In this article, we will talk about personalization in retail marketing. A crucial moment for any brand is the sale, the moment the customer makes a purchase. Here, the customer experience, tested out on different touchpoints scattered along the entire customer journey, results in a purchase. To be able to meet the consumer in the decision phase, whether in a physical store or a virtual one, retailers and marketers have had to adopt unconventional tools and learn to use traditional methodologies in innovative ways, and this includes cross-selling and an omnichannel approach.
In a world revolutionized by the advent of digital communication, retail marketing has also undergone a radical transformation. Today, like all other areas of business, personalization impacts strongly Retail marketing.
Digital disruption: technological and business innovation
Big Bang disruptions, as Larry Downes and Paul Nunes refer to the innovations driven by digital transformation, differ from other “more traditional” innovations.
Big Bang disrupters immediately wanted to compete on all three strategic variables on which, according to Michael Treacy and Fred Wiersema (The Discipline of Market Leaders, 1995), it is necessary to invest in order to obtain a competitive advantage: low cost, constant innovation, and personalization of offers.
They have entered the market with better performance, at a lower price, with greater potential for personalization for Retail marketing. The change took place within a few weeks, immediately involving a broad target of customers. The difference lies right here, in the dizzying time with which this change continues to happen: entire sectors can be swept away and then rebuilt in a few months, weeks, maybe even days.
The smartphone is often cited as an obvious example of disruptive technology. It has managed to improve upon and essentially replace a variety of devices in a relatively short time period.
Steve Jobs himself presented the smartphone as a product capable of bringing together three other different products: “a widescreen iPod with touch controls, a revolutionary mobile phone and a disruptive internet communications device.
In the midst of the Disruption Era, in order to manage and exploit the potential of increasingly crowded and connected tech ecosystems, marketing – and retail marketing specifically – must rethink strategies, change methodologies, introduce more accurate metrics and, at a deeper level, rearrange priorities to give new meaning to business processes and missions. It must create important, new moments to meet the consumer and reconsider the customer experience in terms of an increasingly refined and empathetic personalization.
In short: it must learn to look at people (potential customers) with different eyes.
The words of Brian Solis, Principal Analyst of Altimeter Group, are valuable in this regard:
“Customer experience is the sum of all engagements in the customer journey and lifecycle. It’s not anyone moment, it’s all the moments together. Digital disruption humanizes customer experience today because it forces us to see the “breadcrumbs” that people leave and ultimately the behaviors that they exhibit and, more so, their preferences and interest… it allows businesses to see people for what they are and who they want to become”.
Mass personalization: much more than personalization in Retail marketing
In Consumer Review Made-to-Order – The rise of mass personalization, Deloitte traces the origins of personalization back to an era prior to the Industrial Revolution, when consumer goods were produced manually according to the buyer’s needs. From the end of the Second World War to the 1960s, globalization and economies of scale created the conditions for the development of the mass market.
It was between the 1960s and 1980s that the individual began to gain centrality again.
Each stage of this evolution has led to the contemporary society as we know it today, one that is digital and always connected.
Today’s companies can not only equip themselves with the means to measure what each individual consumer wants, they can also integrate processes and resources to provide them with increasingly personalized solutions. Even so, the definition of personalization is constantly, unstoppably evolving. For a time, it meant “exclusivity”: personalized products were symbols of status and exclusivity.
Today, consumers are able to leave a mark (often their digital signature), for example by participating in the production decisions of the company that intends to bring new flavours of chips to the market or by contributing to a given marketing campaign through the content they generate.
We are in a phase of mass personalization in Retail marketing, in which products can be modified by the company to meet the preferences of consumers. This process does not involve any input from people other than information related to the customer profile or the circumstances of the shopping experience. Starting from this, some brands are developing mass personalization strategies, which allow the consumer to choose between some limited options to modify mass-produced products. The ideal goal is the nearly bespoke product, in which the consumer is involved from the beginning to the end of the process to create a unique product or service.
From customer satisfaction to customer experience
Companies must proceed beyond customizing personalization strategies in Retail matketing that simply predict what product a consumer might want to buy. True personalization is successful when companies not only satisfy the individual but make him or her feel recognized. 84% of customers say that being treated like a person, not a number, is not only very important, it is decisive.
If we want to have an in-depth understanding of the consumer’s encounter with a brand, a product, or service, it could be useful to include concepts and practices within a qualitative analysis of the Customer Experience. To use an expression of PwC: “Experience is everything,” the (consumer) experience is everything.
In a recent report, PwC summarizes the results of its latest survey in six points.
- Price premium, which through a higher commercial value expresses the consumer’s perception of the quality of a product or service, is important. In return for an exceptional experience, 63% of US consumers say they are willing to share more information with the brand.
- Unsatisfactory experiences turn customers away. One in three consumers (32%) say they abandon a brand they love after a bad experience.
- The shopping experience is critical. Seventy percent of consumers attach great importance to certain aspects that are considered absolutely essential for a satisfactory customer experience: speed, convenience, helpful staff, and friendly service.
- The human factor is a priority. Interaction with people counts: It is essential in physical stores and on online platforms for 82% of consumers in the United States and for 74% of non-US consumers.
- Don’t exaggerate when it comes to generational differences. The factors that impact customer experience cut across generations. To win over consumers of the so-called “generation Z,” it is more a matter of convenience – the seamless transition from tablet to smartphone, from desktop to human – is, for example, taken for granted.
- The strategy? Experience. When it comes to customer experience, there is still a gap to fill: 54% of U.S. consumers say that there is still much to do.
Zendesk, a customer service specialist, also comes to the same conclusion. Consumers are less satisfied and more demanding. Since 2013, the CSAT (Customer Satisfaction Score) has been decreasing: from 94.6% in 2013 to 92.5% in 2018.
A survey by Epsilon, one of the major players in the field of marketing innovation, has shown that 90% of consumers surveyed find the possibility of having a personalized experience attractive and 80% say they are much more inclined to buy from a brand that already has a personalized program in its commercial offers.
All of these statistics seem to contribute to strengthening a customer-centric view of the sales process and at the same time, make a link between customer satisfaction, customer experience, and personalization. This situation is also true in the retail sector.
Personalization in Retail marketing
Retail personalization datasets (in large quantities in the case of particularly rich or forward-thinking brands) with the aim of designing and developing shopping experiences, both offline and online, that are useful, rich, engaging. Whatever initiative they intend to take, retailers are faced with a three-step program:
- Collecting customer data (such as location, browsing history, gender);
- Analyzing that data to determine preferences and based on that data;
- Providing a relevant and personalized customer experience through the implementation of specific tactics, online and sometimes offline. Here are a few:
- Send out-of-stock notifications (by viewing similar out-of-stock products, up-selling a premium version of the out-of-stock product, or cross-selling an accessory related to the out-of-stock product);
- Retarget customers before they leave the site (or possibly the store);
- Personalize the homepage and navigation (the landing page of the site should recognize the country, gender, the category of products most searched, and make suggestions that take into account previous purchases);
- Make your posts shoppable: three-quarters of people buy products or services that they have seen on their social media.
- Enable “continuous shopping”, allowing users, if there has been no conversion during their previous visit, to resume from where they stopped.
Retail has always been, but now more than ever, a crucial juncture in the personalization process. A cross-selling and omnichannel approach can help reconfigure the journey in a customer-centric way.
Many of these tactics involve a commitment to cross selling and can be seamlessly translated from offline to online and vice versa.
- Cross-selling: encourages the purchase of complementary or alternative products in combination with the primary product;
- Upselling: suggests the purchase of products or services that affect the price of the primary purchase, increasing its cost (with an upgrade or a premium).
Where cross-selling offers a complementary product, upselling offers another product that represents an upgrade, or a premium version. Upselling tends to be more effective than cross-selling: selling something in relation to what a customer has already purchased is less difficult than selling something that is complementary, but still different.
More and more companies are adopting an omnichannel approach to be able to intercept consumer trajectories (for potential or existing customers) throughout the purchasing process, at different times, in different channels (mostly online but also offline) and in different forms: an omnichannel consumer. In its State of the Connected Customer report (download from here), Salesforce highlights how more and more consumers expect to proceed in their customer journey seamlessly between various channels, digital and offline: customers perceive features that allow smooth transitions between channels (for example, online in-store) as 3.7 times more relevant.
Focus on Italian companies: where we stand
According to data from the Omnichannel Customer Experience Observatory, today 31.7 million Italians (60% of the population over 14 years of age) use various digital and physical touchpoints to get in touch with the brand (through points of sale, the website, social media, advertising). In the face of a consumer who shows interest in an omnichannel landscape and possesses the digital skills necessary to explore them, the situation is still decidedly immature on the corporate side. Although almost all Italian brands collect and store basic data (personal data or contact details: 98%, purchasing history: 86%; data from proprietary channel analytics: 79%, from market and customer satisfaction surveys: 76%; and results from online advertising campaigns: 74%), almost a quarter of companies do not have the necessary tools to organize the information collected on customers in a single framework.
Towards the customer genome
In retail, omnichannel, cross-selling, and upselling support the trend towards personalization in a physical or virtual environment. The trend is destined to become even more complicated and interesting, involving marketing strategies in a permanent restructuring of the customer journey.
Among the most futuristic perspectives of personalization in Retail marketing is the one elaborated by Accenture, which has even borrowed a term from the language of genetics to describe this new situation: the customer genome.
The customer genome is a model that matches the DNA of the product to the attributes that a consumer identifies for that product. In turn, these attributes would provide an extensive library of descriptive data to illuminate the reasons why people choose what they choose. These descriptive attributes would be conveyed by the set of interactions (mobile apps, email, social interactions, surveys, events, etc.), making them emerge on the surface of public communication. An analysis of the interactions, messages, data (with a verticalization on the details) could help to shed light on the preferences, motivations, and passions of each customer.
The combination of attributes in all interactions creates the genome of the client, a living profile of the most singular aspects of each individual, captured in successive snapshots, in its evolution in real-time. The result would be an unprecedented explosion of information which, in order to be managed, would have to be treated with very advanced methods, such as artificial intelligence.