A Framework for Omnichannel Personalization

Transcription

1 A Framework for Omnichannel Personalization A prescriptive guide to help retailers bridge the gap between vision and reality. Personalizing the shopper experience across channels is a goal most retailers covet, yet few truly achieve. The gulf between vision and reality is a reflection of two factors: the lack of a clear definition of the end-state and its associated benefits, and the gap in retailers current business processes and technology systems. This point of view illustrates the business value of personalization, and provides a 4-part framework for retailers to successfully execute omnichannel personalization strategies. Research Partner

2 The Importance of Omnichannel Personalization High Customer Acquisition and Retention Costs Repeat customers drive current profitability while new customers drive current growth and future profitability. This simple axiom of retail is still true. Yet, acquiring and retaining customers is harder than ever before. Consumers expect personalization being offered an experience tailored to their needs and preferences based on their implicit behavior and explicit permission across all interactions with a retailer. Not delivering on this counts as a failure in the eyes of the consumer. Meanwhile, with proliferation of choice and ubiquitous mobility, consumers can abandon engagement with a retailer at the slightest friction in the customer experience. For every customer experience failure, brands lose an average of 65% of the customer s share of wallet during the following year 1. 78% of consumers are more likely to be repeat customers if a retailer provides them targeted, personalized offers. 25% 86% of consumers will pay up to 25% more for a better customer experience Source: Vanson Bourne s Rethinking Retail, 2014 Source: The Annual Customer Experience Impact (CEI) Report, 2011 Source: 1 SDL

3 Commerce and Engagement are Converging For decades retailers have invited consumers into environments they control (stores, websites and mobile apps). Over the next few years, consumers will continue to push retailers outside the comfort of their own walls from social media buy buttons to over-the-top messaging services with integrated payments such as WeChat; from personalized concierge services to full-featured mobile wallets. Source: Shopify, 2015 ecommerce orders originating from social media grew at 202% in 2014 To stay relevant, retailers need to embed themselves in the ongoing phygital lives of their consumers and earn the right to be part of this continuous stream of engagement. They can t do so by following traditional means of marketing, communications and customer service. Personalization is their way in. 550 MILLION monthly active users on WeChat Stores are the Last Frontier Source: Tencent Press Release, 2015 Consumers rich digital body language online and offline behavior that signals their intention and preferences is all but lost on retailers; especially in-store. A key reason: Personalization has largely been the domain of online retailers or the ecommerce teams of brick and mortar retailers. With more than 90% of retail sales still occurring in stores 2, and stores increasingly influencing digital sales, stores can no longer be consigned to the dark ages. Store Associate Recommendations are the Most Effective Personalization Tool 3.5x 2.5x 25x Personalized s Product Recommendations on Website Social Media Buy Buttons Store Associate Recommendations Sources: 2 Deloitte Source: EKN-Mindtree Omnichannel Personalization Survey, 2015

4 What is the Business Value of Personalization? Meeting Consumer Expectations Improved Conversion Revenue Impact 60% 35% of consumers prefer offers that are targeted Personalized call to actions result in 42% to where they are and what they are doing 3 higher conversion than generic CTAs 6 of Amazon s revenue are generated by its recommendations engine 9 64% of retailers believe that their consumer s shopping experience should be more personalized 4 60% of abandoned cart s generate revenue 7 6.6% sales uplift from a unified marketing personalization strategy 10 74% 52% of consumers get frustrated when website content has nothing to do with their interest 5 1 in 2 retailers using automated product recommendations increase their average order value year-on-year 8 of shoppers buy more with crosschannel personalization 11 Sources: 3 Boxever, 4 Vanson Bourne s Rethinking Retail, 2014, 5 Online Personal Experience study, 2013 Janrain, 6 HubSpot, 7 Salesforce s exacttarget, 2014, 8 Annual State of Retailing Online Report, Forrester Research & Shop.org, 9 Amazon Release, 10 EKN-Mindtree Omnichannel Personalization Survey, 2015, 11 The e-tailing group Personalization Comes of Age, 2014

5 Why a Framework for Omnichannel Personalization? Often Misunderstood The simplest definition of personalization can be summed up as Relevance + Trust, i.e. providing a customer experience that understands her context across channels, puts her in control of how her personal information is used for her benefit and prioritizes the protection of that personal information over all else. From Turkey s Grand Bazaar to the local butcher, retail has always been about building personal relationships. Retailers must extend the definition of personalization to include the strategies they adopt at the store to recognize customers (opt-in) and arm sales associates to deliver not only a personalized but also a truly personal experience. Lack of Current Maturity Retailers maturity lags their intent. Though the business value of personalization is relatively clear, few, if any, retailers are able to truly personalize the omnichannel retail experience. Moreover, the fundamental building blocks required to do so aren t in place at most retailers. Inability to integrate data from multiple data sources Top 3 Omnichannel Personalization Challenges Poor quality of data provided to personalization engine Inability to derive actionable insights Source: EKN-Mindtree Omnichannel Personalization Survey, 2015 Difficult to Measure ROI With most retailers losing line of sight into a single view of the customer at the store, it has traditionally been difficult to measure the ROI of omnichannel personalization. The conversion or sales-lift metrics retailers ecommerce teams may report from or web content personalization simply scratch the surface. The true value of omnichannel personalization lies in the concerted interplay of channels. No Single Solution Retailers have no dearth of marketing, analytics and personalization solutions. However, there is no industry standard framework or solution that can help drive a personalized customer experience across channels. Most retailers end up with a patchwork of different systems that limit agility and bloat cost of ownership.

6 The Framework Customer Context Customer Value: Relevance Retailer Value: Single View of the Customer Key Enablers: Customer Data Master Customer Activity Repository The foundational component of an omnichannel personalization framework is a unified view of customer profile, preference, purchase and behavior data. Combined with data such as location, weather, social media sentiment and demographics, retailers can better understand the context in which customers engage with them. More than 70% of retailers do not have a single 360-degree view of the customer 12 Only 18% of retailers use customer contextual data in-store to personalize marketing offers, content and communication 13 Only 7% of retailers recognize their customers across different channels all the time 14 Personalization Engine Customer Value: Personalization Retailer Value: Differentiation Key Enablers: Personalization Software Proprietary Algorithms and IP With a better understanding of the customer who they are, what motivates them to make mutually profitable decisions, what their communication preferences are retailers can supercharge their messaging and engagement strategy for individual customers or segments of customers. They must do so through a combination of analytics tools (that elevate a retailer s current capability to analyze data), proprietary algorithms ( secret sauce that ties customer analytics to their business model) and human ingenuity (personalization isn t the domain of digital channels exclusively). 55% of retailers are dissatisfied with the quality of data input into their personalization engine 15 Only 3 in 10 retailers have the capability to perform investigative or predictive analytics 16 Sources: 12 EKN-Mindtree Omnichannel Personalization Survey, 2015, 13 RIS-EKN Customer Engagement Study, 2015, 14 The e-tailing group Personalization Comes of Age, 2014, 15 EKN-Mindtree Omnichannel Personalization Survey, 2015, 16 EKN 2nd Annual Future of Stores Study, 2014

7 Offer & Content Execution Customer Value: Seamless Experience Retailer Value: Efficient Marketing Ops Key Enablers: Digital Content Repository Marketing Automation Offer & Content Execution refers to the consistent, flawless, cross-channel, multi-format, device-optimized execution of personalized offers and messages. Retailers can address the challenge of channel and device multiplicity through marketing automation tools, digital content repositories and SLA - based service agreements with partners that help manage marketing IT operations at scale cost-effectively. 1 in 2 retailers do not have a single digital content repository 17 Only 15% of retailers are always consistent with their messaging and marketing across channels and devices 18 More than 40% of shoppers have left a store without purchasing because they knew they left a coupon at home 19 Code of Honor Customer Value: Trust Retailer Value: Risk Mitigation Key Enablers: Customer Preference Center Encryption & Security Retailers must balance greater personalization of the shopper experience with the inherent risks associated with managing larger amounts of sensitive customer data. Clearly, retailers current data management practices lag their own intent across 3 key dimensions consumers value the most: Currently do Plan to do Transparency Only use the customer data for the purpose that they have agreed to Notify customers when they are being tracked online or on their mobile phones Disclose who (retailer/third party) is collecting their information 67% 25% 14% 98% 42% 38% Control Take express consent from the customer on how their data will be used Allow customers to access their data and make edits 25% 18% 72% 68% Privacy Customer data is encrypted and no personally identifiable data is stored as-is There is an executive/ombudsman who customers can reach out to for any question related to privacy 38% 11% 95% 52% Source: EKN-Mindtree Omnichannel Personalization Survey, 2015 Retailers must begin by being more open about how they use customer data to personalize the shopper experience, allow consumers more control over what data is used for what purpose and for what benefit, and go beyond current regulations to ensure their customer data privacy and security standards are among the highest in the industry. Sources: 17 EKN-Mindtree Omnichannel Personalization Survey, 2015, 18 the e-tailing group Personalization Comes of Age, 2014, 19 Google Commerce

8 Consumers don t compartmentalize their shopping experience into channels. Personalization, therefore, cannot remain the domain of digital channels alone and must extend to include in-store experiences. Rather than focusing on utopian one-to-one personalization, retailers will do well to strengthen the two primary dimensions that add value to consumers: relevance and trust. Doing so requires a single view of the customer, a differentiated approach to analyzing this data to develop meaningful offers and messages, the ability to deliver these messages across the variety of customer touchpoints, and a razor sharp focus on data governance and consumer consent. Our research agenda is developed using inputs from the end user community and the end user community extensively reviews the research before it is published. This ensures that we inject a healthy dose of pragmatism into the research and recommendations. This includes input of what research topics to pursue, incorporating heavy practitioner input via interviews etc., and ensuring that the blend of research takeaways are oriented towards a real-world, practical application of insights with community sign-off. For more information, visit us at EKNinfo@edgellmail.com Mindtree [NSE: MINDTREE] delivers digital transformation and technology services from ideation to execution, enabling Global 2000 clients to outperform the competition. Born digital, Mindtree takes an agile, collaborative approach to creating customized solutions across the digital value chain. At the same time, our deep expertise in infrastructure and applications management helps optimize your IT into a strategic asset. Whether you need to differentiate your company, reinvent business functions or accelerate revenue growth, we can get you there. Visit to learn more. Disclaimer: EKN does not make any warranties, express or implied, including, without limitation, those of merchantability and fitness for a particular purpose. The information and opinions in research reports constitute judgments as at the date indicated and are subject to change without notice. The information provided is not intended as financial or investment advice and should not be relied upon as such. The information is not a substitute for independent professional advice before making any investment decisions. Copyright 2015 EKN Registered Office: 4 Middlebury Blvd. Randolph, NJ Ph: (973)