Real time personalization in retail

In the past, personalization in retail was just about how to get shoppers specific products that they´re interested in at a special price. But that has changed as retailers look to build deeper relationships with customers.

Now retailers face the tougher challenge of showing customers they understand their individual needs and are ready to meet them – recognizing them as unique people and not making them feel like just another number.

Why retailers are going digital

Covid-19 has fundamentally changed the retail sector. Retail e-commerce sales grew 30% globally in 2020 – and customer´s expectations seem to have risen at least that much.

According to IBM, 80% of CEOs believe their companies are delivering exceptional customer experiences, while 78% of consumers don’t believe brands understand them as individuals.

In addition to this, shoppers today have an unprecedented ability to track prices, putting pressure on retailers to closely follow their competitors to ensure their personalization strategies remain relevant.

Personalization is a force multiplier – and business necessity – one that more than 70% of consumers consider a basic expectation.

Shoppers´ demands force retailers to look at customer experience, supply chain, data and offers to stay ahead of a transformation curve that was accelerated by the pandemic.

For retailers to remain competitive, investment in embracing a digital-first mindset is critical to remaining competitive and owning a share of the market. For now, retailers are only scratching the surface of what is possible.

The good news?

One of the most effective ways food retailers can build ties with their customers is by turning shopping into a personalized experience built around their needs and preferences. When done right, these changes create a continuous loop of operational efficiencies and customer loyalty that increase in value over time. Retailers now have access to a variety of personalization tools, including customized coupons and promotions, product recommendations and rewards.

A different approach to personalization

According to McKinsey´s research, companies that achieve the best results from personalization approach it differently. Rather than seeing personalization solely as a marketing or analytics problem, they view it as an organization-wide opportunity. Rather than focusing solely on short-term wins, they look for long-term drivers of growth and emphasize customer lifetime value.

They have  a comprehensive approach to data-driven growth and personalization, specifically around:

• Opportunity identification, leveraging customer micro segments and customizing their offers
• Rapid activation and optimization at scale, leveraging predictive analytics and models so that they can respond to customer signals in real-time, and deliver the right offers through the right channels at the right moments in a customer’s journey
• Martech and data enablement, defining the desired outcomes, building a road map and identifying the enables and investments needed to deliver
• Agile operating model, driving the retail transformation and committing to customer-centric focus
• Talent development and creation of new roles in the organization (i.e. Data Scientist and Heads of Client)

Outperformers organize their business around real-time personalization

Turning zero-party data into customer intelligence

Your first-party data is one of your most valuable assets and the foundation of any workable strategy. Consolidating all first-party data and resolving customer identity issues are key to creating your first building block: a unified view of the customer.

Let’s get specific:

Up to today, retailers have had a multitude of tools each containing its own fragment of valuable customer information. This fragmentation creates data silos, where only certain teams have access to certain tools and datasets, while no one has full visibility into customer data. Today’s technology allows you to combine and consolidate all this data into one place, providing a unified view of the customer, containing all customer interactions and touchpoints with your brand.

Accurate customer profiles give modern retailers relevant, powerful and actionable insights of customer behavior, which in turn enables retailers to achieve 3 powerful goals: increasing frequency, increasing spend and increasing affinity. This is achieved through the combination of 2 basic processes:

1. Predictive analytics If you know what your customers are going to do before they do it—whether it be making a purchase or abandoning your brand—you can step in to ensure a positive outcome. There are three main use cases for predictive analytics: identifying customers who might churn, identifying those who can be upsold, and general prospecting. By applying machine learning, you can detect who falls into which category and then deploy resources to rectify or capitalize on the situation.
2. Advanced personalization. One of the biggest opportunities within loyalty programs is the ability to create hyper-personalized offers. And because your predictive analytics have told you which customers are worth investing in and what offers they will respond to, you’ll be creating content only for segments that will act on it.

Let’s dive into this in more detail.

Personalization that increases ROI

There is a huge difference in the effectiveness of personalized over massive promotions. Too many retailers make the mistake of spamming their current customers while on the hunt for new ones. This only succeeds in annoying loyal customers and wasting money.

In fact, massive offers do not see a return on investment, meaning they usually end up having a negative ROI.

On the other hand, offering hyper-personalized offers based on customer data helps retailers plan and deliver targeted and customized coupons through the channels that will get the highest redemption rates. In today’s hyper competitive landscape this is key for retailers to remain profitable and increase sales.

Most important marketing initiatives of retailers worldwide:

1. Use personalized actions to drive sales
2. Can actively increase the % of identified sales thanks to their loyalty program
3. Take advantage of sophisticated measurement and analytics with control groups
4. Use automation tools to quickly and easily create and deliver millions of discount campaigns
5. Collaborate with suppliers and distributors based on customer and sales data and create broader opportunities for all parties

According to McKinsey, these are some of the aspects that influence shoppers decision to buy from a brand/ business:

• Make it easy for me to navigate in-store and online
• Give me relevant product recommendations
• Tailor messaging to my needs
• Offer me targeted promotions
• Celebrate my milestones
• Send me timely communications tied to key moments
• Follow up with me post purchase
• Personally address communications to me
• Send triggers based on my behavior
• Engage and onboard me when I buy for the first time
• Show up in my frequently visited websites and apps

Improved performance through a customer app

A customer app is not only the communication tool of the future, it is also a sales catalyst for retailers. Those customers who download a retailer’s app tend to be the most loyal customers. They are the ones who want to take full advantage of promotions and be up to date with the latest developments of the company.

• 9 out of 10 customers use their mobile phone when they visit the store
• 3 out of 4 customers who have a consumer app installed redeem at least one coupon on their purchases.
• The most common channel of 57% of consumers is the app
• Customers with an app spend an average of €40 more than those without it.
• 30% of identified sales use the app for shopping
• 20% of a retailers’ sales come from users who have downloaded the app
• Customers who use the app redeem 3 times as many digital coupons vs physical ones

The benefits of having a customer App

Let’s take a look at one in-house exercise we carried out at Loyal Guru to analyze behavior between customers who use a retailer’s app and customers who don’t, where we see a clear contrast in Coupon Redemption, Average Expenditure and Average Ticket.

1. Coupon Redemption: Shows the customers who have redeemed a coupon in “X” period over the total number of customers who have bought in that same period.
2. Average Expenditure: Represents the average consumption of active customers. It is calculated by dividing the identified sale by the number of active customers.
3. Average Ticket: The average ticket is the average amount per identified ticket, it is obtained by dividing the identified sales by the number of identified tickets.

	No APP	APP	Difference
Coupon redemption (1)	6,07%	28,23%	22,16%
Average expenditure (2)	€208,39	€245,49	€37,1
Average ticket (3)	€47,75	€58,68	€10,93

Maximizing collaboration between retailers and suppliers

Suppliers compete to get the supermarkets to feature their products prominently. And they’ll pay handsomely to get the best place on the shelves. Suppliers pay for promotions and usually give a discount or rebate to the supermarkets if targets are met. It’s all part of what’s known as commercial income.

According to Fitch, the payments are the equivalent to 8% of the cost of goods sold for the retailers, equal to virtually all their profit. Over the years, it’s become a very lucrative source of additional profits for the supermarkets.

You’d think the amount of price reductions that a supermarket can get through rebates is going to be nothing like what we as consumers spend – and relatively you’re right. But in profit terms, at the margin, it’s far more attractive for a supermarket to get ever larger supplier rebates than it is to encourage shoppers to spend more money.

Having a unified source of data that can easily be shared with suppliers allows for better collaboration. When food retailers are able to share sales, product, category, and customer data with suppliers, the planning of discount campaigns is streamlined creating a win-win situation that strengthens the relationship.

Thanks to loyalty marketing platforms, retailers can predict and prove the following scenarios:

• Get predictable sales increase
• Ensure more profitable investment for both supplier and supermarket
• Invest smartly in customized promotional campaigns based on customer insights
• Improve and measure the impact of the ROI of campaigns

Key Takeaways

It becomes clear that those who have not yet implemented personalization at scale are at a clear competitive disadvantage. It is now the holy grail of digital marketing, and companies need to find better ways to do it to keep pace with the competition.

Inaccurate or incomplete customer information is one of the biggest obstacles to personalization. By using a Customer Data Platform (CDP) with advanced personalization capabilities you can develop customer intelligence at an individual level, combine insights from your customers’ experiences across multiple channels and create a closely-targeted, multi-channel experience in real-time that goes beyond marketing.

All this will result in increased sales, average order value and customer lifetime value.

By using the right technology and platforms, modern food retailers are able to collect customer insights and create personalized promotions across different channels. In this way, retailers can automate their marketing efforts, making sure that customers get the right offer at the right moment. Click here to have an overview of Loyal Guru´s loyalty platform and discover how you can take your ROI to the next level.