at every place she's worked. This podcast is all about the challenges marketers face and unlocking the true power that marketing can have. Zena Arnold from Sephora is going to tell us how she did it right after this.

Zena, how you doing?

ZA: I'm great.

GS: Okay. So I need to first off acknowledge that you're one of the many people who have left New York City for allegedly a better place in the last few months.

ZA: That's right. I moved to the best coast. Yep.

GS: I'm so disappointed. Every time somebody leaves, I feel like a small piece of me dies, like angels lose their wings or something. I don't know.

ZA: No.

GS: But you were a New Yorker, though. You've spent a lot of time here.

ZA: Briefly actually, but I loved it. I loved New York. It's such a special place. There's nowhere in the world like it. I do miss it, but quite happy to be back in the West Coast, back in the San Francisco Bay Area.

GS: I lived in the Bay Area. It really is nice. There's pockets of it that have gotten a little wonky recently, but otherwise it's pretty darn nice. In fact, I used to call my friends when I lived out there and I'd call back in New York. I said, "I never knew how nice nice weather could be." You're going, wow, I really dealt with all the pain of either hot sweltering summers or cold winters.

ZA: And I lived in Chicago, too, so I really had all extremes and very happy to be in more moderate temps now.

GS: I lived in Chicago for a year. I went there to launch Cars.com, and it was truly one of the most weather painful places I'd ever been. In fact, what I love about Chicagoans, too, they all say the same thing. It's very funny. I go, "It's so damn cold there." And they go, "Yeah, but the summers." I go, "No, the summers are kind of miserable, too." And they go, "Yeah, it's pretty bad, too." They all say the same thing.

ZA: Because it's true. And the winters are so bad that even though the summers aren't actually that great, you are so grateful for them because the winters are so terrible.

GS: That's what it is. Exactly. It's just the contrast. But they're really awful also. When I was much younger, I did high alpine mountain climbing, so I had all the gear for that and I would wear it there, and it wasn't enough. It was really bad. I was like, oh my god. But that said, I did like Chicago. I do think it's the best city in America. For a city, you got the river, you got great architecture, there's nice parks. It's well laid out. You can always predict where you're going to go. The traffic is never really bad. It's a wonderful city to be a part of. My joke was always, why the hell did they have to put it there? Couldn't they just put it someplace else? Oh, well, okay. I guess I'm missing the point.

Hey, the other thing interesting before we get into our main conversation is that you are one of the rare marketing people with a computer science degree.

ZA: I am. I am.

GS: Okay. So why did you do that, and why did you abandon computer science to go into marketing?

ZA: Well, it wasn't really by choice.

GS: There's a story. Okay, go ahead.

ZA: It is. It is. Well, I've always loved technology since I was a kid, I still remember I was maybe third, fourth grade when my dad brought home our first family PC. And I was just fascinated with it and loved experimenting and playing and learned basic coding very early and just thought it was a lot of fun. I didn't quite understand all of what would be coming, obviously, but knew that something here is just really cool and this is changing a lot and decided I want to major in that. So when I went to school I studied computer science, really enjoyed it. Had several internships at really great...

GS: Oh really? Wow.

ZA: ... companies, dot-com bubble companies. So I was all set to go work for one, get horribly overpaid for a 22-year-old coming out, but this was the dot-com bubble bursting. So just a couple of months before I was supposed to go and start work, the company called and they said, "We're going out of business so you don't have a job anymore."

GS: Oh my god. Who was that? Can you say who it was?

ZA: Yeah, yeah. It was this company called Scient, that they were—

GS: Oh, I know Scient.

ZA: Right, right. They were part of the fast five, not the big five consulting. And we did a lot of digital projects for companies. And again, internship there, phenomenal. Great company and I was very excited about going to work there full time, and then the bubble burst. I graduated from college. I moved back in with my parents and said I've got to find a job. I was looking and looking, and obviously it wasn't a great time for the job market, but I was pretty fortunate to find a role in marketing, product management at GE IT Solutions.

GS: Great. Great.

ZA: This was a company that was selling servers, workstations to midsize businesses. And for me, it was an opportunity to use everything I knew about technology. And I said, "Okay, I don't really quite know what this marketing stuff is going to be like, but I'll figure it out. Let's give it a shot." I ended up really liking it, because GE has a similar view to a lot of companies of product marketing and product management and tech is not just about the technology or just about the product, it's about managing a business. And I really enjoyed that perspective and learning about the breadth of business and how you could do different things to affect it. And so that started me on my path. I loved marketing. I'm from Cincinnati, Ohio. That's where I was living when I was working at GE. And so right in my backyard was Procter & Gamble.

GS: Of course, the best of the best.

ZA: I knew people who worked there and they said, "Hey, if you want to do marketing, that is the place to do it."

GS: Did they value your tech background at that time? So this is early 2000, right? Did they say, "Oh my gosh, she's got a tech background, she'd be good, we'd like to have that" or did they just go, "Oh, bad degree, what about marketing"?

ZA: No, no, no. I won't say it was a value of tech as in computer science per se, but P&G has always valued, and in fact you'll find a large percentage of their marketing leaders have engineering, technical backgrounds.

GS: Oh okay.

ZA: And I think because you learn how to think, you become very familiar with logical ways of framing your thinking, and that's very helpful in business, not just engineering and tech. I wouldn't say it was tech, like computer science, but they loved the technical thinking that comes with those degrees.

GS: Oh, okay. Okay. Okay. Listen, and you did great. You were at Folgers, I think you did Folgers and you did Olay. Is that right?

ZA: That's right. That's right.

GS: I worked on paper, Bounty, for years. My favorite brand I ever worked on. I worked on bar soaps, too, and I think I worked in personal care. I can't remember what the division was called. But yeah, I probably worked with 13 or so brands in my career at P&G. I love P&G, love, love, love, love, love. Smart people trying to figure out good stuff.

ZA: Fantastic training.

GS: Fantastic, fantastic.

ZA: I think you just learn from the best. And...

GS: Totally.

ZA: ... because it's a culture of promote from within and training, you learn so much that in other places you learn as well, but it's more on the job. I loved a lot of the structure that they put around teaching, because yeah, it's fundamentals that I carry with me to this day.

GS: Totally, totally, totally. Same for me, too. I learned some of the most from them and I just found it fascinating ... I think it was the first time I really felt like, I remember Bounty, we were talking about pallet size. I just loved it. Love, love, love the silliest thing in the world. I love that conversation. I don't know why I remember that 30-plus years later. Oh, well.

Now you've only been at Sephora for six months, so I've got to ask somebody like you who's got a technical, at least, appreciation... you've not done coding in a while, I assume. Okay.

ZA: That's correct. I took a long time.

GS: But you probably even understand how AI really works. Given your background and your extensive background in marketing, how are you looking at AI? It's the talk of the town. It's everything that's going on. First off, we agree it's the most important thing of this decade, correct?

ZA: Yeah, I would absolutely agree. For sure.

GS: So how are you looking at AI as a marketer, as a CMO?

ZA: In a few different ways. I am absolutely thrilled for what I think AI can bring to us as marketers in a few different areas. And part of it is my computer science background and knowing and understanding and being very excited by what's possible and the developments that have happened. And then part of it is, as a marketer, looking to see how I think so many different things will be enabled in this world once we figure out how to best use it. As I've been talking about it with my team and folks here, and even broadly in the industry, I think there's two big areas or pieces of AI and how we can use it. There's how do we use it in processes? So a bit of the behind the scenes, if you will. I think it's already been happening in media buying and a number of things that are happening right now in digital media.

I think it can also be huge in processes that we go through for creating work, even little things like tagging work, creating or keeping repositories of all of our content. So there's so many things that can just be done so much simpler, so much faster, require less manual work than I think everyone is all-in on. If you tell someone we can make some of these things that are a pain point easier, everyone's thrilled with it. One place that we have been using it that is customer facing, if you will, is on our website with product recommendations. We can use a number of different cues about what you have bought in the past or what you've looked at to suggest other products that you might like. And it's great.

As a customer of Sephora, I love it because it services a lot of interesting new things for me to try that I like hearing and seeing about that I might not discover on my own. And just from a business standpoint, it's great as well because it's opening up new opportunities for us to bring different brands, different products to our customers.

GS: Do you have a favorite application? Is there a business that you've seen that's offered a solution whether you're using or not? Or have you seen an application maybe in Sephora or even maybe as far back as Pepsi. But that you've seen and you think, "Wow, that is really cool"?

ZA: I think that some of the applications I've seen of chatbots have been outstanding.

GS: Totally.

ZA: I think it was, was it maybe United Airlines that I was having travel snafus a few months ago and the line was busy. You're going to have to wait 30 minutes to talk to someone or you could try our chatbot, and I thought this is not going to work.

GS: Nobody likes a chatbot.

ZA: But I'll tell you, though, Greg. I was impressed.

GS: Really?

ZA: Here's my issue, here's what happened, here's what I need help with, and it was simple. It was clear. It made the changes that I needed to do, and I was on my way.

GS: Did United disclose that as an AI or otherwise chatbot? Did they tell you it was fake, it wasn't a person?

ZA: That's a good question. I don't remember. I could tell that it was just in how the responses came, but they were effective. It helped. I think that those are only going to get better, and we'll continue to see the experience improve.

GS: The exponential gain in what's happening around all that now is just literally insane and what they're releasing. And I think you're right. I am actually starting to hear a thesis of my bot's going to talk to your bot. We might not even have to do a podcast anymore live like this. Someday you'll say, yes, my bot's busy at 3:30 but can do four. Is yours available?

ZA: No, no, my bot will be able to talk to anyone at any time. I'll have a million of them.

GS: I can replicate my ADHD and have five conversations at once on different topics. Exactly. I think that's what we're suggesting is going to go on here. I'm going to have to think that through a little bit if I'm going to be okay with that or not. Oh, well. Okay.

ZA: No, I'm not okay with that.

GS: You're not okay. Let me be really clear, I'm not okay with that.

ZA: Let's be clear. I want a bot to read and respond to my boring emails, but talking to you, this is the fun stuff.

GS: Let's get to the real topic here. Okay, so I ask everybody the same question, and if you take the thesis of the MMA, which is to really try to fix marketing, that's what we're about to do. I use this podcast in order to find out where we think the challenges are, where do we think the problems are? It's not just about glorifying the role that we do. It's like, well, where could we be better? Because that's the right long-term plan and that's what the MMA focuses on. Okay, so the question is, what do you generally think that marketers or marketing doesn't really get right?

ZA: I'd say that many, if not most, marketers don't get that brand and performance are not separate. I think it's really important to understand that they each have to drive each other, they're each linked very closely. To be clear, it is not easy at all to bring those together in an effective way. But when I've done that and when I've seen that out in the world, that's where you really get a lot of magic. Brand being this powerful statement of who you are, what you stand for, your brand's purpose for existing in the world. And performance being all about driving sales, driving conversions, whatever the ultimate business goal is.

But I've seen that the best marketing is when those two things are influencing each other very, very heavily and elements of both show up in the channels that you might say are just one or just the other. And when you can figure that balance out, figure out that yin and yang of influencing each other, that's when the magic happens.

GS: I think this is the number one question I hear from CMOs, and I have, as you are probably aware, we've been doing this research around understanding brand's relationship to performance and optimization and so on. We can talk more about that. But since we decided to go down that project, we're trying to do some research, which we can get into. I've probably talked to 300 CMOs and there's not one of them who doesn't say that is the discussion within their company. It's crazy that we don't have the answer to it. Okay, so let me ask you a couple of questions: are you talking about brand optimized with performance?

So you have to use performance in some cases and brand, it's that combination of two different marketing channels or is it treating brand as a performance channel and then taking responsibility for growth? Not just in performance, but in brand, too, as it might be to either the board or the CFO or wherever that might go within the company that you're at?

ZA: I would state it as it's about ensuring that you have the right balance of things in the right channels, but I don't think it's completely one thing or the other in any channel. So you might say like, okay, if I'm making a beautiful 30-second TV spot — that still happens, believe it or not. And if that's your goal and you say, this is just about an expression of our brand, if it is this beautiful emotional thing that doesn't show how that brand solves a problem for that brand's customer or consumer, or if it doesn't tell you ultimately who the brand is in a memorable way, if it doesn't tell you where to get that brand or use that brand, then you might've created a beautiful piece of art, but it's not going to have any effects. And so those elements need to be brought in. Now, on the other hand, you also don't want to get to using a certain channel, especially something like a TV ad to say, "The only thing this is about is performance, so I'm looking to get a click out of it."

It's just knowing, okay, you probably can lean heavier into that brand side, but you need to have some of those elements of performance to make it effective in that channel. And in something like search, again here I'd argue you don't have a ton of space, you don't have a lot of ability to tell a story. But when you can figure out how to do that and bring that in with various cues or a tone of voice, then you have the most effective performance ad because you can bring some of that bit of your brand and what you stand for into that. So yeah, I said it before, it's not easy to do that and it takes time to develop and it develops over time. Most of the brands I've worked on, you iterate your way there to figure out both the big brand positioning things and the most effective performance. You've just got to be open to doing that and playing with all the little levers until you hit something that works.

GS: No, it's interesting, too. And by the way, I had done the research about, that was probably 18, 19 years ago or so. But I did the research with Google in trying to understand if there was brand value out of search, and there was. So you're right, it's not either or. And we're certainly not running TV as just for brand, it had better produce sales.

ZA: Yes.

GS: Okay. MMA looked at this issue. We have a research initiative we've been working on for four and a half years. It's called Brand as Performance. And so the thesis is brand has to be performance, but it's over time. Now, the challenge you've had as a marketer is that there was no methodology to measure that. I know that, I have asked 300 CMOs and nobody has told me about an off the shelf methodology for that. We built a methodology, and I raised $2.5 million dollars in order to do a series of research studies. And we are now out in field. This is public information, we finished our first study with Ally Financial and that's been talked about at the Possible event that we do in April. And then also at the MMA CMO & CEO Summit.

Also, Kroger's has been executing a study. I literally yesterday saw the results of that study. I saw the first results 48 hours ago, but we showed it to the board yesterday and Kroger's hadn't even seen it. We've shown it to the board. And it's interesting. And so what we've discovered, I'll tell you what the data is now. What we knew from the Ally study is that if you gained a dollar today in sales from a brand campaign, that campaign would deliver another dollar and a half over time. So 2.5x. What appears in the Kroger study — and I'd like this to settle a little bit, I'd like the research team to finish their analysis before we be hugely public about it at the moment.

But we found that a dollar gained today likely generates between $5 to $6 down the road. These studies are three-quarter-million-dollar studies. This is very serious research. It's never been tried before. And in fact, when I told Google we were going to do this, they said, "We love this idea. We don't think you can do this. We don't think it's possible." And we're like, okay, well that's the smartest guys in the room just told us it's not possible. We'll go anyway, I guess is what we did. What do you think? We've never had that measurement. We don't really know what a dollar invested today is worth in brand in the future, do we?

I think what you're saying to me, which is funny for the computer science person to say, but from your gut, right, you knew it. Isn't that what you're in essence saying?

ZA: Well, yes. I think we also showed in the longer term certain brand metrics. There's a number of different ways you can measure it, but these brand love metrics.

GS: Yeah, brand love, brand trackers. Right.

ZA: Exactly. Have shown there's certain things that if you track and improve over time, they have a strong correlation with your business over time. But it's never been as tight as the ROAS that you know you're getting from a spend in performance marketing. So really excited to see that work. I think that could be really breakthrough.

GS: We think it's one of the biggest questions that marketers haven't answered that we really have an obligation to answer for the CFO and others.

ZA: That's right. We do. We do. And I've mentioned it before, I believe marketing must be a business growth driver. Got to link it back to performance in the short term where you can. And this is also what's so exciting for me about being in retail because now this is getting that data at the moment of conversion, and it's a lot more than you get as a brand. So that's important for sure. Yet also investing in building what you stand for for the long term, because ultimately a brand is something that lets you have pricing power over the long term, and that's the language the CFO wants to hear. And finding a way to show that the more clearly we can, the more we get the investment in marketing.

GS: It's got to be really interesting. We should talk about that a little bit, because you had Google Chrome, I saw it was a product. Kellogg's. You've got a lot of CPG in there and then some tech. Okay, but retail is a whole nother beast, and you don't have to use that word. You get daily sales. I've talked to enough of my retail CMOs on the board. You get daily reports on what the hell's going on. You really know.

ZA: I get emails every hour during our great sales.

GS: Oh my god.

ZA: You can watch things roll in by the second if you wanted to on dashboards. It's so much fun.

GS: Is marketing set up to be able to respond to that yet today, do you think?

ZA: No, not by the second, by the hour. And honestly I don't know if there's a lot that would come of making those types of changes. We're getting more and more closer to real time, but definitely not in it, and I don't know that we really need to either. But the fun of it is seeing the impact immediately in so many of the things you do. One of our key roles of marketing and retail is driving traffic, whether that's into a store or whether it's to our site or our app. And it's pretty awesome when you turn things on to see that having a direct effect almost immediately.

GS: That's really like running two different business lines, though, in some regard, isn't it? Customers are different, expectations are different, the marketing is going to be different against those I assume, or somewhat or no?

ZA: It's not shockingly different. And what we're seeing actually is this omnichannel customer shopping online, sure, but also coming into the store. Some of the exciting things we've done in recent years, we have a store mode of the app so people can actually come in and there's certain cues and things you can see when you have the app open when you're in the store. I think there's a ton more we could do with that.

GS: Wait, what does store mode mean? Do you mean you're getting an AR, you're not getting an AR experience, are you?

ZA: No, no. But being in the store, you can actually turn that on your app to help you find certain products that you're looking for.

GS: Wow. Wow. So helpful to everybody.

ZA: Yeah. Yeah. There's a lot of interesting, exciting things that we can do to enhance that omnichannel experience. And one of the things that's been growing for us a lot is buying online, picking up in-store. So people are thinking about it, they want something maybe right away, they know the store's on the way home, but let me just order it, have it waiting for me, I can run in quickly, grab it and go. So that blurring of the channels has been really good for our customer client experience.

GS: What is the biggest difference, though, you think between doing CPG and going to retail? What advice would you have for another senior marketer making that kind of transition that's been interesting to you?

ZA: I think and see that the pace and the quantity of the market work in retail is just off the charts. In traditional brands, you've got a couple of key products that you are launching every year, a few big campaigns a year. And here we've got something happening every few weeks because you've got to keep the excitement, you've got to drive that traffic into the store. I think that's the biggest difference. I think the other big difference is always balancing a bit of your equity as a retailer and the equities of your brands that you carry and that you sell. It's an interesting environment for me because previously in packaged goods, we didn't have any exclusive retailers. We were in all of the channels...

GS: Everywhere.

ZA: ... retailers were everywhere. And here at Sephora there are a number of key brands that are exclusive to us and so obviously want to talk about those. They're amazing brands. And so how do you balance telling that story plus our story? What are we bringing as sort of the curator of all of these brands? But then obviously the brands themselves aren't what people are there to buy. So that's another interesting and fun thing to balance.

GS: Let's take a quick break. We'll be back after this with Zena Arnold.