eTail Asia 2020

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*NEW* The Future Of Personalisation In Retail - Predictions And Tips For Online And Offline


The trend for personalisation in retail continues with much hype, but limited success - at least, in the eyes of consumers.

This apparent failing owes much to a disconnect between the retailers view of personalisation, and what the individual customer perceives - and wants - as a personalised buying experience. It’s a balance that the retail sector has to redress, if the industry is to fully benefit from the potential gains of true personalisation - which can be quite considerable.

According to research conducted by the Boston Consulting Group (BCG), personalisation is key to increasing the rate at which retail organisations can convert occasional shoppers into regular customers, and increasing the lifetime value of those customers.

That’s the strategic view. From a financial perspective, organisations that use advanced personalisation methods can achieve an improvement of 20% or more in their net promoter scores. What’s more, such retailers can see productivity gains of 6% to 10%, and incremental revenue growth of 10% or more.

McKinsey & Company go further, asserting that personalisation will become the prime driver of marketing success within five years. In that time frame, technological advances and improvements in information handling and data analytics will enable marketers to create much more personalised and “human” experiences across moments, channels, and stages of the customer journey.

These are exciting prospects, but there’s still some distance to go. For the moment, the number of retail organisations actually achieving personalisation in their selling tactics and actively gaining from this practice is limited. Retailers like this are however doing certain essential things right - and staying in tune with the trends and opportunities most likely to promote personalisation to the levels envisioned by industry analysts.

The Ideal Of Personalisation - And The Less Than Ideal Reality

Analysts consider many of the attempts so far made by retail organisations to “personalise” their marketing processes to range from ill-conceived and rudimentary at best, to crude, intrusive, and irritating, at their worst.

Many retailers assume that simply because an individual looks at an item, they automatically want it. Crude attempts at personalisation based on this kind of assumption include putting someone on a remarketing list, then pestering them with discount offers for goods they may have simply glanced at out of curiosity.

“Personalising” this experience further by putting their name on the follow-up advertising can be the final step in a process that sees that prospective customer look to some other retail organisation for a better experience.

This isn’t just a subjective view. A recent article in the New York Times refuted Facebook CEO Mark Zuckerberg’s claim that consumers prefer ‘tailored ads’, through a survey which established that 61% of the respondents did not want any tailored advertising - a proportion that rose to 86% when the question was restricted to political messages.

Besides the conclusion that people only receive tailored ads because they have no choice, the study takes issue with the concept of tailoring itself, seeing it - and many organisations’ attempts at personalisation - as a mechanism that adapts an existing message to suit an individual, rather than developing a marketing approach specifically designed from the ground up, exclusively for that buyer.

A similar study by McKinsey reveals that “two in five users overall said most [personalised] messages they received still felt like mass marketing that ‘wasn’t created with them in mind.”

Clearly, the fundamental principle of personalisation (as understood by customers) is being misinterpreted by many retailers. And the message that their marketing is giving to consumers is breeding frustration and a lack of respect - hardly the intended result.

Customisation For A Curated Future

In a truly personalised journey, power resides with the customer, who can decide whether or not they receive personalised advertising, the nature of the content they see, and the products they are able to access.

Some retailers do appreciate this distinction, and take steps to customise their buyer experience in a manner more appealing to their consumers. The tailoring brand Savitude for example, requests minimal data from its customers, yet uses this information to produce outfits cut to suit the customer’s body shape, their individual preferences, and even the occasion they plan to attend.

The tailoring analogy extends to current trends in consumption, which look for sustainability in the form of minimal purchases of curated goods, designed for longevity. The price tags associated with commodities like this may be higher, but consumers are increasingly prepared to part with their money if the products and services they get are specifically attuned to their needs.

This is the kind of personalisation that customers want: a personalised service on their terms, with responsible data gathering, their consent requested from the outset, transparency, and clarity over how their information is put to use.

Quantifying Personalisation - And Putting Observation Into Practice

Though a small percentage of organisations are getting it right, many retailers are unclear what steps to take and which capabilities to build, in order to generate and sustain a truly personalised experience for their customers.

The Boston Consulting Group (BCG) has developed a methodology enabling companies to assess and elevate their level of “personalisation maturity.” This metric is defined as “the extent to which companies enable personalisation across communication channels with advanced tactics, and support it by investing in personalisation capabilities.”

(Image source: Boston Consulting Group)

Studies by BCG indicate that retail organisations that implement personalisation initiatives and excel in delivering personalised experiences can quadruple the revenue lift they receive from these schemes. Forming more effective partnerships, boosting targeted advertising, and improving their use of data to make real-time customer recommendations are some of the ways in which retailers can improve their personalisation maturity level.

Customers who experienced highly personalised journeys with a particular retailer were 110% more likely to add additional items to their baskets, and 40% more likely to spend more than they had originally planned. In rating the organisations that they buy from, customers who experienced a high level of personalisation provided net promoter scores 20% higher than those from customers who experienced a low level of personalisation.

(Image source: Boston Consulting Group)

Top performing retailers use personalisation to make the customer experience as quick, easy, seamless, and intuitive as possible, across all touch points - online and offline.

Though it’s critical to develop the capacity to handle the huge amounts of data typically available on individual customer preferences, success doesn’t necessarily require organisations to create a unique experience for every customer, at every step. Instead, successful retailers may use technology to personalise the experience at critical touch points, in a manner that derives most value for the consumer and the retailer.

Balancing Data Needs With Privacy Concern And Customer Preferences

Personalisation requires retail organisations to continuously tailor the shopping experience to individual customers. This in turn requires a combination of first-party data (collected directly from the customer or target audience) and third-party data, typically obtained from external organisations and providers.

At all stages - and in an ecosystem that now includes legal frameworks like GDPR and the imminent California 2020 - retailers must aggregate, analyse, and utilise data in a manner that’s responsible, transparent, and in full compliance with whatever conditions of consent and disclosure the applicable regimes require.

In particular, privacy continues to be a top priority for consumers. The BCG study ranks “Keeping my payment information private” as the number one issue among customers surveyed, with “keeping my personal information private” coming in at a close second.

Despite these concerns, customers are increasingly willing to share their personal information with trusted brands, in exchange for tangible benefits such as a more streamlined and faster buying process.

In an atmosphere where McKinsey reckons that 46% of consumers want increased governmental regulation to protect data privacy, retail organisations chasing personalisation must go the extra mile to make clear to their customers that they are being transparent about how data will be used, limiting the processing of personal information to what is strictly necessary, protecting data against theft, and granting their customers the right to be forgotten.

Addressing The Issue Of Technology

According to a 2017 Salesforce Personalization in Shopping Report, AI-powered recommendations can induce customers to return for more, after their first visit. 37% of shoppers who clicked a personalised recommendation during their first visit came back, compared to only 19% of shoppers who didn’t click a recommendation.

Hyper-personalisation - a methodology that combines behavioural analysis and real-time data that a brand extracts from its customers - is another way in which retail organisations are connecting with consumers and taking personalisation to another level. A typical example of this approach is when a shopper browses a website for certain items and the website instantaneously recommends similar products based on their specific search history.

(Image source: CapGemini)

Implementations like this require investment in a certain level of technology and infrastructure, training or skills acquisition, and management of the tools and processes needed to provide omni-channel facilities that store customer information across all online and offline points of contact.

A technological foundation for personalisation also requires marketing and IT to join forces. For the business as a whole, cross-functional teams must take responsibility for product management, road mapping, developing use cases, tracking pilot projects, and so on. Agile management techniques are ideal, with teams dedicated to specific customer segments or journeys - and with the ability to act on decisions rapidly.

Retail Organisations That Are Getting It Right - And How They’re Doing It



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