Robin’s Blog, Trends

Personalization! The Next and Biggest Thing

RR PersonalizationBring It to Me, Just for Me, New, Now & More Often

Listen to this. And, listen with great attention to what I’m about to say. The bar has been fundamentally raised on consumers’ expectations in this transformational century. Not incrementally raised, it’s been raised to a level that will require fundamental leaps forward in what you must do to meet those expectations.

You must relentlessly pursue the personalization of products, brands, services and experiences for each and every one of your customers. Those who do will be big winners. Those who do not will be lucky to survive.

Personalization is a big deal, if not the biggest competitive imperative for this century. Amazon, like in so many other ways, is the undisputed leader. All other major retail players are hardly out of the starting gate. They are well advised to get their acts together.

IT’S PERSONAL!

Why must personalization be the next biggest thing for all retailers? The short answer is because it can be, due to technology and big data. The long answer is that consumers have raised the bar. Everything that used to win their dollar—new products, more often; and, even experiences—are just the price of entry. Now they want personalized products, service and experiences, because they can. And, if you can’t provide it they will simply cross the street to another store or key tap into another site that provides such personalization. Having fun yet?

It’s all about big data analytics, mining customer’s personal information, including shopping behavior, all drilled down to the proverbial “gnat’s eyelash.” On a scale of one to 10, in my opinion, the industry’s use of data analytics to personalize its offerings, might be at a level two or three. I would rank Amazon somewhere around eight or nine. Recently I asked a C-level executive of a major department store what was on top of his priority list. His answer: “I need to find somebody with about 10 PhDs in data analytics.”

Predictive Replenishment

Personalization at its extreme is also predictive, providing a consumer with a desired product, service, or experience before the consumer asks for it, or before even knowing they want it. Amazon knows I like mystery novels, and they know it takes me about a month to read one. So every month they send me an email suggesting several new titles listed along with a description of each story. Or Amazon might send an unexpected birthday card mailed to consumers offering a personal gift of something that fits their lifestyle.

Amazon’s recent Dash Button innovation, which allows customers to push the button for immediate purchase and delivery of items they need, is also used by Amazon to increase their predictive capabilities, further personalizing their connection with consumers. So a man arrives home from work and finds an Amazon package containing a light bulb on his doorstep (probably dropped by a drone). Puzzled, because he did not remember ordering it, he is totally awestruck an hour later when the light bulb in his kitchen goes out. This consumer, having used the dash button to order light bulbs over a period of time provided Amazon with the ability to predict the consumer’s replenishment needs. Online businesses are able to gather more detailed personal information and shopping-behavioral patterns than brick-and-mortar retailers. And Amazon, as first mover in everything digital, leapfrogged ahead of everybody in data analytics. So, the catch-up efforts among the brick-and-mortar retailers, with their evolving omnichannel models, are daunting. But nevertheless, catching up is imperative for survival.

On a macro level, information is generated from a number of sources, aggregated and disseminated to an equally enormous number of recipients for millions of different uses. By the way, just to give context to the mountains of data available and growing by the nano-second, the amount of information collected between the years 1999 and 2003 would have filled 55,000 Libraries of Congress. Between 2003 and 2013, enough additional information has been accumulated to fill 555,000 Libraries of Congress. And I could not guess the amount stored over the past three years.

Data Trails

Data collection is a three-part process. First, as a part of the massive generation and aggregation of data, consumers shopping and lifestyle behavioral patterns are tracked, identified and recorded at their various browsing and transactional points of contact. Data is also collected through the use of various types of technologies and systems that can literally follow consumers while they are shopping and record their behavior, And to make sense of it all, RetailNext, a firm that is in rapid global expansion mode, provides retailers with a shopping behavior “dashboard,” used to elevate the shopping experience.

The second part of the process is the much more complex phase of figuring out what data to make use of out of the mountains available. And the final and most challenging phase is what to do with the information; how to use it. This is the most important phase that personalizes, connects with, and delights the consumer beyond expectation. Think: the not so serendipitous light bulb on the porch event.

It’s All About Me

Entertaining, enthralling, enticing, basically just seducing the customer has become the number-one challenge for retailers because this seduction process is now on a one-on-one, customized basis. Forget the concept of building it and they will come. You now have to build it one by one, one for one. And the underlying formula for success is a sensational idea your customers want, not what your marketing team thinks is cool. And the glue that holds it all together is complex data science, analysis and insight to market to people in a way that feels targeted and relevant to them.

A personalized experience has become the normal expectation. Banana Republic CMO Aimee Lapic talks to lapsed customers, prospects and top customers by segmenting these groups with differentiated messages and offerings, it was able to increase engagement by four times the normal rate.

Dunkin’ Brands is careful to not just chase the “bright, shiny new thing,” according to John Costello, president of global marketing and innovation. Apparently its strategy works: The DD Perks mobile app has been downloaded 17 million times. “You can disrupt, adapt, or be left behind.”

Jumping on the tremendous power and influence of social media and peer-to-peer personalized messaging, Dunkin’ decided to use the synergy between old and new media for a recent marketing campaign in which it looked at real tweets from guests to create one of its newest crop of television ads featuring real people, and reflecting their connection with the brand to others.

The idea of personalization is simple, and has been at the root of successful retailers since trading began, says Bill Adler, CEO of True Fit. “Retailers have always tried to get the right product in front of the right consumer at the right time, a very personal experience. Now we have technology, digital, and data, and we are trying very hard to do that at scale. We will look back on today’s inefficiencies of poring through pages of thumbnails and product to figure out what is best for you. This will all go away with advances, and you will get just the right thing, at the right time, in the right way.”

Attribution

Right now the huge hurdle is attribution in the anonymous Internet space. Most shoppers (80 to 90 percent) online are anonymous, or “one-and-done.” They are just spending time browsing, and the challenge is to create commerce. Retailers need to turn these visitors into shoppers, and then find a way to retain them. Neil Capel, founder and chairman of Sailthru says, “Once you’ve got the customer, they are your customer and you should look after them. We’ve got to change our interactions with our customers. Why is it acceptable to acquire a user and then annoy customers every single day with irrelevant information? Look at the consumer and give them the right cadence of the right content in the right channel in every interaction.”

Getting Permission

Retailers and brands are increasingly realizing the significance of the personal customer relationship they are engaged in, and the responsibility it carries. James Rhee, CEO of FirePine Group, says, “The mobile phone is an intimate device. It’s in her bed, on her thigh. We need to get the right permission, to stay within the persona of the brand when we speak to her, which is one of a very caring friend.”

The creepy factor usually comes up in any conversation about personalization. The balance between intrusion and a welcome call is a fine line. The prevailing opinion is that if there is a value, and the customer sees it, she will be happy to use it and talk to you. But first, you need to seek permission. Bill Lee of The Honest Company says, “Marketers need to be the butler, not the stalker.” JuE Wong of Elizabeth Arden says, “After mind share and market share, then there’s heart share. You need to capture all three.”

Subscription commerce is one of the game changers in on-demand personalization. Birchbox is now an icon in subscription commerce. It solves beauty issues personally through algorithms. By using explicit and implicit data, the replenishment model uses discovery to make the customer experience delightful. Based on “try, learn, buy,” personalization becomes the winning sales proposition.

A new kid on the block is Kidbox. It’s a unique example of personalization that does not require a subscription or fee up front. Envisioned by its founder and CEO, Haim Dabah, “it’s a convenient and efficient time-saver for moms with kids one to 14 years old. It’s all about “unpacking happiness,” which is the Kidbox slogan. Indeed, following an online personal profile of what the kids like to wear, a box of six to seven outfits or items is delivered monthly for free. All of Kidbox’s apparel comes from well-known brands such as 7 For All Mankind, Diesel, Puma Kids, Rocawear, and others. Any or all items can be returned, also for free. Purchase of the complete box is $98, or selection of a few items are competitively value-priced, averaging $14 per item. And, for each box purchased, Kidbox donates clothing to children in need.

Self-Expression

Fashion e-commerce site Revolve.com has managed to capture heart share among millennial consumers and become a major player in the premium apparel space by catering to the younger consumer’s desire to stand out in a unique way. According to cofounder Michael Karanikolas, who with Michael Mente founded the business 13 years ago, the retailer’s core customer is a young woman in her 20s or 30s who is sexy, fun, social, vibrant, and who loves fashion. She’s looking for something that she can’t get elsewhere from traditional retailers. Mass-market brands actually turn her off.

When you think about the consumers today, their world has changed compared to that of their boomer parents a generation ago. Twenty years ago, people had a social circle of maybe a dozen people who they saw on a regular basis. Wearing the same thing as someone else back then was a sign that you belonged and were cool.

Today’s young consumers have social circles numbering in the hundreds, if not thousands.

Fashion and self-expression are very different. Now, people want to wear emerging designers and micro labels that say hey, I’m unique. I’m an individual. Brand logos are endangered. It’s really about identifying and connecting with a product and purchase in a deeply emotional and individual way.

Karanikolas and Mente dispel the misconception that millennials only want cheap stuff. “Our average unit selling price is $150, and average order size is $300. Our customer really does value nice things that are special, and they value the emotional connection
they have with brands they love.“

A Brief History

“Know your customer” has been a part of the retail vernacular for at least half a century, becoming overused and less understood for its absolute centrality. But it is the genesis from which every retail decision must be made to succeed. Other buzzwords evolving from knowing your customer are “consumer centric,” “consumer power,” “consumer driven,” and other clichés that I have since forgotten. Throughout the C-suites of big brands and retailers, the consulting world, academia, and marketing and advertising agencies, these terms became intellectual candy, transformed into strategies at the beginning and the end of every business decision that was made. In theory, on paper and in ad nauseum presentations, the consumer was indeed central. However, in reality, the 20th century “consumer as center of the universe” gave way to the “consumer at the check-out line” to sell something to.

The customer-based jargon became a strategic lexicon of the larger, more sophisticated brands and retailers. The actual implementation of knowing the core customer often got lost in the complexities of bureaucracy and huge, siloed operations. Although retail leaders intellectually recognized that the consumer controls and drives every decision, many only paid lip service, so inevitably the end result was, and still is, to a large extent flawed and imperfect.

Small is Big

On the other hand, since time began, individual creators and purveyors of goods and services, the mom-and-pop businesses and even small store chains, know each and every customer on a very personal and detailed level. Why? Because they live, work, and play with them in their neighborhoods. They don’t have to focus on consumer-centric or consumer-driven strategies. Their customers are their friends and neighbors.

We are experiencing a back-to-the-future phenomenon. Centuries ago, one person created something of value and sold it to another person, directly connecting with the customer. All this and more is possible today through technology. Algorithms and data science are reversing the 20th-century paradigm of centralization, consolidation, and massification into a 21st-century long-tail move to decentralization, de-massification, and personalization. The new transactional landscape will be comprised of an infinite number of finite market niches being served by an infinite number of finite brands and retailers.

Today the customer rules: “bring it to me, just for me, new, now, and more often.” Personalization, personalization, personalization.

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