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Furthering Personalization in Retail: Going beyond the “Why”

Generic customer outreach is outdated. We all know that at this point. It has to go beyond inserting a first name into the beginning of an email template (even though some retailers aren’t even doing that yet). 

When looking at personalization in the retail world, it is interesting how big of a focus it is, yet how little it’s executed. In a recent Mastercard Sponsored Report by Harvard Business Review on the Age of Personalization, eight in 10 respondents say personalization is important to their organization’s strategy, and more than half of which noted their personalization tactics are already an important driver of revenue and profits. Yet in a recent McKinsey survey of senior marketing leaders found that only 15 percent of CMOs believe their company is on the right track with personalization. 

Similarly, taking a look at Sailthru’s Personalization Index, it states that personalized marketing results in a 6 to 10% increase in sales. Yet, according to McKinsey, retailers are investing an average of 0.7% of their revenues in personalization. 

There seems to be a theme here. Personalization delivers results for companies who are utilizing it. Yet many aren’t (but are saying they are, or are starting to, or trying to start). 

Of-course retailers are saying it’s a focus, because if it’s not then your brand will die right? Retail is a cold world! There are countless studies, articles, and blogs like this that talk about why you need to deliver a personalized experience, or your customers will leave you for your competition. For example, this chart from BCG below highlights the level of personalization, corresponding with the number of items purchased, the value of the average order, and net promoter scores. Everything is up and to the right, so if you’re a retailer and you see this, you put personalization high on the priority list. 

There is one issue with that, which McKinsey explains in their article about the future of personalization. “Personalization is impossible if marketers don’t have the means to understand the needs of high-value customers on an ongoing basis.” Many marketers know that they need to personalize, but it is a matter of how, not why. The challenge for retailers is execution. 

So how do you achieve this level of personalization? Let’s go through a few steps that can help. 

  1. Start small. Identify what personalization means for your brand, and your customers. How many channels do you engage with your customers? Email, online, mobile, offline? While the end goal is for all of these channels is to deliver a consistent messaging, you have to start somewhere. If you don’t know where to start, take a look at Mastercard’s report on The Age of Personalization. In figure 1, they show which personalization tactics deliver a competitive advantage which is a good reference point. However, if you haven’t tackled “Hi, First Name”, you know where to start. 
  2. Think of your consumer’s life outside of your organization. It makes sense for you to rely on your internal data to drive personalization initiatives. Yet if you think about it, so much in a consumer’s life (outside of your brand) affects their relationship with you. What else are they interacting with in their day to day? Say you know from internal data that a customer is based in Boston. An external factor that could inform a personalized experience could be the weather in Boston, that tells you to deliver an offer for winter coats, scarves, hats etc. (It’s cold here, by the way.) Take advantage of external data sources that can more fully inform a customer experience, like weather data, survey data, third party data, census data, and more. 
  3. Don’t resist help from the experts. There is a reason why there are entire companies out there designed to do this for you – so you don’t! Developing a system that can unify and operationalize all of your customer data, then identify algorithms that will recognize customer behavioral patterns and propensity, while also deciding what engagement is best to keep that customer happy all on an individual basis, or 1 to many basis (while driving ROI) isn’t easy. If that isn’t in the budget, then simply start by learning to tell a story with your customer data to inform your engagements. 
  4. Be cognizant of data privacy. This is an important one! By interacting with your brand, your customers are trusting you with their data. Therefore, you are accountable with their personal information, meaning you not only have to protect that information, but also be able to explain how you do it. This means compliance with GDPR, and the upcoming CCPA. Your customers have the right to know what data you have collected, the right to request restriction of use of that data and deletion of that data. Get ahead of this! 

Retail is a cold world out there, and personalization is the future of customer engagement. Whether it’s by starting small, partnering effectively, or understanding what customer data you have and what else you can leverage to boost engagement, there is no time like the present to start! If this is something on your 2020 agenda, we’d be happy to chat about what that could look like. If you don’t want to chat but are still interested, check out some of our resources on SessionM University!