‘Trust your gut, but verify it in the data.’
When Kroger Co., the largest supermarket chain in the United States, agreed earlier this month to buy Milwaukee-based Roundy’s Inc. for about $800 million including debt, the Mariano’s grocery chain, a subsidiary of Roundy’s, was the sweetest part of the deal. Roundy’s CEO Robert Mariano, ’87 (XP-56), relied on his signature blend of analysis and intuition to create the namesake grocery store chain five years ago. The Mariano’s stores quickly developed a cult-like consumer following and solidified Mariano’s reputation as a great merchant.
After beginning his career behind the deli counter at Dominick’s Finer Foods, Mariano rose to become CEO of the Chicago-area chain. He led the company through an IPO in 1996 and left when it was acquired by California-based Safeway Inc. in 1998. In late 2013, as CEO of Roundy’s, Mariano bought 11 locations from Dominick’s when it pulled out of the Chicago market, and he put his own name on the stores.
We recently spoke to Mariano about his Chicago Booth education and his view of leadership.
CHICAGO BOOTH: How has your Booth experience influenced your career?
Mariano: Booth really prepared me for the whole notion around retailing in a fact-based environment. The exposure to the rigorous thought around analyzing business issues and making decisions–that is key. When you run a business day in and day out, you need that consistent application of financial analysis and understanding of what the numbers are telling you about consumer behavior.
CB: You have experienced both a corporate career as president and CEO of Dominick’s and the success of striking out on your own as CEO of Roundy’s, creating and expanding the Mariano’s stores in Chicago. What was your biggest challenge when you decided to become an entrepreneur?
Mariano: The challenge is building–the people, the organizational infrastructure as well as the system infrastructure. You are hard pressed to do anything, especially in retail, without a very solid organization underpinning the entire enterprise. The people development and the culture creation take a lot of energy to develop and nurture as time goes on.
CB: We have so much information on consumers these days, down to minute details. How does Big Data fit with the intuitive art of becoming a successful merchant?
Mariano: Marketing analytics ought to support your notion of people and what they’re looking for. The way I learned it at Booth is—trust your gut, but verify it in the data. I have tried to live that. If my intuition suggests something in terms of the customer, I’m going to scour the data to either prove or disprove my notion. The analytics point you in the right direction but behind it are parameters that some human being established. Someone has made an assessment of how the consumer behaves; what things various consumers buy together with other products, and what might entice them to buy more. You have all this data, but getting it down to operational size and then beginning to interact with the customer and see if you can get them to change behavior is not yet a well formed path. I believe there is opportunity for people who understand the customer on the ground level to interact with those tools and make them work very effectively. So I think it’s a combination of marketing analytics and intuition. You have to have both.
CB: When you walk into a Mariano’s store, there is the oyster bar, the wine bar, the smoothie bar, and all those experiences that make Mariano’s different from a typical grocery store. Was that intuitive or data analysis or both?
Mariano: We did a fair amount of consumer research. We did more focus groups in terms of why customers were going where they were and vice-versa and what they were looking for. I had the opportunity to travel throughout Europe and the United States to see different types of stores. I remembered from my days at Dominick’s, when we did the Fresh Stores, that we didn’t push the envelope far enough with the customer. We could have pushed them further. At Mariano’s, we tried to push further. We continue to push. What I mean by push is to expose the customer to different and unique things and allow them the opportunity to tell you, ‘No, I don’t like that,’ or ‘Yes, I like that.’ I look at our major competitors, I look at people like Whole Foods, Trader Joe’s, Costco, Chipotle, and that’s quite an array of specialty grocers. So the “push” is what we’re trying to accomplish within the stores in terms of having what the customers want when they want it.
CB: Tell me about what went into the decision to open the Mariano’s store in Skokie. It’s the first kosher store within a Mariano’s store and is quite expansive, with separate kosher aisles, a kosher sweet shop, cheese shop, meat department, fish, and sushi counter. Was that decision data driven or intuitive?
Mariano: Most of us at Mariano’s have lived in this market, so we’re familiar with the neighborhoods and communities, and we knew this was an area with a heavily Jewish population. Once we decided on the location, we started to quantify the size of it and of course verify our initial sense of it. We looked at our demographics. We counted the number of synagogues. We talked to the rabbis. We got get a real sense of how many temples there are, how many people there are, what their likes and dislikes are. We collaborated with the Chicago Rabbinical Council for at least a year before that store opened to get the products and product care right. It was a significant effort to bring it to fruition and we continue to interface with the council to assess how well we’re doing, what things we need to adjust and modify, and what things we should discontinue.
CB: When should you trust your gut in a data-driven world?
Mariano: I don’t know that you ever trust it. There is always a tension between what your intuition tells you and what the data says. What happens is the data keeps you honest. You can still decide to do what you want to do, but at the end of the day the data keeps you honest. It forces you to constantly look at it deeper and make sure you’re not going too far afield. It’s not either or. It’s both the data and the intuition, and the observations that you see and feel.
CB: What advice would you give current MBA students looking to pursue careers in marketing today?
Mariano: You need to know the analytics, but you need to know human behavior. We know that consumers do not behave rationally. We know there is research that says they are going to do one thing, but they do something quite opposite. Human behavior is not a precise science. If you simply look at the analytics, you miss half of what you need to be looking at.
CB: Is it a good time to go into marketing?
Mariano: It is. I would suspect some marketing budgets from an IT perspective are going to be pretty robust over the ensuing years.
CB: What advice would you give someone going into a leadership position for the first time?
Mariano: I’m a big proponent of servant leadership. You have to create the right environment for people to succeed at a high level. The role of a leader is to make sure the right resources are allocated so people can do their best work and ensure there is a shared vision of what the future looks like while moving the business in that direction.
My recommendation would be find someone who can mentor you, someone who can help you see yourself clearly—your impact on others and your effectiveness on others—so you can become an effective leader. The only way we can become an effective leader is if we get constructive feedback, to learn what works, what doesn’t work and what you need to change.
CB: What was your experience when you first stepped into a leadership position?
Mariano: There is a difference between when you become CEO and any other role. In any other role there are usually others around you who have earned similar roles, so there are people that you can talk to and model your behavior after. But when you become CEO, it’s kind of lonely out there. They don’t provide you with a book. You have got to be very cautious about taking your own counsel. You have to develop listening places. Besides your own direct reports, you have to be able to listen to the rest of the organization, so you’re getting a good cross section of what’s going on in the organization while listening to the customer at the same time. You listen more, enabling you to get a sense of what’s going on in the organization; what the temperature of the organization is and what is driving success or failure.
When I went to Booth for my MBA, that was really an experience in listening–listening to how people went about their affairs and how they did things because we had such a cross section of industry. I found it very interesting to listen to how other companies approached things, what their culture was, how they did performance reviews, how they incentivized people, how the vision and mission of the company was communicated. Those things intrigued me, and I learned a great deal during my time at Booth.
CB: What is the biggest challenge facing business leaders today?
Mariano: Finding the right people. If you have the right idea, you can get access to the financial markets, you can get the money you need, but finding the right people to execute on those plans and having it function as a well-oiled organization is a challenge. I’m in a people intensive industry–but even if I’m running a software company, and I only have a half dozen programmers, each of those programmers is pretty darn important. I always advise people that you want to do work that you’re passionate about, and you want to do it with people that you enjoy being around. The old adage is people don’t quit companies, they quit managers. Anyone who is in a leadership role or manages people should know if we want our employees to serve our customers, then we must serve our employees.
For more on Robert Mariano at Booth:
Chicago Booth Podcast–Road to CEO Series: Robert Mariano and Maria Kim
Alumni Profiles: Merchant at Heart