To foster long-term relationships, retailers must offer meaningful personalization. With various digital forces at play, and more significantly, use cases connecting two or more digital channels, a one-to-one relationship with consumers may no longer be a distant dream—it is a fast approaching opportunity that needs to be seized. The operations, marketing, technology, and corporate teams will have to come together to define the constructs of designing and delivering these personalized interactions which means that the rules of the retail game need to be redefined.
Commoditization of retail: Why is personalization important?
“Being on par in terms of price and quality only gets you into the game. Service wins the game.”
- Dr. Tony Alessandra; marketing and behavioral sciences expert
Customers and retailers are increasingly adopting digital channels, and this has resulted in the availability of and access to product data, reviews and comparisons, price, promotions, and stock levels. This ubiquitous availability of rich data has pushed digital customer interactions towards transactions. While customers are demanding more from retailers—lower prices, better value, larger range, quicker fulfillment—information democratization is the over-arching theme. Customers are consistently seeking better deals and this has commoditized retail, forcing retailers to differentiate themselves through value-added interactions. A transaction becomes more valuable when it involves a personalized interaction—it creates a serendipitous experience by enriching product discovery.
When interactions are defined well, designed to interconnect, and delivered consistently, they nurture loyalty. For retailers, personalization will play the single biggest role in their customer experience management efforts (refer the adjacent figure).
Consider some alarming trends. Around 80 percent of retailers confirm that they intend to spend more on paid searches this year, but only 32 percent will spend more on behavioral targeting of shoppers. 
For many global retailers, the focus seems to be on:
- Attracting more traffic to their digital properties.
- Improving conversion rates through rich product data, inventory visibility, checkout optimization, support form factors, extended range of products, and seamless cross channel fulfillment.
The strategy to acquire a loyal customer base therefore cannot be restricted to:
- Merchandizing a wide range of products, also known as endless aisle. This is a concept that competitors can quickly replicate.
- Price reduction or competitive pricing, also known as price matching. Retailers cannot win by losing margins.
- Omni-channel presence. Channel congruency is inversely proportional to channel profitability, making omni-channel presence more of a necessity than just a customer experience strategy.
Long lasting differentiation can be created only by providing relevant, consistent and high quality experiences—the key differentiator. The rapid proliferation of channels, backed by increased customer adoption, has made retailers define or redefine their cross-channel retail strategy. In an omni-channel ecosystem, it is important for every channel to have an equally important role in fulfilling customer expectations and contributing to a positive brand experience.
Consider this. While waiting at the train station, a person might pull up a mobile app or visit an e-commerce site, and add some items to the shopping cart, compare products, or read product reviews. On reaching home, the person might turn on her desktop PC and continue the journey by completing the transaction, resulting in a longer interaction. Would it be right then to treat the first interaction as a failure? It is a fact that multi-channel conversations result in obtaining more data points to identify the customer’s context and preferences. Traditional CRM and analytics platforms might find it challenging to handle this level of dynamic granularity, but when harnessed in the right manner, this data can help create moments of customer euphoria.
Manifesting extreme personalization
On digital channels, product recommendations constitute the first step in personalizing the user experience. The algorithm for product recommendations has evolved from ‘you-may-also-like’ prompts to clickstream-based intelligent recommendations. Some companies are experimenting with linking product recommendations with the customer’s in-session activities, wisdom-of-crowd, basket-affinity for products, and product linkages to drive personalization use cases.
While this is definitely a step forward, enterprise-wide personalization has a much wider implication on the customer experience. Contextually appropriate deep personalization scenarios can considerably reduce the cost of acquiring and retaining customers. Comprehensive customer centric marketing can lead to up to three times improvement in Customer Lifecycle Value. Keeping customer experience as the primary goal of extreme personalization will deliver these fundamental benefits:
- Product and content discovery to enable long tail content monetization
- Consistent and efficient enterprise-customer conversation to optimize conversation volume
- Opportunities to create serendipitous engagement and ensure relevant and fresh customer experience
However, this requires a fresh and comprehensive approach that challenges the status quo by incorporating the following actions:
- Creating 360 degree customer profiles: When based on the foundation of unified customer information, enterprise-wide personalization (refer the adjacent figure) can lead to dramatically different and perpetual customer experiences. Customer information is an amalgamation of each relevant customer interaction—profile, transactions, and interactions. To create a 360 degree view of the customer, it is imperative to record every customer interaction. These interactions could be of varied types—adding items to the wish-list, purchasing items from the gift registry, ‘showrooming’, downloading mobile apps, scanning coupons, conversations with customer support agents, social media activities, and product reviews.
It is critical to define the scope and extent of the customer view which is manageable and sufficient for the level of personalization being envisioned. The extent of customer interactions to be considered in deducing the personalization service should be limited to the context which needs to be catered to. Not every interaction will contribute to the richness of personalization service; rather a meaningful combination of interactions might create that moment of euphoria.
Typically, creating a 360 degree view begins with a loyalty-program based customer database tagged with transaction history. This knowledge base could form the backbone of the retailer’s personalization efforts. Customer profiles and transactions from digital channels are also a good starting point.
- Profiling product and non-product content: The other major aspect of personalization is the content set. Through the evolution of digital channels, rich product metadata such as product specifications, keywords, genre, and product hierarchy is readily available. When mapped with customer interactions, this product data can be transformed into meaningful product linkages or ontology derived from data modeling techniques. Similar profiling for non-product content such as buying guides, FAQs, and campaigns should be used for content personalization.
By using a combination of customer profiles, and product and non-product ontology, retailers can create various levels of personalization scenarios. Rich customer profiles—where personalization scenarios such as similar, related, associated, and popular products are enabled—facilitate effective one-to-one personalization.
For customers who interact anonymously via different digital channels, or for customers who are new to the enterprise, the cold-start problem can be managed by mapping partial profiles based on current in-session transactions to mathematically similar profiles. The personalization scenarios can be extended to practically any medium of conversation with customers: email campaigns, contact center conversations, and in-store connect among others.
The breadth of personalization scenarios, extrapolated by the uniqueness of entity profiles makes controlling personalization scenarios challenging. By leveraging available explicit knowledge, automated intelligence systems help control and administer personalization scenarios successfully. For example, available business rules or context data can be fed through a rule-based reasoning algorithm and can then be combined with case-based reasoning models to gather inferences from past experiences.
Automated intelligence techniques such as rule-based reasoning, case-based reasoning, genetic algorithms, model-based reasoning and neural networks help support extreme personalization initiatives. For an enterprise, it is imperative to identify and use the right combination of these techniques, thus making it possible to invoke the appropriate technique based on explicit and implicit knowledge. This approach will cover the full spectrum of one-to-one, one-to-segment, and one-to-many personalization use cases and will specifically help address challenges around anonymous customers, product or content cold start and above all, using personalization for nurturing loyalty. When enterprises are able to achieve this, personalization scenarios can be extended to practically any medium of conversation with customers—email campaigns, contact center conversations, and in-store connect among others.
The manifestation of personalization as an enterprise-wide capability is no longer a distant dream for retailers. A unified view of customers and content can power the transformation to extreme personalization. To realize success, the transformation should be governed by the following tenets:
- An enterprise-wide, common personalization vision aligned with the customer engagement strategy and the overall marketing plan
- Enterprise-wide data strategies such as granular and real-time data ingestion layers for personalization
- Definition of progressive personalization dialogue services within the enterprise data constraints, relevant to customer context, which complement every customer communication—email, customer accounts, and call centers
- A process design that aligns omni-channel operations with the comprehensive personalization approach
- Personalization platforms to allow configurable business rules, which can be simulated against customer experience and organizational goals
- A Test–Learn– Recalibrate–Test–Evolve cycle with no end state
Deep personalization offers an immense opportunity to counter the commoditization of retail. It is a race towards excellence where the customers have begun drawing the finish line. Every retailer will be pushed to get there, but those who take the lead in the right direction, on time, will derive maximum value.
 The State of Retailing Online 2013: Marketing & Merchandising by Forrester Research Inc.
TCS Retail Forum Journal
Read other articles
- Unified View of Customer: It’s All About Customer Experience
- Curate Digital Customer Engagement with Extreme Personalization
- How Retailers Can Create the Right Social Circle
- Customer Loyalty Experience: You Can't Afford to Ignore It
- Realizing Unified View for Better Customer Engagement: Understanding What to Build
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