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Personalization in Retail

Retailers today face a massive challenge in engaging both new and existing customers across all channels. Seeking a differentiated experience, retailers have been investing in personalization efforts for years, but these investments are becoming increasingly valuable through analytics. Retail is applying a growing volume of data to tailor the shopping journey to a customer’s preferences and desires. However, retailers must be cautious as they proceed with analytical investments to ensure that all data is properly secured, ethically acquired, and provides the transparency customers expect in the current environment. Retailers who increase their personal relationships with customers can improve customer lifetime value, reduce the impact of competitors, and build customer loyalty.

What is Personalization in Retail?

The definition of personalization has expanded over time as technology-enabled new experiences, but at a base level personalization is the tailoring of retail experiences to an individual customer. Historically this has been executed in targeted customer emails or product recommendations online. But an ever-increasing volume of data has enabled retailers to innovate traditional experiences throughout the customer journey. Additionally, in-store and omnichannel practices are evolving to leverage these strategies that have primarily been focused on solely online experiences.

Digital storefronts have long used personalization to tailor shoppers’ experiences. For example, they may include a  “similar products” or “customers also purchased” recommendation on the product detail page or checkout page. More mature companies are supplementing that product data with individual customer historical purchase data to improve these recommendations. Some companies are even seeing double-digit revenue growth from such investments.

Apparel retailers are making personalization a revenue-generating service. Organizations such as Stitch Fix, Nuuly, Nordstrom’s Trunk Club, and others are doing this to varying degrees. Ranging from clothing curation based on historical preference to simply saving customer sizing, these services are creating an individual experience that builds customer loyalty.

In-store retail has been using analog personalization for years. “Mom and Pop” shops that get to know their customers over time can build rapport just by being friendly each time a customer comes in. Large brands are now  employing digital tools to better enable this same experience across both stores and channels. Clienteling gives sales associates access to customer purchase history, behaviors, and preferences at the point of sale. Leveraging mobile devices, associates can work closely with customers to provide a personal experience tailored to specific customer needs. During the pandemic, Ralph Lauren provided customers with virtual appointments where stylists assisted shoppers in finding products and sizes. This personal experience has doubled spend in those appointments vs. the average transaction.

Email is also transforming with increased personalization capabilities.  Moving away from mass email blasts, retailers are embracing novel ways to reach out to customers. Using purchase history, retailers can adapt emails to match customer personas, targeting them with products relevant to their interests. Mature organizations are even doing this on an individual level with in-store and online experiences that can drive engagements via email. Zulily follows up with customers based on products they’ve viewed and sends “community signals” (a notification of remaining inventory to entice customers to purchase the item) when they’ve abandoned their cart. It is important to remember that the goal isn’t to overwhelm your customer with notices but to provide targeted nudges at the right moments along their purchasing journey.

Each personalized touchpoint across the purchase journey can build loyalty and improve customer experience.

How Do You Do It?

Building such personalized experiences requires a detailed understanding of your customers. At a minimum, this includes demographic information, individual purchasing history (both online and in-store), and typical shopping locations. Knowing product preferences is also important, including colors, sizes, and styles. Understanding shopper motivations and occasions can also drive personalization experiences. If your customers shop around holidays or birthdays, that would drive different messaging than customers who come to your store regularly every few weeks. Similarly, marketing and personalized experiences should be different for customers that are shopping for themselves versus for those that are shopping for others. Any point where a customer engages with your company should be captured as well.

Some of this data can be gathered from existing sales and loyalty data, but some may need to be newly collected. This can be done by adding information to the loyalty profile (such as a birthday) and allowing customers to attach tags to historical purchases (such as “gift”). Also, in-store clienteling solutions can allow associates to gather this information from the customer at the point of sale. Lastly, event tracking is a must-have for retailers. Capturing clicks on emails, abandoned carts, and other actions should be captured to identify any additional follow-ups that could take place.

To store these data points, firms are leveraging more flexible data storage such as data lakes which allow unstructured data storage. Other options include data fabrics or virtualization that can allow data to be stored in their current system but queried or accessed via a central location. While these storage options may not be needed for those just starting personalization, they become essential for advanced personalization programs seeking to draw upon all touchpoints the customer has with the brand, regardless of channel or location.

Building a personalized customer experience doesn’t require having all this data to get started. A great way to test and prove the value of personalization is to identify a pilot program based on existing data sources. As with any pilot program, the team should continuously gather key metrics and performance indicators to understand what is working and what is not. Organizations that are flexible based on those metrics and results and can pivot quickly are able to build more successful analytical teams .

Personalization in Retail Considerations

With increased regulatory scrutiny and personal data concerns, organizations must overcommunicate and operate ethically when it comes to any customer data acquisition. Any data acquisition must be specified clearly, offer an opt-out, and allow users to clear their data at will. Within your analytics groups, steps should be taken to anonymize data wherever possible to protect identifiable customer information. To encourage data sharing, organizations should advertise the benefits of their program and highlight the precautions being taken with data.

Any strong personalization efforts should be reviewed for equity, diversity, and inclusion. Customers are becoming increasingly aware of inclusivity in all programs, and personalization is one that could be prone to oversights. Building a diverse team of analysts and business representatives of all backgrounds can help prevent mistakes and increase the appeal of your program to all.

Personalization is a growing trend in the retail space. Organizations that find the right way to leverage this technique can grow their customer relationships and increase top-line revenue.

To learn more about our retail consulting practice, contact us.

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Tags: Retail Planning and Execution, Sales and Marketing Technology, Specialty Retail, Retail