Prioritizing personalization for_growth

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Transcript of Prioritizing personalization for_growth

  • 1.PRIORITIZING PERSONALIZATION FOR GROWTHBy Lauren FreedmanPresident, the e-tailing groupNovember, 20111

2. Table of ContentsSection I IntroductionSection IISurvey Objectives and MethodologySection III Reflections on PersonalizationSection IVEight Steps to Mastering Personalization Understand Personalization is a Process Align Internally to Ensure Success Foster a Personalization Culture Listen to your Customers Deliver an Experience that is Helpful Put the Personal in Personalization Apply a Cross-Channel Lens Test, Measure, EvolveSection V:Final ThoughtsSection VI: About the Companies 2 3. SECTION I: INTRODUCTIONPersonalization has long been a promise of the Internet however its execution among the merchantcommunity has not yet met the elevated expectations of consumers. Todays consumer is morecomfortable than ever before with personalization so may once again be ahead of the merchants desireand ability to deliver on its promise. A great deal of confusion and angst remains around this veryimportant topic as retailers resist taking advantage of the tools and technology that are often at theirfingertips. Rather than starting with realistic philosophies, they seem to take on personalization from amacro point-of-view, putting obstacles in their path that keep them from testing and triumphing via well-conceived visions.This white paper, graciously sponsored by Adobe, takes a two-pronged approach, sharing merchantsqualitative insights in conjunction with a quantitative survey completed by 130 merchants in late 2011.Remember, personalization is a process that we believe is worth pursuing. Success starts with smallsteps per the list we compiled of eight not to be missed initiatives in pursuit of personalization. Theseare a must read for any merchant already entrenched in personalization as well as those who may bebantering internally about the optimal solution for their business. The results are tangible from a monetaryand consumer engagement perspective, the two critical components for driving businesses growth.Having interviewed and written about this topic over the past eight years, some changes are evident butmuch remains surprisingly stagnant. One milestone achieved, upon which this paper is predicated, isconsensus among merchants regarding the definition of personalization. Despite that progress, internalconfusion still reigns where one department store executive shared, Even when it comes to internalmeetings about personalization there are a wide variety of expectations and some individuals cant seepersonalization beyond product recommendations. A discussion of philosophies, the complexity ofpersonalization, the potential and pitfalls will also be explored as personalization has many grey areas.Expectations of the customer jumpstarts our discussion given their comfort level with personalizationparticularly as many are accustomed to the Amazon model and its requisite sophistication. We thenprovide a brief overview of the state of personalization as merchants acknowledge their efforts are stillearly stage, even among larger retailers. Deployment onsite and post-order are addressed and thoselucky enough to have loyalty programs share its associated business contribution.As our title indicates, prioritizing personalization for growth is essential and the reasons range from branddifferentiation, to conversion and ultimately bottom-line performance. Success starts with leadership,responsive cultural dynamics and alignment within the organization. Tapping into technologies thatsupport personalization needs can be intimidating for some; powerful for others. Once deployed,measuring personalization will enable retailers to ensure their efforts are optimized. While personalizationnirvana may be a longer road, small wins are incremental and will set merchants down a performancepath that meets and exceeds expectations.3 4. SECTION II: SURVEY OBJECTIVES AND METHODOLOGYWe began this project by fielding a quantitative survey that explored the current state of personalization,its performance within merchant organizations and the opportunities and challenges that might preventpersonalization from realizing its cross-channel potential. Additionally, knowing that the premise ofpersonalization has been discussed since the webs introduction, we wanted to understand if it is playinga growing role in driving loyalty and bottom-line sales.MethodologyAn online survey was completed by 131 merchants in 3Q 2011 representing a range of company sizeswhere online sales accounted for 70%+ of overall business for more than one-third of those surveyed. In which of the following ranges do yourWhat percent of your overall businesscompanys annual sales fall?do online sales represent? 5% or less $5 million or 19%More than $1 less More thanbillion19%70% 26%35%6-10%More than $510% $201 million - to 50 million $1 billion19% 11-20% 16%$51 to 20051-70% 11%21-50%million13% 12% 20% 4 5. SECTION III: RELFECTIONS ON PERSONALIZATIONDefining Personalization Starts with Marketing 101Personalization attempts to deliver the right message (product, content, community) at the right time andright place to the right person. Relevancy is the operative word since personalization at the core isabout leveraging what we know to provide more targeted experiences for customers and prospects in anintelligent manner. When shoppers experience relevancy it is our belief that both the experience and thebottom-line benefit.Relevancy can take on many forms as a result of recognizing something about the customer (keywordssearched, IP address, past purchases) where retailers can capture rich customer data. One wonderfulexample shared by a publisher was a desire to tailor a marketing message to families in the path of arecent hurricane. Understanding that these customers would be looking to entertain their children, ideallythey would present books targeted at specific grade levels as digital downloads where personalizedselections would resonate.There are many ways to tackle personalization but it should be kept top-of-mind that the ultimate goal ismost often to sell more. In the early days of ecommerce, merchants could cast a broad net. Currently,however, they find themselves in more of a harvesting mode where personalization plays an importantrole for both customer acquisition and particularly for retention. Unleashing incremental salesopportunities with existing customers should be a fringe benefit of personalization as well. In todayscompetitive landscape, if a retailer is merely reactive, relying on customers to come to them, there maybe minimal upside. Those that are proactive are able to stimulate shopping behavior. Knowing wherecustomers are in their buying cycle they can consistently deliver personalized experiences across allchannels including email, stores and even retargeting to optimize customer spend.Potential and PitfallsOf course with richness and relevance marketing can be more risky so balance is important. To avoidpoor experiences, it is also essential to adhere to what customers say they want as click-behavior is notalways a true indicator. Better information about what your customers are doing and personalizing allowsyou to tailor a more individual experience.Maintaining brand integrity is of great concern when implementing personalization. It is not thereforesurprising that 40% of retailers surveyed emphasized that they are very deliberate in theirpersonalization strategies so as not to denigrate the brand in any way. One in three merchants sharedthat they would test a range of strategies to understand which performed well and fit best with their brandvision. This sentiment was reinforced by one retailer hoping to understand customer expectations, Wewill test our way into this, looking at purchases and establishing personal rapport while soft sellingpersonalization. Experimentation is ideal to monitor how your efforts play out by looking at everythingfrom bounce rates to conversion along with personalization touchpoints. Focus groups and usabilitytesting can help merchants to realize the comfort factor they seek from personalization and find the righttipping point for their business. 5 6. Thinking about the potential and pitfalls of personalization, please indicate your level of agreement with each of the following statements. (Top-1 Completely Agree)We are very deliberate in our personalization strategies ensuring that we dont degrade our brand in any way 40% We will test a range of strategies to understand which perform well and fit best with our brand vision31% Our view of personalization is centered on segmentation of shopping groups or types rather than a true one-to-one vision23%We are very deliberate in our personalization strategies ensuring that we dont offend our customers in any way11% We are pursuing a one-to-one personalization strategy 11% We will pursue personalization but will request our customerspermission before employing strategies6%We allow consumers to self-profile their behavior type (Fashionista, soccer mom, metrosexual, etc.) which we then target accordingly 3%Customer ExpectationsIt was essential to understand the current set of customer expectations as the consumer is very much incontrol of the shopping experience today more than at any recent time. Aware of that scenario, each ofthe merchants interviewed was asked, What do you believe your customers expect from youregarding personalization?Heightened customer expectations set the tone for personalization demands as the majority believe thatcustomers expect you to know them. It is no longer optional and moreover the customer is notoffended by such personalization attempts but rather embraces them through subsequent browse andbuy behavior. At a minimum customers expect that you will target based on their past behavior andideally treat them as individuals, with unique customer tastes and behaviors across channels factored intothe mix.Customers desir