While the retail industry recognizes the importance of offering personalized customer experience, a new study reveals that most retailers still fall short when it comes to delivering the level of personalization that their customers demand and expect.
A recent Boston Consulting Group (BCG) report called The Next Level of Personalization in Retail shows that customers are willing to share their personal information with certain trusted brands if they think this information will be put to good use such as making shopping more convenient and relevant to their needs and wants.
Additionally, the research shows that customers are 110% more likely to add additional items to their baskets and 40% more likely to spend a higher amount than they had planned in response to personalized product recommendations and offers. Such valued experiences also instill a sense of loyalty and encourage customers to give higher net promoter scores (20%).
Authors of the BCG report, Mark Abraham, Jean-Francois Van Kerckhove, Rob Archacki, Josep Esteve González, and Stefano Fanfarillo, studied five retail segments — mass merchants, specialty, pure play, consumer electronics, and telecommunications. They noted that younger companies, especially the pure plays that started as digital first, tend to be ahead of the other segments in their personalization efforts.
According to the authors, best-in-class retailers are using personalization to make the shopping experience as easy, fast, intuitive, and as seamless as possible across touch points. Such an experience requires technology that can sift through the large volume of customer data at a high velocity, recognize patterns and take action at the right moment to assist the customer in a contextual manner.
While most retailers now claim that personalization is a high priority for them, the BCG research shows a substantial gap in the level of investment in personalization technology of best in class companies versus all retailers. Today, the best-in-class companies are ahead of the game by “activating more channels, using more personalization tactics, and building personalization infrastructure that enables highly automated, data-driven targeted marketing,” according to the report.
On average, retailers are spending 0.7% of their revenue in personalization compared to best-in-class retailers who are investing 0.9%. Going forward, retailers said they expect to increase their investment in personalization by 18%, on average, over the next three years. However, best-in-class retailers plan to increase their investment by 30%, on average, which will widen the performance gap even more.
Closing this gap is critical for retailers to not only acquire customers but also to retain them and increase their lifetime value. To achieve this, the report provides suggestions such as improving the use of customer data to deliver contextual and relevant recommendations in real time, something that personalization solution providers such as ZineOne do effectively for their customers. The authors also listed some guiding principles such as:
Overall, the report concludes that building personalization capabilities to deliver relevant and meaningful experiences is no longer a “nice-to-have” but a “must-have” for retailers to compete effectively in the market. Let’s not forget that companies that invest time and money on personalization technology are seeing incremental revenue growth of 10% or more. These retailers experience, on average, four times the revenue lift from their personalization efforts.