Mind the Gap: The Real Story of Personalization in Retail
Retailers know personalization matters, it’s getting the right technology to execute on a personalization strategy that’s the problem
Do you remember the last day that went by that you didn’t hear, read or talk about personalization?
Personalization has come to dominate nearly every conversation in the retail world for a very good reason — because consumers now demand and respond positively to personalized experiences.
But I’d argue that most of these conversations miss the most important piece of the retail personalization story.
Most often, these conversations center around topics like:
- Why personalization is so important (consider Accenture’s finding that retailers lost $2.5 trillion globally in 2017 due to poor personalization and a lack of trust)
- Why the time to get started with personalization is now (BCG found that creating personalized experiences could increase revenue by 6% to 10% — and help deliver those increases faster)
- What an ideal personalized experience should look like (check out McKinsey’s take on what shoppers really want from personalized marketing)
- Which retailers do personalization best (Amazon regularly tops lists, as do some non-retailers like Spotify)
These findings and advice are no doubt interesting and valuable in the right context, but for most retail marketers, they’ve passed their prime. They focus on personalization 101, and most marketers are ready for the more advanced course.
What is Personalization in Retail and How Does it Work?
Retail personalization means tailoring your offerings and marketing materials to suit the need/s of a specific shopper or small segment of like-minded customers. Personalization also requires analyzing a wide range of data, including location, browsing, and demographic data, to determine individual consumer preferences.
After all, everyone is unique – we learn it when we’re young, and we’re constantly reminded of the little idiosyncrasies that make humanity so varied. Shoppers have unique paths to purchase, and personalization helps retailers guide customers on the right path based on their needs and behaviors.
Today, retailers are beginning to realize they can leverage the personal elements of each shopper to create a truly curated experience. With customers shopping on more channels than ever before, this is no simple task.
Many marketers struggle with the arduous task of collecting and analyzing customer data, let alone combining that with granular product data. This can result in a sizable missed opportunity, with customers being served subpar products during outreach.
If everything is executed correctly, however, personalization can provide a boon to retailers. Customers will not only feel known, but they will also appreciate the convenience of shopping with a retailer that understands their product needs.
Why It’s Time to Update Your Personalization Approach
There’s a reason that conversations about personalization are everywhere. It’s because retailers, and especially frontline marketers who handle channels like email, know personalization is important. In fact, more than 90% of US retailers rate personalization as at least somewhat important to their business goals.
And not only do retail marketers know personalization is important, but they also have a good idea of what that personalization should look like. So the problem isn’t the why or the what. It’s also not selling the pitch up the ranks internally, as personalization is on every retail executive’s radar too.
Then why haven’t we realized the personalization nirvana we’re so desperately seeking? The problem is executing on the personalization imperative due to technology limitations.
The Real Story Is The Retail Personalization Gap
As it turns out, the real retail personalization story no longer centers on the why or even the abstract how, but rather on the nitty gritty of moving from a strategic vision to reality. We need to tell this story — and more importantly, solve this problem — now because we’ve hit a personalization gap.
Specifically, RIS News reports that despite the fact that over 90% of retailers recognize the importance of personalization, 69% lack the advanced technologies they need to improve their personalization capabilities. The same data reveals that most personalization efforts to date focus on email communications.
We’ve arrived at this retail personalization gap because the technology that most commonly comprises retail marketing stacks, especially when it comes to email, aren’t designed to meet the more sophisticated and nuanced needs of today’s marketers. Plain and simple, retail marketers are often held back by their technology (or really, a lack thereof).
More specifically, a survey of retail leaders conducted by Worldwide Business Research and Bluecore found that some of the top technology-related challenges that retailers face include the length of time required to derive insights, the ability to enable activity across multiple channels and the ability to access a single view of all customer data.
Given these limitations, what are you as a frontline marketer supposed to do? If you have a vision for an amazing personalized experience to create for your customers but can’t execute on it because you don’t have the right solution in your marketing stack, you’re not alone.
To meet your personalization goals, you need a solution designed specifically to optimize retail performance that also marries product and customer data, since that combination is essential for deep personalization. Instead, what you likely have are solutions that were built to satisfy needs across many industries and focus on volume over performance. And your product and customer data likely live in their own distinct silos.
What Advanced Retail Personalization Looks Like
Retailers need a personalized marketing solution designed specifically for their industry, instead of using ill-fitting services designed for a vague set of massive enterprises. Retailers don’t sell a small selection of products to certain groups of people – they often offer hundreds, if not thousands, of products to a large swath of consumers. Connecting these products to the shoppers who are most interested in them can be overwhelming without a sophisticated way to associate customer data with product data.
From a customer’s perspective, advanced retail personalization goes beyond emails with their names in the headers or receiving a coupon in the mail for a product they just bought. These subpar initiatives often fall short and don’t produce the intended results.
For example, a customer may buy a laptop in person after examining your store’s extensive selection online, causing the personalized marketing solution to indicate they are interested in laptops and technology. As a consequence of being categorized in this way, that customer begins receiving email advertisements for new laptops — even though in all likelihood, the customer only needs one. This sullies your rapport with the customer and certainly will not help close future sales.
With an advanced strategy, this situation would play out quite differently. After browsing laptops on your website, the customer visits your brick-and-mortar location and purchases a laptop. Your personalized marketing solution records this interaction, then evaluates the customer and sales data, uncovering a few insights: The customer is interested in portable technology, did not purchase any peripherals and owns a new laptop.
As a result, the customer receives very specific email advertisements for a wireless mouse, a wireless headset, a mousepad or a spare charger for their laptop. The customer may view these suggestions after a frustrating experience with their trackpad and purchase the advertised wireless mouse – driving additional revenue for your business while creating a satisfied customer.
Critically, the only way to create this type of positive, highly personalized customer experience is by marrying product, customer and behavior data across multiple channels and making that information accessible and actionable for your marketing team. Without this type of accessibility and actionability, significant gaps exist in any attempts to create a personalized experience.
3 Examples of Retailers with Proven Personalization Strategies
Since personalized marketing can become a rather abstract concept, it’s helpful to contextualize this approach with a few real-world examples. Let’s take a closer look at three retailers who have had considerable success with ecommerce personalization.
Sephora is a well-known prestige retailer with a wide range of beauty products. Their personalization strategy boasts a behavior-based email marketing program that captures and responds to client behavior in real-time, as well as a targeted online experience for those who visit their ecommerce site.
Perhaps the most interesting part of Sephora’s personalized marketing strategy is their use of a predictive “next best purchase” model. When the retailer’s marketing team identified that multi-category shoppers were more loyal than single-category shoppers, they set a goal to convert more single-category shoppers into additional categories. To do so, Sephora partnered with Bluecore to introduce a “next best purchase” model that uses highly targeted customer and product data to include personalized recommendations from new categories in post-purchase emails.
For example, imagine a customer that buys only liquid eyeliner from Sephora. The marketing team will use the “next best purchase” model within post-purchase emails to feature personalized recommendations for other cosmetic products, such as mascara or lipstick, based on insights from their combined customer and product data. This intelligent approach to personalization resulted in an 8.4% increase in revenue per client for Sephora.
Hammacher Schlemmer is America’s longest-running catalog, founded in 1848. Today, the retailer sells products through catalogs, ecommerce and a landmark store in New York City. Hammacher Schlemmer often defies categorization, as the retailer appeals to a wide range of demographics with a product catalog the marketing team describes as a “mile wide and an inch deep.”
This sizable product catalog traditionally made personalization difficult for Hammacher Schlemmer. However, the marketing team has overcome this challenge by introducing AI-driven personalization software that allows them to automate the process of building dynamic emails that feature personalized product recommendations.
Now, the marketing team can easily create highly curated experiences for each customer, despite the challenge of such a varied product catalog. For instance, a new parent may receive an email that recommends a pair of shoes, a coffee maker and a toy. To an outside observer, these products are unrelated, but to the customer, it’s the perfect mix of everything they need. This strategy has been a resounding success, leading to a 28x ROI from email campaigns and a 24.6% increase in email engagement
Since 1863, Pendleton has distributed products like wool apparel, blankets, home decor and gifts throughout many channels, including catalogs, brick and mortar stores and online. In an effort to grow the ecommerce side of the business, the Pendleton marketing team began looking for new ways to innovate and immediately saw an opportunity to drive sales by bringing personalization to email.
To do so, Pendleton introduced an intelligent solution that allows the marketing team to automate the build and delivery of personalized, dynamic emails and easily build targeted audiences — all without any technical expertise. Specifically, Pendleton now has a variety of triggered emails that feature dynamic product recommendations and target shoppers based on their behavior onsite and changes to products. The team also builds unique audiences based on past and predicted behavior to send more relevant emails rather than generic batch-and-blast emails.
3 Considerations to Confront the Personalization Gap
If your personalization strategy isn’t up to snuff, take a moment to evaluate your current approach to personalization and consider where some improvements could be made. Here are three questions to help get you started.
- Do we have a roadmap to advanced personalization? While the right technology can make all the difference in your personalized marketing campaigns, it’s important to extensively plan your campaigns beforehand. Ask yourself a few questions. How can personalization help increase repeat purchases to grow revenue? Will personalization help protect margins? How can we scale my personalization initiatives effectively? This will help you evaluate your workload while setting realistic expectations from the outset.
- Are we nurturing customers at every lifecycle stage? It’s important to engage buyers with different marketing tactics depending on their lifecycle stage, as you want to treat non buyers differently than active buyers, active buyers differently than at-risk buyers and so on. With the right personalization solution, you can use predictive modeling to determine the lifecycle stages of each individual customer (rather than using blanket rules that assume all shoppers behave the same) and craft the most appropriate messaging for each one at any given point in time. For example, you could send active buyers an email featuring best sellers based on their past or predicted interests while sharing the same recommendations with at-risk or lost buyers but including an offer for free shipping as well to sweeten the deal. This targeted, nurture-based approach helps determine the most appropriate products and offers for individual shoppers based on their unique lifecycle stage.
- Are we making the right technological advancements? The right technology is crucial to your personalization strategy. Far too many retailers rely on solutions that simply weren’t designed for personalization — let alone personalization at scale. This leaves marketers scrambling to piece together different systems and force them to work in ways for which they simply weren’t intended. To deliver true personalization at scale, your marketing team needs technology that was purpose-built for retail personalization. This technology should collect and combine customer, behavior and product data in real-time and make that information both accessible and actionable for your team. Both retail-specificity (which allows you to go deep with data that is unique to retail) and being purpose-built for personalization (which means you don’t have to build convoluted workarounds) are key to success.
Let’s Stop Ignoring the Personalization Gap and Start Solving It
Conversations about how to personalize the retail experience aren’t going anywhere anytime soon. But in order for these conversations to provide the most value for marketers, they need to shift away from the why and the what and instead dive deep into the how.
It’s clear that the one of the most pressing problems to solve when it comes to retail personalization is the technology piece of the equation, so let’s start talking about how to make that happen and bridge the personalization gap once and for all.
And hopefully when all is said and done, your marketing team will have the proper ammunition and clear course of action that you need in order to say to your stack: It’s not me, it’s you.
What exactly does it take to bridge the personalization gap? Click here to check out our take on why pairing a deep knowledge of your products with insights on customer behavior is key to success, plus how a handful of retailers are using technology to put this approach to work.