The Next Level of Personalization in Retail 2020-06-17¢  evel of personalization...

Click here to load reader

download The Next Level of Personalization in Retail 2020-06-17¢  evel of personalization experienced with the

of 20

  • date post

    16-Jul-2020
  • Category

    Documents

  • view

    0
  • download

    0

Embed Size (px)

Transcript of The Next Level of Personalization in Retail 2020-06-17¢  evel of personalization...

  • The Next Level of Personalization in Retail

  • Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we help clients with total transformation—inspiring complex change, enabling organizations to grow, building competitive advantage, and driving bottom-line impact.

    To succeed, organizations must blend digital and human capabilities. Our diverse, global teams bring deep industry and functional expertise and a range of perspectives to spark change. BCG delivers solutions through leading-edge management consulting along with technology and design, corporate and digital ventures—and business purpose. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, generating results that allow our clients to thrive.

  • June 2019

    Mark Abraham, Jean-Francois Van Kerckhove, Rob Archacki, Josep Esteve González, and Stefano Fanfarillo

    The Next Level of Personalization in Retail

  • 2 The Next Level of Personalization in Retail

    AT A GLANCE

    Increasingly, retailers that want to get ahead will need to be able to create the easy, fast, and intuitive experiences that customers have come to expect. BCG’s research across five retail segments—mass merchant, specialty, pure play, consumer electronics, and telecommunications—reveals that companies delivering best-in- class personalized experiences can quadruple the revenue lift that is attributable to personalization initiatives.

    Some Retailers Are Leading the Way Retailers are increasing their investments in personalization capabilities. In partic- ular, they are building the technology infrastructure that is needed to use the copious amounts of data vital to creating personalized shopping experiences. But best-in- class retailers are investing significantly more than their peers. They are also activat- ing more channels, using more personalization tactics, and building personaliza- tion infrastructure that enables highly automated, data-driven targeted marketing.

    It’s Time to Prepare for the Future All companies should take steps to increase their personalization capabilities; the pre- cise actions a retailer should take will depend on its current level of maturity. As the top companies continue to build their lead, other retailers will need to up their game.

  • Boston Consulting Group 3

    All retailers—even leaders—should make advancing to the next personalization maturity level a strategic priority.

    Most retailers are nowhere close to delivering the personalized experienc-es that their customers expect. The vast majority have not even taken the essential first step of defining what personalization means to their customers and businesses. And many retailers are unclear about which capabilities to build to create a truly personalized experience. A few companies are pulling ahead, but the race is far from over.

    To help retailers advance their efforts, Boston Consulting Group has developed an innovative approach that companies can use to assess and elevate their level of per- sonalization maturity. This is defined as the extent to which companies enable per- sonalization across communication channels with advanced tactics and support it by investing in personalization capabilities. Opportunities for improvement abound. Retailers can raise their level by, for example, partnering more effectively, boosting targeted advertising, and improving their use of data to make real-time customer recommendations.

    Our approach also enables retailers to quantify the business impact of reaching the next level. BCG’s research shows that personalization maturity levels vary widely across companies and retail segments. It also shows that companies that implement personalization initiatives and become best in class in delivering personalized ex- periences can quadruple the revenue lift they receive from their personalization initiatives. (Best-in-class retailers are those that are in tier two in BCG’s Personaliza- tion Maturity Index. No retailers qualified for tier one, the highest level. See the sidebar “About Our Research.”)

    Best-in-class retailers are using personalization to make the shopping experience as easy, fast, intuitive, and seamless as possible across touch points. In most cases, suc- cess requires building personalization capabilities, which is critical for maximizing the value of the vast amount of data that is available on individual customers’ pref- erences. But success doesn’t necessarily mean developing a unique experience for every customer at every step of the way—an undertaking that can be very costly. Rather, the goal for leaders is to use technology to personalize critical touch points in a way that best drives value for the customer and retailer.

    The size of the personalization opportunity varies depending on a retailer’s cur- rent personalization capabilities. Even if a retailer has significant capabilities, how- ever, its growth potential can still be substantial. All retailers—even leaders— should make advancing to the next personalization maturity level a strategic priority.

  • 4 The Next Level of Personalization in Retail

    To better understand the personaliza- tion opportunity for retailers, Google commissioned Boston Consulting Group to research and analyze customers’ opinions and behaviors, as well as marketing executives’ strategies and activities, across five retail segments: mass merchant, specialty, pure play, consumer electronics, and telecommunications.

    BCG conducted three key research ini- tiatives: a broad survey of 3,144 retail customers, a targeted survey of 302 mar- keters, and in-depth interviews with 38 senior marketing and technology executives from 26 leading retail organ- izations. The study asked marketers to rate their companies’ personalization maturity in detail—their use of person- alization across communication chan- nels, their use of personalization tactics, and their investment in personalization capabilities. BCG distilled this complex personalization maturity model into four summarized maturity levels. Mar- keters’ detailed responses were then used to place retailers at one of the four maturity levels:

    • Level One. Companies were delivering highly connected experi- ences (the most advanced level).

    • Level Two. Companies were scaling advanced personalization capabilities.

    • Level Three. Companies were building basic personalization capabilities.

    • Level Four. Companies were just starting the personalization journey (the least advanced level).

    Next, to determine each company’s personalization maturity perfor- mance, BCG created the Personaliza- tion Maturity Index. This tool uses two data points—the retailer’s personalization maturity rating and the revenue lift that retailers reported receiving as a result of their personal- ization efforts—to categorize compa- nies into one of four performance tiers:

    • Tier One. Retailers are delivering highly connected experiences and achieving a revenue lift of 40% or more; no retailers met this criteria.

    • Tier Two. Retailers are scaling advanced personalization capabili- ties and achieving a revenue lift of 25% or more; the retailers in this tier are defined as best in class and account for 19% of the participating companies.

    • Tier Three. Retailers are building basic personalization capabilities and achieving a revenue lift of 10% or more; the retailers in this tier account for 40% of the participating companies.

    • Tier Four. Retailers are just starting the personalization journey; the retailers in this tier account for 41% of the participat- ing companies.

    In addition, BCG created the Person- alization Value Calculator. This tool identifies the key steps that compa- nies in the five retail segments can take to advance to the next tier and quantifies the impact on future sales for those that do so.

    ABOUT OUR RESEARCH

  • Boston Consulting Group 5

    Customers Respond Positively to Personalization According to a study conducted by BCG and commissioned by Google, customers in- creasingly prefer a shopping experience that’s easy and fast and that helps them make purchase decisions. Customers think less about personalization per se than they do about the benefits it can provide. By contrast, retailers are increasingly fo- cused on personalization and what it means. We define it as continually tailoring the shopping experience to individual customers by using a combination of first-party customer data (which a company collects from its customers or audi- ence) and third-party customer data (which is collected by external organizations that are not the original sources of the data).

    Although customers are not inclined to consider personalization as an end in itself, our customer survey suggests that personalization done well can result in signifi- cant benefits to the retailer. For example, when the shopping experience was high- ly personalized, customers indicated that they were 110% more likely to add addi- tional items to their baskets and 40% more likely to spend more than they had planned. Moreover, when asked to rate a particular retailer, customers who experi- enced a high level of personalization provided net promoter scores that were 20% higher than those of customers who experienced a low level of personali