When she was the chief marketing officer of McDonald’s USA in 2015, Deborah Wahl came up with the idea of serving breakfast all day. She told her team to pull customer data from the last three years to find “the number-one thing that people ask for.” It turns out that customers want to eat breakfast all day, not just in the morning. McDonald’s created its All Day Breakfast menu, which became a critical piece of the fast food chain’s turnaround strategy.
Wahl is now at the helm of another iconic American brand, as the global CMO of Cadillac. Speaking at the recent Wharton Customer Analytics Initiative conference, she talked about some ways that companies can more effectively deploy their valuable marketing dollars, as well as the challenges of promoting a legacy brand.
Citing a McKinsey report, Wahl said there are three ways for a company to grow: by increasing market share, through mergers and acquisitions and by expanding within a category. She said category growth is “that white space that no one’s in.” With this strategy, a company either creates a new product category or finds a new customer segment. Wahl said focusing on category growth “creates a whole bunch of new customers, traffic, sales, margin and cash flow, which is exactly what you want.”
McDonald’s All Day Breakfast innovation was an example of this, Wahl said. Another example was Toyota’s 2000 launch of the Prius, which created the new category of the mass-produced hybrid gas-electric car. Wahl had been involved with that launch as a senior marketing executive at Toyota. (She also was the CMO at Chrysler and held marketing jobs at Lexus and Mazda.)
For Wahl, category growth is the Holy Grail, but in her view companies spend too much time and resources trying to boost market share instead. Referring to the McKinsey findings, she said that out of an average of 8.5% sales growth among companies, market share growth accounted for only 0.1%; M&A for only 3%. All the rest came from category innovation.
“You can actually walk to the car, open the door, lean in and see all the stitching and the leather.”
She said Cadillac developed a category growth idea itself: a subscription car service called “Book by Cadillac.” For about $1,500 to $1,800 a month, drivers can switch out their vehicles up to 18 times a year. Insurance and maintenance are included. Launched last year, the service is available in New York, Los Angeles and Dallas. “For those of you who think this summer that you might want to change your cars frequently — a convertible one day, an Escalade another day for your trip to the country … ‘Book’ is a great way” to do it, she said.
To develop Book, Wahl said the marketing team looked closely at the customer journey and their pain points, or areas of frustration and inconvenience. They also considered factors such as how technology-focused Cadillac’s customers are, as well as growth areas in the market. Notably, she said, the team chose “progress before perfection” when launching Book, which is a principle she espouses as well. They moved fast to get the idea out there, she said, and now the company will keep iterating as it learns what customers like and don’t like.
Wahl noted that a category growth idea does tend to sprout imitators. Other car manufacturers have started experimenting with subscription models, too, she noted, just as other restaurant chains copied McDonald’s all-day breakfast idea. Does this mean it is still a success? “As long as I am leading the growth, yes,” she said. Category growth provides more opportunity both for one’s own firm and competitors, “so it puts us all in a better place.”
Selling a 116-Year-old Brand
Wahl said Cadillac is using new technologies to market its brand. For example, the company is working on deploying Twitter chatbots to provide advice to people shopping online for cars. The chatbot might discuss what kind of car to configure, as well as important factors for the consumer to keep in mind.
Another technology Cadillac is using is dynamic retargeting: delivering personalized ads based on products a user has recently viewed online. While it’s not a new idea, “getting the right vehicle, right benefit, right offer, to the right person at the right time, is incredibly productive and we continue to see huge growth in optimization of those [ads],” Wahl said. She noted that click-through rates are up significantly, as are conversion rates of shoppers turning into buyers, which tells her that the marketing dollars are being used effectively.
“The big challenge for legacy is you have to keep the core business going.”
Virtual reality has been added to Cadillac’s marketing playbook as well. Last year, the company began offering VR headset experiences in showrooms alongside the conventional test-drive option. This helps remedy the situation of having only a limited number of cars available for test drives. It’s also a way to let people experience new models even before they’re on display in the showroom. “Now you can actually walk to the car, open the door, lean in and see all the stitching and the leather,” she said. “It is incredible, and people are wowed by that.”
Virtual reality can also help carmakers avoid costly errors during the design phase, she said. Manufacturers can gather valuable customer feedback before making the huge investment required to build a new car model. Wahl saw this phenomenon in action while working in the home building industry. “You find the mistakes so clearly,” she said. For example, an architect might situate a bathroom near the dining room because of sound design principles and optimal use of space. But the homeowner might balk at the two being so close together.
Interpreting the Data
There’s an enormous amount of information on what consumers are doing and where they’re doing it. But Wahl said the data is syndicated, meaning everyone in the industry has access to the same thing. That’s why interpreting and acting upon the data are critical. “I’m always amazed as I look back … at people using the exact same data streams and the different choices that have been made about it, and [putting different] strategic stakes in the ground,” she said.
In Wahl’s view, businesses are in an era that requires pursuing multiple strategic pathways. However, she emphasized that all of it needs to point to growth, and that marketers should bear this in mind. She observed that given the trillions of dollars that are invested in marketing, one would think every company would be expanding. Yet, she noted, half of the Fortune 500 is not.
“While we all throw around [the idea of] ‘growth,’ we often do so many things that are not absolutely related to it,” she said. In an age when business is moving so fast, companies can’t afford to do anything other than make sure all the information, analytics and data we have is “absolutely actionable for growth.”
Wahl also reflected on what it’s like to innovate for a legacy brand as opposed to a new market entrant. “The big challenge for legacy is you have to keep the core business going.” That’s what generates the cash flow and margins so that you can actually do the innovation. Disruptor brands can just focus all their energy on their big breakthrough. Yet, she pointed out, even they will “eventually reach that peak where they have to balance it.”