Personalization is Key to Customer Loyalty

Transcription

1 Personalization is Key to Customer Loyalty BRP SPECIAL REPORT A supplemental report based on the findings from the 2017 Customer Experience/Unified Commerce Benchmark Survey Gold sponsor:

2 Personalization is Key to Customer Loyalty 2 Personalization is the best way for retailers to enhance the customer experience, especially for those customers who are already invested in your brand. - Perry Kramer, SVP and Practice Lead, BRP Introduction Personalization is a hot topic for retail. As consumers become more technologically savvy and have access to better information, there is a widening gap as retailers struggle to meet consumers escalating expectations. Personalization fills that gap and is one of the best ways to create and maintain a connection with the brand s most valuable and loyal customers. Today s consumers connect with brands across multiple channels, which complicates the process of recognizing, servicing, and rewarding loyal customers. However, customers don t have patience for complicated processes, they expect engaging and relevant Interactions and conversations across any and all channels. When approached correctly and done for the right reasons, customers want and expect personalization and are even willing to spend more than they initially planned for that experience. Generally, the more personalized the experience, the happier the customer will be. In fact, according to the 2017 State of Personalization Report of more than 1,000 U.S. consumers, 44% of consumers say that they will likely become repeat buyers after a personalized shopping experience with a particular company 1. According to The Economics of E-Loyalty, a report from Harvard Business School, increasing customer retention rates by 5% increases profits by up to 95%, plus retaining a customer is far less expensive than acquiring a new one. And a happy customer isn t just a customer who wants to purchase more, they are a customer that is loyal, valuable and perhaps most importantly a customer who will be an advocate for your brand. The subject of personalization has gone well beyond simple marketing to demographic groups, customer segments or even personas. It is more than simply greeting a customer by name when they walk in the store and goes beyond merely offering product recommendations on a website. Personalization encapsulates all the details that make the customer s shopping experience unique to her. Of course, it involves knowing the customer and understanding her past purchases and current interests, but it also encompasses the overall experience itself and whether that experience meets the customer s needs and expectations while creating an environment that fosters brand loyalty. To understand how retailers are personalizing the shopping experience for their most valuable customers we examined some of the findings from the 2017 Customer Experience/Unified Commerce Benchmark Survey. 1 The 2017 State of Personalization Report,

3 Personalization is Key to Customer Loyalty 3 Customer Identification and Incentives To engage with customers on a personal level requires retailers to identify the customer early in the process at any touchpoint. This initiates the dialog and sets the foundation for relationship building. The key is providing customers a value proposition that makes it worth the effort to identify themselves. Offering Incentives which is almost mandatory in today s environment is a smart way to encourage customers to provide retailers their personal information for customer identification. It is important for retailers to offer compelling benefits to ensure that the customer feels they are getting value in return for sharing their personal information. The optimal incentive will vary greatly based on each retailer s customer demographics. Younger generations are much more willing to share their contact information; however, they also have much higher expectations for constant content refreshes and value associated with sharing their information. We asked retailers what types of incentives they offer customers to encourage identification and 53% of the respondents extend specialized offers to their customers, up from last year s 40% (Exhibit 1). Specialized offers could be in the form of a specific offer only available to a current customer or a personalized offer based on that customer s purchase history. In practice, incentives create a strong correlation to the rate in which customers identify themselves, and identification creates opportunities to personalize the shopping experience and or offer special discounts and promotions, which typically translate into higher sales. Exhibit 1 Customer Incentives Specialized offers Product incentives Maintenance of purchase history for ease of returns/exchanges More personalized service Credit towards future purchases Product information Interaction with in-store technology (e.g. smart mirrors) We do not offer any incentives We can't identify customers 18% 16% 26% 32% 32% 29% 34% 53% Loyal Customers With 80% of a retailer s business typically coming from 20% of its customers, identifying your most valuable customers and understanding their shopping habits is critical to cultivating loyal, brand enthusiasts.

4 Personalization is Key to Customer Loyalty 4 Intrinsically, your most valuable customers are loyal to your brand, but to cultivate loyalty it is crucial to surpass expectations whenever and wherever possible. This niche of customers responds most favorably to a personalized experience because they want to feel recognized and rewarded for their loyalty. Again, the optimal way to achieve this is to identify the customer as soon as possible and communicate his or her information to an associate so they can facilitate information gathering, provide personalized recommendations and an excellent customer experience. Exhibit 2 "Most Valuable" Customer Identification Process established and working well Process not established Identification of "most valuable" customers Process established and needs improvement 53% 23% We asked retailers if they were able to identify their loyal customers. While 77% of them could identify this segment, 69% of those feel the process needs improvement which highlights potential missed opportunities (Exhibit 2). Most retailers utilize the traditional process of identifying valuable customers through RFM (recency, frequency and monetary value of customer purchases) as the driving method for identifying customer value, but other methods are growing in popularity like customer profitability and brand advocacy (Exhibit 3). Brand advocacy is a valuable measurement tool for retailers as many consumers base their research and purchasing decisions on peer recommendations and testimonials. Measuring brand advocacy is a promising means of identifying valuable customers, since these customers have a propensity to influence other potential customers and draft additional loyal customers principally through their social media networks. Using brand advocacy as a means of identifying the most valuable customer is gaining traction. While only 40% of retailers are currently using this method, it is up significantly from 28% last year. Customer Engagement How a retailer chooses to implement customer engagement is a key differentiator in personalizing the customer experience. But one of the key criteria is to ensure that sales associates not only recognize your most valuable customers, but also have the tools in place to personalize the shopping experience by offering specialized offers, purchasing suggestions, or promotions. Shopping "recency" Shopping frequency Dollars spent Customer profitability Brand advocacy/social media endorsement Exhibit 3 Identification of "Most Valuable" Customers Utilize and works well Utilize and needs improvement Utilize within 3 years 13% 8% 30% 29% 26% 32% 39% 35% 39% 39% 33% 27%

5 Personalization is Key to Customer Loyalty 5 How the organization selects, implements, and incentivizes a given engagement model should be aligned with the end goal to support a customer experience matching or exceeding expectations, with the underlying intent to deepen the customer s relationship with the organization. While many retailers can identify their most valuable customers, only 53% have a process in place to communicate this information to an associate, and of that 89% feel that the process needs improvement (Exhibit 4). What is even more telling is that 47% of retailers do not currently have any process in place to communicate most valuable customer status to their associates before the point of checkout. This is a missed opportunity for retailers to nurture relationships with their most valuable customers and it also risks disappointing them. In today s unified commerce world, customer engagement has to be holistic and transcend channels. Furthermore, today s well-informed consumers are not satisfied with a warm body or a one size fits all experience they expect retailers to put time and effort into establishing and offering a personalized experience. Personalizing the Experience Research shows the best methods for enhancing the customer experience involve offering personalization. An Infosys study of 1,000 consumers and 50 U.S. retailers indicated that 59% of customers say that personalization influences their shopping decisions and 31% indicate they would actually like their shopping experience to be more personalized than it actually is 2. Exhibit 4 "Most Valuable" Customer Processes Process established and working well Process established and needs improvement Process not established Communication of "most valuable" customer information to associate before transaction 6% 47% 47% Exhibit 5 Methods of Enhancing "Most Valuable" Customer Experience Invitations to special events Personalized promotions Personalized rewards Preferred/first access to new products Personal shopper 19% 25% 50% 56% 69% And even more telling, 93% of consumers indicated they would provide retailers with detailed information if they received Special shopping times/days Personalized e-commerce microsite for direct to consumer targeted sales 17% 17% 2 Rethinking Retail: Insights from Consumers and Retailers into an Omni-Channel Shopping Experience,

6 Personalization is Key to Customer Loyalty 6 meaningful and customized offers in return 3. Consumers ability and willingness to provide detailed information when they see a value is a trend that continues to increase as today s younger generations have defined personally identifiable information much differently than their parents did. In our Customer Experience/Unified Commerce Survey we found that retailers realize that customers want more personalization, especially loyal customers that expect to be recognized. More than half the retailers surveyed utilized personalized promotions and rewards as methods of enhancing their most valuable customers shopping experience (Exhibit 5). Engaging the customer through personalization and relevance is the key to attracting and keeping customers. Retailers that identify customers when they enter the store and equip their associates with the proper mobile tools can personalize the shopping experience based on customer context. Customer context is the interrelated factors of customer insights and environmental conditions the make the shopping experience relevant. It enables retailers to personalize the shopping experience based on customer preferences, purchase history, their closet, their most recent online browsing history, time of day, weather and their physical location all based on real-time information and personalized to create a bond with these valuable customers. Understanding customers preferences and meeting them in a personalized way is also a significant component in bridging the gap between a profitable and non-profitable e-commerce transaction. As the percentage of e-commerce transactions grows, the importance of making these transactions profitable will be key to long term success. The most valuable customers have already established their loyalty to the brand but to keep them coming back and to encourage their advocacy of the brand, it is important to ensure each and every shopping experience they have is personal and positive. 3 Engaging With Digital Consumers, June 2013,

7 Personalization is Key to Customer Loyalty 7 About BRP BRP is an innovative retail management consulting firm dedicated to providing superior service and enduring value to our clients. BRP combines its consultants' deep retail business knowledge and cross-functional capabilities to deliver superior design and implementation of strategy, technology, and process solutions. The firm's unique combination of industry focus, knowledge-based approach, and rapid, end-to-end solution deployment helps clients to achieve their business potential. BRP s consulting services include: Strategy Point of Sale (POS) CRM Order Management Supply Chain Business Intelligence Mobile POS Unified Commerce E-Commerce Networks Business Process Optimization Payment Security Customer Experience & Engagement Merchandise Management Private Equity For more information or assistance on any of the topics covered in this white paper, please contact: Brian Brunk, Principal (405) bbrunk@bostonretailpartners.com Ken Morris, Principal (617) kmorris@bostonretailpartners.com Perry Kramer, SVP and Practice Lead pkramer@bostonretailpartners.com David Naumann, VP of Marketing (916) dnaumann@bostonretailpartners.com Kathleen Fischer, Director of Marketing (330) kfischer@bostonretailpartners.com BRP Atlanta Boston Chicago Dallas Denver San Francisco BRP. All rights reserved No part of this publication may be reproduced or transmitted in any form or for any purpose without the expressed permission of BRP. The information contained herein may be changed without prior notice.