Why retail still hasn’t cracked personalization

Customers outside a food truck
(Image credit: Future)

We’re all aware that with inflation rising and leading economists forecasting a “miserable” 2023 for UK households, retail brands are navigating an exceptionally tricky landscape.

But, personalization offers marketers hope and will become a lynchpin for retailers wanting to maintain a competitive advantage. Effective, contextualized personalization is key to increasing conversion rates, brand affinity and customer retention. And by effective and contextual personalization, I mean having an in-depth understanding of customer behavior and tailoring brand communications accordingly.

Yet, many retailers are struggling to advance personalization at scale beyond addressing customers by name. In fact, our recent research of 200 senior marketing professionals revealed 43% believe that their personalization efforts are not sophisticated. Hence the generic marketing copies we receive often, personalized with nothing but our names.

For those wanting to advance their personalization efforts, and reap the rewards in return, the first step is to identify the mistakes that retailers have been making. So, let’s look into why, after all these years, marketers haven’t cracked personalization.

Data does not guarantee success

Data collection and storage capabilities have advanced significantly over the past few years. With businesses also generating impressive traffic, both online and offline, retailers are now able to harvest more customer data than ever before.

However, data isn’t valuable if it can’t be used to generate actionable insights. This is one of the biggest hurdles for retailers today. In fact, a mere 16% of B2C marketing professionals believe they have the adequate resources to gain actionable customer insight to inform campaigns. Without sophisticated processes that can aggregate and unify consistent data to create a Single Customer View, retailers drown in data whilst simultaneously experiencing a dearth of actionable insights.

Sophisticated processes and Single Customer Views are the difference between personalization limited to basic customer data, such as names or birthdays, and contextual personalization which factors in customer preferences and interests, as well as external factors such as the seasons. As such, until marketers can access unified and real-time views of each customer, they’ll struggle to leverage data to bolster brand loyalty.

The first step for retailers wanting to use customer data to generate customer loyalty is unifying behavioral, attitudinal, and demographic data. By joining together omnichannel behavioral and transactional data - which will include in-store and online interactions, web behavior, product reviews, email, footfall, and customer service, amongst other first-party data sources - businesses can empower their marketing teams to deliver highly personalized customer experiences and drive retention.

Stuart Russell

Stuart Russell is the Chief Strategy Officer of Planning-inc.

AI adoption is lagging

To achieve true personalization, businesses need to ensure every customer touchpoint is optimized. This requires a lot of data and is simply too much to process at scale in real-time, even with extensive analyst resources. As such, retailers need to embrace predictive analytics and AI, once and for all.

However, marketing teams have fallen behind when it comes to AI adoption. In fact, our research reveals 43% of marketers believe AI is not an effective tool in their marketing, with only 16% finding it ‘very effective’. Surprisingly, the very high earning businesses with £500M+ turnover find it even less effective, with 61% saying it is not an effective tool in their marketing.

But, there’s a fact many overlook when it comes to harnessing the power of predictive analytics: AI and other MarTech tools are dependent on the quality of data. So, if the quality inputted in isn’t up-to scratch, then the outputs won’t be either.

This means that ensuring data is collected in real-time, and incorporates omnichannel behavior, is crucial to give AI and MarTech the tools that they need to produce quality results. Without established and effective processes that can analyze vast amounts of quality data in real-time - which is only possible through the use of AI - the percentage of marketers capable of gaining actionable insights to inform contextual and dynamic personalization won’t increase. And many marketers’ hands will continue to be forced into sending the dreaded ‘spray and pray’ messages more often than they would like.

Embracing people, processes, and technology

It’s not just retail marketers that are struggling to crack personalization, it’s an issue many are currently facing. To harness personalization as a means of increasing conversion rates, brand affinity and customer retention, marketers must focus on having the right people, processes, and technology to effectively leverage their data.

The ‘right people’ represent the resource and skill levels needed to execute and manage effective, data-driven customer marketing. The ‘right processes’ represent the ways of working that enable marketers to access data, and turn insight into action. And, the ‘right technology’ represents using MarTech and AI to unify and activate data, uncover insights, and optimize campaigns.

Together, these will form the strong foundations needed to manage advanced, and effective, marketing today.

Yet, many marketers are stretched just keeping the lights on. As such, I believe the first step to harnessing personalization
is not to complete an intensive tech overhaul, but evaluate your existing programs and identify the specific use cases that are most likely to improve the customer experience.

For example, you might notice that pre- and post-purchase communications specifically need improvement - and then decide to integrate product or category recommendations that are most relevant to the customer. This way, you’ll be optimizing your data based on specific use cases and scaling up your customer data strategies - one use case at a time.

Once you've identified the ones that are most likely to advance customer experience, you'll be able to leverage customer data to elevate your personalization efforts - giving marketers that all important competitive edge.

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Stuart Russell is the Chief Strategy Officer of Planning-inc. He has 20 years of experience in CRM and data marketing in the retail, e-commerce, gaming, travel and B2B industries.