What is Personalization?
Personalization, as defined by the Cambridge Dictionary, is the act of making something suitable for an individual’s specific needs. This simple definition has seen an evolution in its application, particularly in the retail industry. In our current era, personalization isn’t just a trending topic; it’s a paradigm shift transforming the way customers engage with brands and merchants.
The Evolution of Personalization
Looking back, there was a time when customers would purchase standardized items or services, reflecting a uniformity of taste and requirement. Clothing, food, cars, electronics – all these products were once more or less similar for everyone. The concept of personalization, or customization, was relatively alien.
However, personalization isn’t a recent phenomenon. Its prominence, though, has drastically increased over the past few years. The shift to online shopping provided a dual advantage. For customers, it unlocked an avenue to explore shopping more creatively and conveniently from their homes. For retailers, it opened up opportunities to listen to what their customers want.
Economic conditions, such as inflation rates, also play a significant role in shaping the way personalization is being done and perceived. As inflation increases worldwide, customers are finding themselves in a financially challenging situation. Such volatility has led to customers becoming more strategic about their shopping habits.
Interestingly, personalization is being deployed as a strategy for enhancing customer experience and cost-saving. Amid a global price hike of 13%, as per NielsenIQ Global Price Tracker November 2022, customers are seeking personalization to save money while fulfilling their needs and desires. But it also allows the retailer to create a better shopping experience by implementing personalized reminders, online smart shelf, and more.
The existing economic environment underscores the importance of personalization. With many customers reporting that they are in a worse financial position than the previous year (add a quote from NielsenIQ research), there’s an imperative need for retailers to offer more value. But beyond discounts, retailers and brands also have an opportunity to engage with their shoppers differently by tailoring messaging, targeting promotions when shoppers need them, and providing timely communication across touchpoints. Customers expect more than just a transaction; they seek genuine engagement and recognition from their loyalty programs.
The Multifaceted Nature of Personalization
The core of personalization is understanding that it should always start with the customer, not the product. It’s not just about what you’re offering, but how, to whom, and when you’re offering it. Personalization can manifest in various forms – product offers, personal coupons, targeted ads, and return offers.
There’s a broad spectrum to consider: in-store offers, online-only promotions, or exclusive personalized discounts through timed email or push notifications. As the retail landscape becomes more sophisticated, customers have grown accustomed to – and indeed, expect – these tailored shopping experiences. Personalization success (alongside the costs of running it) will depend on many factors, here are 4 tips that will make your personalization strategy work better for your organization:
1. Increase Coverage of Your Offer Bank
Build an offer bank that covers your customers’ needs to enable true personalization. Personalization strategy must be based on a sophisticated algorithm that will be sourced from an offer bank containing the right number & mix of offers to allow scale. To cover more of your customers’ needs in a quantitative and qualitative way, you must make sure you get the right mix of offers between suppliers funded offers, private label ones, offers on niche items etc‘ to create adequate combinations over time and get a winning hand that will serve all your customers.
2. Have a Clear Engagement Plan for Each Customer
Strategizing around specific customer groups is a concept that is sometimes difficult to land: it requires the right technology but also alignment across functions. The temptation to either start just with whatever product is at hand or apply standardized discounts % to certain customers group is tempting (it’s also easier). However, personalization is about increasing wallet share: to do this, retailers must understand each customer’s behavior, analyze it, have a clear plan to influence that behavior, measure the success, adjust if needed, and repeat the steps – this is what will move the needle over time.
3. It’s All About Engagements
Keep it fresh, make sure your engagements are relevant and aligned with your customer’s needs and expectations. Personalization is not about discounts or your customer’s name in the email. It’s about engagements and making sure your customers keep coming back. Avoid duplication and execute a hierarchy leveled plan that will allow diversity in the category, and will ensure you are there for the long run.
4. Invest Strategically
Different investments are personalization’s secret weapon. Use a robust platform to allow you to diversify your investment levels. For example, ensuring the value you grant to each of your customers varies according to their tier and shopping habits. It does not make sense to provide the same 20$ reward to customers who buy a 200$ basket or a 25$ basket. Setting rules and implementing the right balance for that individual plan is what ensures the investment is well managed and that the customer is not swamped with repetitive or irrelevant engagements.
The Future of Personalization
In conclusion, while the future of personalization might be unclear, one thing is certain: personalization is more than just a buzzword; it’s a significant driving force in the retail industry. Retailers equipped with a robust, AI-based platform combined with the intelligence of strategic teams are undoubtedly better positioned to navigate this fast-evolving landscape and deliver superior, tailored experiences to their customers. As we move forward, personalization will continue to redefine the shape of customer engagement and retail success. Retailers that will exceed with their personalization strategies and implementation will be better set for success with their retail media plans for the long run