The digital transformation of our economy offers significant opportunities for retailers to reach customers on their terms. To realize those opportunities, it’s vital to understand a critical distinction: there’s a big difference between personalization and mass customization.
That’s not to say there isn’t value in in targeting certain groups of customers — for instance, runners who are loyal to brands such as Nike or Under Armour. But the true holy grail lies in the ability to create offers specific for each customer.
That was one of the biggest takeaways for me from the National Retail Federation’s 106th Annual Convention & EXPO in New York City, the industry’s largest annual gathering. The convention brings together the biggest players in retailing and technology, including Google, Intel, IBM and others. The show included hundreds of presenters and showcased miles of retail technology in EXPOs and the Innovation Lab.
To be clear, the concept of building personalized relationships is not new to retail. Yet the connected world and the age of big data are making it possible to communicate a deeper, more intimate understanding of your customers’ wants and needs than ever before.
Indeed, personalization enables retailers to differentiate their customer experience if it is done well by leveraging artificial intelligence, cognitive commerce and analytics, said Nikki Baird of RSR Research, who led a session titled “Exhibitor Insights: Delivery on the Promise of Customer-Centricity and Personalization.” In this session, Ms. Baird emphasized several key points.
First, she said, personalization is defined as an offer that is both customized and relevant to a specific individual. The alternative – ongoing deep discounting across the board — is a race to the bottom. Many customers have learned to wait for promotions, knowing that it will come sooner rather than later.
Yet caution is required, Ms. Baird told the audience. You cannot move from “high promotion pricing’ and then instantly switch to an “everyday low price” model for ALL of your current customers at once.
The advantages are vast. Personalization helps you maintain a more loyal customer at a higher profitability without the need to compete solely or primarily on price.
Personalization also makes it very difficult for competitors to understand pricing positions as it is unique to individuals, and not mass communicated.
The more you personalize and differentiate each experience, the more difficulty your competitors will have in trying to understand your pricing and merchandising strategies. Even though you may have a standard ad price, competitors do not know what personalized offers are being sent to your individual customers
The customer journey and omni-channel delivery of relevant communications is a key step in this challenge, and a significant priority for Conduent. Our philosophy: Digitize, improve, connect. When you optimize communications and processes with artificial intelligence and analytics, you improve the customer experience and make transactions personal and secure.
The call-to-action for retailers used to be “Visit our store.” Now consumers can purchase products immediately within apps, social media and ads without ever visiting your physical or online store. By converging digital and physical shopping, the emerging category of data-intensive retail services help brick-and-mortar stores reinvent themselves.
And yet, it’s easy to say. Harder to implement. Solutions such as these must be seamless across channels and on-demand. Retailers need to be ready to accept payments as soon as the customer is ready to respond to the offer; if you aren’t, you might end up with abandoned items which is far too common.
Digital transformation opens a world of possibilities for all businesses, but is a particularly powerful tool for the ultra-competitive world of retail. We’ll be writing more about data-driven retail services in this space in the future.