McKinsey highlights key agile marketing lessons from Zalando
SOUTHEAST Asia isn’t very familiar with Zalando, but in the last 10 years, the e-commerce giant has grown quickly in Europe.
In the process, the company has created an interesting story — one of being a digital business that kept pace with changes in the industry.
In the last two years, Zalando has disrupted its marketing function entirely, leveraging technology to transform how the business advertises to and engages with customers.
McKinsey discussed the details with Zalando Senior VP Moritz Hahn to highlight how the company is really using technology to make its marketing strategy more dynamic using cutting-edge technologies.
“It was very risky not to change the marketing department, and we realized we needed to disrupt marketing. We figured out that we actually had to combine tech and marketing.”
According to Hahn, Zalando embedded tech teams into marketing because it wanted algorithms to help with the millions of day-to-day decisions it made in terms of investing in marketing.
“We first had to automate all the marketing processes. Our second step was to rigorously A/B test. With a randomized control group and a test group, we were able to isolate the impact of each euro invested in marketing.
“This brought the magic of machine learning to the game, as it let us see causal inferences on a day-to-day basis in millions of decisions.”
Hahn admitted that it took time to train the machine learning algorithms but over time, the solution has completely changed how they’re marketing.
From his description, it seems as though Zalando is quite agile in its marketing engagements now.
“As an example, in the past we had a couple of thousand creative assets on Facebook. Nowadays, we have up to millions of creative assets on Facebook at any given point in time.
“This is possible because we can automate not just content creation and uploading but also the routing and bidding for the placement of the different creative assets as well.
“As a result, we can deliver a personalized marketing experience to almost every individual customer.”
While the results have been more than amazing, Zalando’s team has had to put in the hard work admitted Hahn.
The biggest challenge moving to a machine-learning-powered, algorith-led, agile marketing strategy is the fact that it take time for the algorithm to learn from the data.
Sure, it gets better with time, but return on investments (or the lack thereof) could be quite challenging in the short term.
“In the beginning, in particular with machine-learning systems, you don’t see the benefits immediately. You have to go through a time when the performance benefits aren’t apparent.
“With machine-learning systems, the results come at a later stage. This makes leadership and a commitment from the top of the organization extremely important.”
Zalando is definitely on the cusp of a breakthrough with its agile marketing strategy. Although today’s success is led by machine learning, tomorrow might be entirely different — and Hahn understands that.
“Disruption can’t be a one-time endeavor. The ability to disrupt from the inside is true agility and will help us to continuously evolve our business,” Zalando’s Hahn concluded.