The Problem With Retail Personalization

The Problem With Retail Personalization

Buzzwords. AMIRITE? They come and go. They mean something sometimes and other times, not so much. And retail buzzwords, don’t even get me started. The vague terms, confusing implementations, and lack of context on how they can apply to your organization can start to be overwhelming if you’re simply just trying to improve your customer’s experience.

We don’t want personalization to fall into this same trap. Although it carries some of the same stigmas as other buzzwords and some may see it as meme-worthy already. All we need is someone to turn some iconic meme into something that shows personalization as the hottest new thing. Hold on…my high school writing teacher always said, “show don’t tell”, so, let’s take care of that. Ok, here you go:

Those retailers who have gotten past the barriers to true personalization are seeing a 46% increase in customer spend according to the State of Customer Engagement Report.

Under pressure from retail leadership, marketing, and brick-and-mortar stores, IT has likely applied a patchwork of technology to address critical issues, but most retailers are struggling with true personalization. What retailers need is clarity and empathy. So, let’s start by telling you that you’re not alone. Many retail organizations are trying to piece together a personalization strategy (that was the empathy, you’re welcome).

Now let’s get to the clarity. Sometimes it probably feels like true personalization should already be implemented at your organization. The reality is that getting to an ideal state of personalization is not as simple as flipping a switch. You need to know what you’re up against and have a solid approach to do it well (like any successful undertaking). Let’s explore some of the common challenges retailers are facing to bring this vision to life.

Retail personalization terms are unclear

“Personalization” is sort of vague, isn’t it? When people refer to personalization, they might be referring to something as simple as adding a name variable to an email, or something as complicated as building an engine that offers a unique experience to each customer. Let’s clarify the terms to ensure we’re all starting from the same page.

What is customized communication?

This is just simple, old school, variable driven content. Think of it as a rule-based variable that catches the eye. It uses simple logic like, “if this, then that.” You most commonly see this with email marketing when people use first name variables in subject lines and email copy. It’s reliable, it provides a lift in open rates, but it’s not a complex way to approach your customers.

Is it personalization? Nope! Variables-based customized communication can provide a customer with the perception of personalization, but meaning behind the content being served isn’t customized in most situations.

What does segmentation mean?

Segmentation is a way to slice and dice your market by attribute in order to better target them. What are the benefits of segmentation? Great question! According to Qualtrix, it can be used to create stronger marketing messages, to target your market with digital ads, to craft more effective marketing strategies, and lower your acquisition costs, to name a few. Segmentation can use demographic, firmographic, psychographic, or behavioral information, or some combination of some or all of them.

Is it personalization? Nope again! You can use segmentation to help inform your personalization. Assuming that your segmentation is based on customer data, you can provide simple personalization by crafting marketing strategies that appeal to the larger groups of people.

What is real-time personalization?

Real-time personalization is the result of synthesizing information across multiple systems that collect pertinent information about your customers and delivering a relevant experience or interaction at the right time. Although there is a lack of clarity around what personalization aspects they use (they don’t like giving out the secret sauce), Netflix and Amazon have pretty effective examples of real-time personalization.

Is it personalization? Yup! That might not come as a shock, but real-time personalization uses engines that leverage multiple streams of data and enable artificial intelligence and machine learning to create experiences based on a person’s behavior.

What is 1:1 personalization?

1:1 personalization is a completely immersive customized experience for a customer. This level of personalization provides a completely unique experience for every customer. It means that an organization can personalize its pricing, products, offers, and user experience thanks to technology that helps a retailer synthesize information collected about that user over time.

Is it personalization? You bet! This is the ideal state. It’s a segment of one. Anna receives ads tailored to Anna’s preferences. Anna receives email and SMS offers pertinent to Anna. Anna gets an ecommerce store designed for Anna. It’s personalization in its purest form.

Although the terms above are used interchangeably in the industry, there is a clear distinction between the building blocks of a user experience and launching a way for a customer to truly get the experience that will keep them coming back to your retail store again and again. But, it’s not easy.

Investing in personalization is hard

McKinsey said it pretty well in 2019: “Personalization is impossible if marketers don’t have the means to understand the needs of high-value customers on an ongoing basis.” With any new endeavor, you need to put the core pieces into place to ensure success. First, you need to start with your people (staffing, culture), process (data cleanliness, organizational strategy), and technology (customer engagement platform). Without those elements firmly in place, personalization efforts fail. And don’t get us started about data!

The data is dirty

Ok, let’s talk about data. Retailers are collecting data whether they realize it or not. Organizations are gathering and storing customer data across SMS, chat, app, website interactions, social platforms, ad platforms, customer service calls, and research and development. In fact, I was wow-ed by the number of unique technologies I saw in this piece highlighting innovative retail digital technology points. The data nerd in me just kept worrying about how they planned on porting all of that data into a centralized system!

Most formats of data are non-agnostic and require a level of administrative gymnastics to get it to the point where data can be analyzed. Without being able to gather the insights from a source of truth, data is the equivalent to a bunch of knick knacks gathering dust on a shelf in an old hutch, useless.

To complicate matters, points of imperfect user entry, fraudulent accounts, or old shopper information mean that the data could be untrustworthy.

Customers want a lot from retailers

Your customers need you to cater to them. They need to be able to engage seamlessly with your brand, anytime and anywhere. They want personalized experiences from your agents, and expert guidance over preferred channels. They want to easily track their packages. They want their transactions to toggle easily between online and in-person shopping experiences. They want it to be easy to make an account, but difficult for that account to be hacked. And to top it all off they don’t want to remember passwords. They want retailers to make their lives easier.

Simple. Right? 😆😭💀

The drive for a bigger bottom line never stops

Your leadership is looking at personalization as a potential silver bullet that helps reduce churn and lift lifetime value. They want to strengthen loyalty by providing access to information across every channel, but they don’t want to have to spend too much for it. They also want improved return on ad spend, sales per square foot, average transaction value, and inventory turnover ratio.

While there is pressure to improve the personalization game in retail, it’s met by a strong desire to keep costs down. Fighting for budget to get new people, processes, and technology for personalization isn’t easy.

The hopeful ending

Hey, I’m not going to sugarcoat it: there are challenges to overcome when it comes to prioritizing a personalized shopping experience. As we make the argument for more sophisticated personalization, the promise of a holistic customer journey designed to maximize engagement, increase lifetime value, and lower cost of acquisition is very real. The ability to bring together the disparate pieces of technology into a singular bouquet that serves to provide the customer with a seamless, high-converting experience is available. All we need to do now is advocate for that coveted budget to get started.

Maureen Jann is a Senior Content Marketing Manager at Twilio. She has over two decades of experience as a marketer and has helped organizations level up their marketing strategies. Maureen has a Bachelor's of Art from San Jose State, and an MBA from the School of Failed Startups. She is a frequent speaker and guest writer for popular marketing industry organizations and lives in the Pacific Northwest with her husband, daughter and dogs.