Webster’s New Collegiate Dictionary defines personalization as “The action of designing or producing something to meet someone’s individual requirements.” But for retailers facing myriad challenges to growth and profitability, a more applicable definition would be “an imperative for succeeding in a consumer-controlled marketplace.”
An overstatement? Not at all. According to Accenture Interactive’s 2018 Personalization Pulse Check, 91% of consumers are more likely to shop with brands who recognize, remember and provide relevant offers and recommendations. Shoppers want to buy from brands and retailers who “know” them and know what matters to them. Period.
As crucial as personalization is to activating shoppers, the idea of achieving individual engagement at sufficient scale sufficient to drive true incrementality can be daunting for many marketers. But at its core personalization is simply delivering on the promise of a comfortable, valuable interaction between seller and buyer. And the resources exist to make this both possible and profitable.
It’s a balancing act
For personalization to have the desired effect, the experience must surprise and delight consumers. Interaction must not be intrusive nor creepy. The latter seems obvious but according to InMoment’s 2018 CX Trends Report, 75% of consumers find most forms of personalization to be at least “somewhat creepy.”
The interaction should be immediately relevant and reflect what the consumer knows they have shared and feels good about having done so. Marketers must avoid creating audience concern regarding loss of privacy or any sense of intrusion. Even seemingly unconcerned younger shoppers have become adamant about protecting their information and will turn their backs on those they perceive as having violated their trust.
Failure to respect these sensitivities carries great risk. A Consumer Pulse report from Accenture found 41% of consumers switched companies over a lack of trust and poor personalization, costing businesses $756 billion. No one can afford that.
Promotions can be personalized.
On the brand side, digital coupons – easily targeted and distributed to larger shopper segments – comprise a particularly powerful tool for delivering must-have personal relevance and driving sales. The specificity that can be attached to their face values, purchase requirements and cadence of and flexibility of delivery enables intelligent integration into personalized marketing across virtually every channel.
Exponentially growing in both shopper popularity and marketing impact, digital promotions continued to “punch above their weight” in 2018, accounting for a hefty 15% of all coupons redeemed but just a minuscule 1.6% of those distributed, according to Inmar’s 2018 Promotions Industry Analysis. Further evidence of the increasing significance of this method is the fact that 2018 was the fifth consecutive year of double-digit growth in redemption for digital promotions even as overall coupon redemption fell 15.8%.
When strategically overlaid with trade promotions, digital promotions bring additional, measurable impact to temporary price reductions. They attack high subsidization rates and typically low levels of incrementality by delivering incentives that efficiently generate additional purchases. Because the lack of volume lift from storewide events is often due to deals not being hot enough to motivate promotion-sensitive households, delivering a digital overlay to these consumers exclusively can drive sales lift with unparalleled efficiency.
Pricing is going personal
For retailers, personalized pricing represents a new and unique means to activate large numbers of shoppers at the individual level while improving price image, engendering loyalty and driving repeat purchase. A significant departure from the broadly used and arguably inefficient practice of employing Known Value Item lists (KVIs), personalized pricing involves identifying the items most important to individual shoppers – or Personalized Known Value Items (PKVIs) – and providing shopper-specific discounts taken automatically at checkout.
By leveraging existing algorithmic capabilities to identify PKVIs based on purchase history along with real-time POS connectivity enabling shopper/basket offer matching in milliseconds, retailers can offer unlimited, individualized item-price combinations tied to a shopper loyalty ID. Personalized pricing results in a better return on investment, with same-store sales growth generating a significantly higher margin contribution. It also delivers on consumer demand for personalization under the competition’s radar, minimizing their ability to defend.
It’s not a science
Personalization depends on science, but it is not a science. It’s a means to connect with each consumer. Yes, advanced predictive analytics are enabling enhanced, large-scale incrementality-driving personalization, but that’s on the marketer’s side of the effort, not the consumers.
Engaging consumers with the kind of singularity that results in greater loyalty, category growth and bigger baskets isn’t about providing them with technology. It’s about providing them a personalized experience that’s relevant, well-timed and delivers obvious value – even as the delivery itself isn’t so obvious to shoppers.
Jim Hertel is Senior Vice President of Analytics Research and Development Inmar