Consumers Want Retailers to Get More Personal

Shoppers are willing to pay more for an experience they feel is designed exclusively for them
April 19, 2017Andrea Lillo

woman looking at smart phoneNEW YORK—Personalizing messages are the way to a consumer’s heart—and wallet—as shoppers now expect not only to engage with a retailer when and where they want to, but that retailers understand and respond to their individual shopping behaviors.

This consumer change is called the Amazon and Uber effect, said Matt Sargent, senior vice president of retail at Magid Associates, a research-based strategic consulting firm. “Customers’ expectations have shifted to the point where they fully expect retailers and manufacturers to know what they want, when they want it and how they want it presented to them.”

Most retailers realize there is work to be done, however. A 2016 study on the state of personalization from Evergage and Researchscape International found that while 85 percent of companies do implement some form of personalization, 55 percent of marketers gave themselves a grade of C or lower for their efforts, while giving 63 percent of their competitors a grade of “C” or lower.

The struggle for most retailers is transitioning from a “legacy campaign mindset,” which is based on planning around sales events, to a “customer mindset,” which plans instead on the needs of different segments of shoppers, according to Deloitte’s The New Digital Divide report last year. Another oversight is “few retailers leverage an integrated budgeting/planning process that plans holistically across channels,” which results in “double and triple counting key metrics such as customer interactions, and failing to recognize programs that are decreasing in productivity,” the report added.

Brands that stick with a non-personal approach, however, will be considered “bland” by consumers, Sargent added. “Experiences that feel bland’ cause customers to focus on lower price points—a race to the bottom which no retailer wants ... Customers are much more willing to pay a higher price point for an experience they feel is designed exclusively for them.”

Consumers don’t want a “mass experience,” where everything is sent to everyone, agreed Laura Kennedy, director of retail insights, Kantar. The direct offer is a more curated experience for shoppers, “rather than throwing everything at once at them.” The challenge for large retailers is that personalization “requires specificity and nuance.” Similar to when retailers localize the assortments in their physical stores, this is now occurring on the digital side, she said. But it requires more resources such as the tools to process data, especially as there’s a lot of ways to segment people, rather than grouping people together in traditional ways, such as female ages 35 to 55 years old, for example.

Dorm and apartment décor retailer Dormify has so many types of shoppers, from ones who want to match their roommates’ decor to others who love neutrals, said Nicole Gardner, coo of Dormify. “We get all sorts of requests.” Dormify strives to “allow the experience to be all about who they are,” she said, “making it a very personalized experience for that customer.” That includes live chat, talking to a designer online, sending personalized suggestions by text and others.

While this strategy is becoming vital, it’s not cheap. “Personalization is expensive and can challenge existing retailers’ infrastructure as well as their ability to scale such an experience,” said Sargent. “This is why you see companies like Target announcing $7 billion spending plans to improve their digital/personalization experiences. Such investments are never taken lightly, and can be challenging due to the issue that such investments do not provide short term results like traditional retailer marketing investments,” such as advertising and promotions.

Andrea LilloAndrea Lillo | Senior Editor
alillo@hfnmag.com

Andrea Lillo has written about a variety of topics, from beer gardens in Queens to kitchen design trends to residential caves. Having joined Home Furnishings News in 2006, she serves as Fashion Editor.

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