Why leading retailers are ditching targeted offers and making personalization at scale their TOP priority
Are we finally arriving to the end of mass promotions and targeted marketing?
Let’s dive into this very interesting question.
There has been a bit of a revolution going on in grocery retail marketing. Sparked by the remarkable evolution of data science, grocery retailers are questioning commonly held beliefs and popular strategies that are slowly but surely declining in terms of their effectiveness and ROI.
In this article, you will find:
- A brief history of retail marketing and its evolution
- What is offer personalization – and why it’s different from targeted offers?
- Ways that Offer Personalization drives value
- What makes bad personalization?
- Offer personalization done right and 6 TOP examples of offer personalization
A brief history of retail marketing and its evolution
Think back to the 1920s, when the inception of mass radio use allowed companies and brands to explore the first experiments in mass marketing. Back then, retail marketing was the most generic and broadest type of promotional activity with little or no defined targeting, and gave corporations a chance to appeal to a wide variety of potential customers.
Over time, mass marketing spread over to a variety of media, including television, newspapers, direct mail, mass email campaigns and beyond.
An example of this was selling a product like toothpaste. Toothpaste isn’t made specially for one consumer and it is sold in huge quantities. Any company that manufactured toothpaste wished to get more people to buy their particular brand over another. The goal was: when a consumer was at the grocery shop looking for toothpaste, he or she would remember the product seen on TV.
You can guess that by reaching the largest audience possible, exposure to the product was maximized, and in theory this would directly correlate with a larger number of sales. But only in theory, because this shotgun approach proved to have a limited outcome.
Why limited?
Oftentimes, mass marketing would simply focus on grabbing the attention of consumers in different, surprising, original and entertaining ways in order to generate brand recognition, but would not always result in higher sales.
Mass offers started to clearly show limited long-term benefits. In addition, it was doubtful if it lead to any measurable increase in brand loyalty. Increased competition and the complexity of consumers’ wants and needs made mass marketing campaigns less and less successful.
Marketers then began a process in which their marketing efforts became increasingly sophisticated. It became clear that marketing to a niche, instead of to the masses, generated better results.
And then, niche marketing was born.
As you know, a niche market is the subset of the market on which a specific product is focused, and takes factors such as demographics, lifestyle, values, attitudes and beliefs into account.
Segment based marketing showed clear benefits over mass marketing. However, it has long been considered as a compromise between a mass offer and a vision of a one-to-one, individualized approach between the company and their end consumer. Shifting from niche marketing and segmentation towards individualized offers has one very compelling goal: avoiding the narrow majority trap.
What is the “narrow majority trap”?
It is probably the biggest trap in marketing. In essence, the “narrow majority trap” is a result of what has long been named the First Rule of Marketing: Focus on your audience.
This rule taught brands and companies that marketing to everyone meant marketing to no one, and that knowing who your ideal customers are would save you time, money and stress.
However, while segment based marketing is more targeted and specific than mass offers, it is a only a compromise between mass marketing and an individualized approach.
Today, personalized offers are not only possible but mandatory in grocery retail.
And be clear on this:
This shift from segmentation personalization truly allows your company to address your customers in a personal manner, give them a special treatment and clearly generate more sales.
What is offer personalization – and why is it different from targeted offers?
Many companies still believe that targeted offers and offer personalization are the same thing, and that is not an uncommon mistake.
Let’s dive into the basic differences:
First, think of personalization as the act of tailoring an experience or communication based on information a company has learned about an individual.
Just like you might tailor a gift for a good friend, companies can tailor experiences and communications based on individual data they collect about their customers.
On the other hand, targeted offers are sent to multiple customers based on a variety of factors.
So yes: while targeted offers do take a step further from one-size-fits-all marketing towards more personalized experiences, those offers are still generic to a group or segment – an not to an individual.
Offer personalization therefore means that any and every offer is specific to a segment of one.
It is the ultimate expression of a grocer’s intention to cater to the needs and wants of each individual customer.
Of course, retailers and grocers have a huge customer base, and might believe that it is impossible to tailor millions of promotions all the way down to an individual level.
Well, we have good news for you!
Today’s technology makes offer personalization at scale very possible and highly desired. Specifically, Loyal Guru’s personalization technology encompasses the variety of tools and strategies that collect, unify and activate customer data in order to orchestrate individualized experiences.
With Loyal Guru you can supercharge the effectiveness of your campaigns with mass personalization.
We know, the term “mass personalization” may seem like an oxymoron, but the truth is that never before have grocers had such an opportunity to harness the power of data and make their marketing efforts both personalized to the individual and scalable to millions.
Ways that Offer Personalization drives value and why your retail business should invest in it
Today, every retailer has the potential to collect enough customer data, so that he can then create hyper-personalized offers. With just a few data points, like average order value, basket contents, average lifetime value and purchase frequency, a grocer can structure individual-specific deals to encourage each customer to buy more, buy higher-margin items or buy more frequently than they would without the deal.
Offer personalization is know to increase customer loyalty, attract new customers and deliver an average of 1 to 2% lift in total sales for grocery companies and an even higher lift for other retailers.
Boston Consulting Group claimed in 2021 that redirecting 25% of mass promotion spending to personalized offers would increase return on investment by 200%, leading to a top-line growth opportunity of more than $70 billion annually in the United States alone.
However, high returns are not assured.
Success requires integrating offer personalization seamlessly into the customer experience and avoid frequent mistakes and bad practices.
What makes bad personalization?
It is obvious that if personalization misses the mark, customers may be more peeved than pleased, resulting in negative impacts on sales, if sales even occur. Marketers need to ensure they are addressing what consumers value and dismiss when it comes to personalization.
1. Bad data
Not all personalization is good, valuable, or appreciated. Since data is the fuel of personalization, it’s not a surprise to see that a personalization effort fails because of the wrong fuel.
For retailers that are investing their efforts into personalization, these numbers published in 2017 in a Sitecore and Vanson Bourne study reveal very specific challenges:
- 59% of brands use out-of-date information about their customers
- 57% get customers’ personal details wrong
- 36% keep no record of customers’ previous purchases or interactions with the brand
- 54% make assumptions based on single interactions or purchases
- 54% send too many personalized messages
2. Personalization that evokes negative memories or even guilt
For example, individualized recommendations connected with a medical condition or with weight loss.
3. Suspiciously accurate personalization
For example, welcoming a new customer to your loyalty program with an email reading “Hello Ann Baker from Brooklyn. Would you like to get a new winter coat for your long evening walks with your two dogs, Bennie and Robbie?”
4. Counterproductive personalization
For example, if coupons are offered to consumers who would have made a purchase without a coupon, marketers are leaving money on the table.
5. Bad retargeting
Shoppers don’t want to be constantly reminded of products they’ve already bought or searched for, especially if the ads appear either too soon, too frequently, or too late in the process. Personalized offers need to offer complementary products or services instead of just the things the shopper has already browsed or bought.
Offer personalization done right and 6 TOP examples of offer personalization
So, by now we are all clear that consumers expect brands to demonstrate they know them on a personal level, whether it means meeting them where they are, knowing their tastes, offering something just for them or checking in with them.
When personalization is done right, it directly influences buying behavior across the customer life cycle, increasing the likelihood to purchase, recommend and repurchase from a brand.
These are ways in which Loyal Guru helps retailers with offer personalization.
1. Individually reactivate lapsed customers with hyper-personalized deals on items they’ve purchased in the past
For example: Instead of offering discounts to regular shoppers who frequently buy coffee, create a re-engagement campaign for customers who have been inactive for more than 2 months with a specific offer on the coffee brand they love.
2. Give customers relevant recommendations they would not have thought of by themselves.
For example: incentivize users to buy items in new categories “adjacent” to their recent purchases. If they buy shoes, they are incentivized to buy socks.
3. Communicate with customers when they are in shopping mode
For example: send customers personalized offers on their smartphone app as they pass by the store or while they are inside of it.
4. Remind customers of things they showed interest into, but might not be keeping track of.
For example: send a reminder when someone may be running out of an item purchased earlier, when a desired item is back in stock or on sale, or when a new style is launched for a product or category the shopper has repeatedly bought.
5. Identify customers no matter on what channel they interact on, both online and offline.
For example: All of Sephora’s customer communications—no matter the platform—display the customer’s loyalty points. Sales associates can see these point totals and can access a customer’s profile in store. The profile includes data on the customer’s in-store purchases, online browsing and purchasing patterns, and interactions with in-store salespeople.
6. Share the value of a product in a way that is truly meaningful to the customers.
For example: send a St. Patrick’s Day Special Deal for customers from Ireland, or launch a charity loyalty program with rewards being different charity initiatives.
Loyal Guru’s offer personalization module is the choice for grocery and enterprise retail CMOs across the globe
If you found this post valuable and you are considering a solution to launch or develop personalized offers at scale, Loyal Guru’s offer personalization module can be the solution for you. The offer personalization module allows retailers to get started with offer personalization OR make their offer personalization strategy truly effective.
If you are ready to optimize your customers’ experience with your brand, schedule a demo with one of Loyal Guru’s consultants and learn what we can do for you.