There are no signs that the online retail revolution is over. Online growth in retail seems certain to continue to easily outpace total retail growth for the foreseeable future, and according to recent research from Verdict Retail, in 2020 online will account for 17.1% of total retail sales – up from 13.8% in 2015.
The ongoing march to online retail and the related migration to multi-channel and omnichannel has driven retailers to implement new systems and solutions that build a capability to engage with and deliver to customers anytime, anywhere, anyhow. That’s one element of the challenge of modern day retailing but retailers also increasingly need to understand each customer’s preferences and behaviours in order to effectively personalise and individualise their service offering and differentiate themselves from their rivals.
It’s a tough challenge to navigate. Traditionally, the market has been used to focusing on broad segments, using broad-brush demographics – females aged 20-35 from the South of England, for example. That is no longer a focused enough target market. Today, it is about understanding the individual customer, it’s about knowing Kirsten, what her likes and dislikes are, what category of products she is interested in and what her propensity to buy is.
Consumers not only want, but expect a personalised experience. They expect retailers to know their preferences and interests. A recent Infosys survey revealed that 78% of consumers are more likely to be a repeat customer if a retailer provides them with targeted, personalised offers. Failing to provide this personalisation will have the opposite result: the CMO Council reported that more than half of U.S. and Canadian consumers consider ending their loyalties to retailers who do not give tailored, relevant offers. And they’re willing to pay for it, too. According to a RightNow Customer Impact Report, 86 per cent of consumers will pay up to 25% more for a better customer experience.
This is now beginning to resonate with retailers. According to a recent consumer survey from global information services group, Experian, 86% of UK brands are currently personalising their communications. But as the company highlights in its accompanying report, “it’s not quite as simple as ‘doing personalisation’ – it’s more about the level to which we personalise our marketing that will prove the difference.” Technology will be key in delivering that personalisation. And, at HSO we believe it will be those retailers that most successfully leverage the power of technology such as customer relationship management (CRM), enterprise resource planning (ERP) and machine learning that will be most successful in engaging with customers and building future competitive edge.
So how successful have retailers been so far in doing all of this? Unsurprisingly perhaps, it’s the larger, well-known brands that have been leading the way but up to now it has been driven primarily by innovation in the online channel. These firms have been able to leverage their greater financial muscle to tap into the capability of the richer and more expensive ecommerce platforms – and they have benefited from the greater personalisation that many of these solutions support.
Yet, even these more forward-thinking and resourceful businesses typically only have limited capability today and generally still lack the ability truly ‘to market to a consumer of one’. That’s because most of these organisations are still only able to personalise through a single channel: ecommerce. They don’t really have a handle on and certainly not the ability to collate all of the data that is generated by implicit and explicit customer interactions across all channels.
In summary then, there is a broad and growing awareness that ‘marketing to a consumer of one’ is a desirable goal for most retailers to aim to achieve. At the same time, however, while the move to a truly personalised service offering is starting to happen, driven by the biggest brands in the sector, all companies, including those industry giants, are struggling to achieve the ultimate goal of using data to understand the customer across the full spectrum of interaction channels and then take action to optimise those engagements and drive up sales.
So what’s the solution? What needs to happen to change that situation and enable retailers to be more data-driven and have a perspective across all of their channels of engagement?
A new landscape
Today, many of the landmarks that defined the retail map in the past are disappearing fast. The traditional Attention, Interest, Desire, Action (AIDA) marketing rules no longer apply. AIDA only really worked in the pre-digital days when the customer journey was linear. Those days are now past. In the far more complex retail landscape of the 21st Century, mapping the customer journey is much more difficult. Often, it is a major challenge just to understand where the customer has started from.
With customers increasingly using multiple channels in the lead up to the decision to purchase and often spending significant time on the web, especially in the case of higher value or luxury items, a complex web of interactions have often taken place before a customer ultimately makes a decision to buy from a retailer. At the moment, most retailers have little power to leverage the resultant data trail and intervene at any point to positively influence the buying decision in their favour.
If a shop assistant could be presented with the information that a particular customer last night spent five minutes on a specific web page, looking at this particular item that a store had in stock, that data could be invaluable to the retailer in delivering the right message to the customer and sealing a sale.
All of that is much easier said than done. To achieve it and a similarly advantageous position across all channels of engagement, retailers first need to be able to record all of the interactions that their customers and prospective customers are having with them across all channels.
Very few retailers are actually doing all of this at the moment. Many are recording explicit interactions such as when a customer buys a specific item, for example, or when they add an item to their online basket. Hardly any are recording the implicit interactions i.e. dwelling on a web page for five minutes looking at one individual product that customers and prospects have with them.
The ability to mine this kind of rich intelligence about an individual enables the retailer to build an in-depth profile of each customer and prospect and their preferences and behaviours. And this knowledge is critical for these organisations in understanding what makes particular people tick and therefore being able to deliver the right message at the right time across the right channel in order to secure a sale.
Some retailers have elements of this capability in place. Some are using their expertise in the ecommerce channel to profile small groups of consumers; to suggest for example that customers that bought one item in their product portfolio then went onto buy another, or changing the home page layout to reflect what the customer last looked at. This kind of approach has been highly successful in building engagement and loyalty with retail customers and it will still have considerable value as a marketing tool in the future. Increasingly though, it is not in itself sufficient to drive competitive edge in today’s sophisticated retail environment.
Consumers increasingly expect a personalised service offering to be delivered to them when they want it, regardless of the communications channel over which they are engaging. In the future, if they don’t get this, they will be more and more likely to defect to a retailer who can offer it.
How technology can help
Personalisation, effectively marketing to a consumer of one, therefore has to be a core goal of the retail sector going forward. And technology will have a key role in delivering it. Retailers can, of course, use ERP systems to capture all of the explicit interactions and retain key transactional information. That’s a critical element of the future retail story but it’s nevertheless far from the only one. In addition to a fully functional ERP system, retailers also need a rich CRM capable of bringing all of the customer information, including social, together into one central repository.
What retailers then need is the capability from a technology perspective is first to track all of this big data available to them including transactional data and then make some sense of it. The second element is being able to profile each individual user based on their interactions. A big ticket retailer, for example, would benefit hugely from knowing that individual is just about ready to buy when they are spending time looking through the website. But that knowledge is nevertheless of little value unless retailers also have the technological capability to do something about it.
CRM and ERP solutions form part of the critical foundation layer but the retailer needs to be able to build on this to deliver offers to the mobile phone of a customer who last night spent 15 minutes looking at a suit or a new pair of shoes online. Moreover, they need to be able to customise the website to personalise it to each customer’s personal likes and behaviours. And they need to change the look and feel of the landing page to match the consumer’s preferences. That’s a key part of the battle, but the trick is not just to collate and integrate all of this data but to also deliver it in a timely fashion to the customer at the point of sale.
All of this technology is out there and ready to be embraced but most retailers are still struggling to fully grasp the scale of the opportunity and how technology can best be harnessed to support their goals. There is work still to do but the ultimate goal of marketing to a consumer of one is a target that is coming into ever sharper focus.
Richard Salters, HSO