The retailing giant saddles up its customer relationships and asks an advertising agency to take the reins.
Posted Jan 29, 2008
Sears Holdings Corp. today selected OgilvyOne, the digital and direct marketing unit of Ogilvy Worldwide, as its direct marketing and CRM agency of record. The move, which essentially outsources the retailing giant's customer relationships for the first time, represents what analysts call an anomaly for the industry -- a reflection, some say, of the retailer's financial difficulties.
The assignment calls for OgilvyOne to develop and manage the strategic redesign, execution, testing, and ongoing optimization of targeted marketing programs for both the Sears and Kmart brands. The direct and email marketing was previously handled by multiple agencies. Ogilvy will service the account from its New York and Chicago offices.
"Most retail companies want to continue to manage the customer relationship, but Sears has seen an erosion of its business," says Zachary McGeary, associate analyst at JupiterResearch. "This is not a trend we see other retailers following."
Toni Lee, spokesperson for Ogilvy North America, says Sears is not the first firm for which OgilvyOne is performing CRM work, but declined to provide further details. Since the contract was just awarded, Lee adds, the marketer has yet to determine a CRM strategy for its client.
By outsourcing the CRM function to Ogilvy, Sears should be able to continue at least the same level of CRM service and perhaps even improve it, according to McGeary -- and at a lower cost than doing it in-house, enabling the company to focus on its core business.
Sahir Anand, retail analyst with the Aberdeen Group, agrees that Sears is taking an uncommon approach among retailers, due to its poor financial performance. But Anand says that, even in the face of dire financials, he doesn't think the move is a good long-term strategy for Sears: The firm is giving up control of the customer information.
Giving up oversight over customer information is not only a business concern, but a security issue, Anand says, citing Sears' responsibility for the data even if it's in the hands of a third-party such as Ogilvy.
Sears Holdings has struggled ever since the 2005 merger of Sears and Kmart. The company's stock price, which was above $195 a share in May of 2007, dropped to less than $100 a share before a recent rebound. The outsourcing is one of several moves the company is making in an attempt to improve its performance. The company also announced today a major restructuring, the departure of CEO Aylwin B. Lewis, and a reduction of the role of chairman Edward S. Lampert.
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