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Prioritizing personalization for_growth

  1. 1. PRIORITIZING PERSONALIZATION FOR GROWTHBy Lauren FreedmanPresident, the e-tailing groupNovember, 2011 1    
  2. 2. Table of ContentsSection I IntroductionSection II Survey Objectives and MethodologySection III Reflections on PersonalizationSection IV Eight Steps to Mastering Personalization Ø Understand Personalization is a Process Ø Align Internally to Ensure Success Ø Foster a Personalization Culture Ø Listen to your Customers Ø Deliver an Experience that is Helpful Ø Put the Personal in Personalization Ø Apply a Cross-Channel Lens Ø Test, Measure, EvolveSection V: Final ThoughtsSection VI: About the Companies 2    
  3. 3. SECTION I: INTRODUCTIONPersonalization has long been a promise of the Internet however its execution among the merchantcommunity has not yet met the elevated expectations of consumers. Today’s consumer is morecomfortable than ever before with personalization so may once again be ahead of the merchant’s desireand ability to deliver on its promise. A great deal of confusion and angst remains around this veryimportant topic as retailers resist taking advantage of the tools and technology that are often at theirfingertips. Rather than starting with realistic philosophies, they seem to take on personalization from amacro point-of-view, putting obstacles in their path that keep them from testing and triumphing via well-conceived visions.This white paper, graciously sponsored by Adobe, takes a two-pronged approach, sharing merchant’squalitative insights in conjunction with a quantitative survey completed by 130 merchants in late 2011.Remember, personalization is a process that we believe is worth pursuing. Success starts with smallsteps per the list we compiled of eight “not to be missed” initiatives in pursuit of personalization. Theseare a must read for any merchant already entrenched in personalization as well as those who may bebantering internally about the optimal solution for their business. The results are tangible from a monetaryand consumer engagement perspective, the two critical components for driving businesses growth.Having interviewed and written about this topic over the past eight years, some changes are evident butmuch remains surprisingly stagnant. One milestone achieved, upon which this paper is predicated, isconsensus among merchants regarding the definition of personalization. Despite that progress, internalconfusion still reigns where one department store executive shared, “Even when it comes to internalmeetings about personalization there are a wide variety of expectations and some individuals can’t seepersonalization beyond product recommendations.” A discussion of philosophies, the complexity ofpersonalization, the potential and pitfalls will also be explored as personalization has many grey areas.Expectations of the customer jumpstarts our discussion given their comfort level with personalizationparticularly as many are accustomed to the Amazon model and its requisite sophistication. We thenprovide a brief overview of the state of personalization as merchants acknowledge their efforts are stillearly stage, even among larger retailers. Deployment onsite and post-order are addressed and thoselucky enough to have loyalty programs share its associated business contribution.As our title indicates, prioritizing personalization for growth is essential and the reasons range from branddifferentiation, to conversion and ultimately bottom-line performance. Success starts with leadership,responsive cultural dynamics and alignment within the organization. Tapping into technologies thatsupport personalization needs can be intimidating for some; powerful for others. Once deployed,measuring personalization will enable retailers to ensure their efforts are optimized. While personalizationnirvana may be a longer road, small wins are incremental and will set merchants down a performancepath that meets and exceeds expectations. 3    
  4. 4. SECTION II: SURVEY OBJECTIVES AND METHODOLOGYWe began this project by fielding a quantitative survey that explored the current state of personalization,its performance within merchant organizations and the opportunities and challenges that might preventpersonalization from realizing its cross-channel potential. Additionally, knowing that the premise ofpersonalization has been discussed since the web’s introduction, we wanted to understand if it is playinga growing role in driving loyalty and bottom-line sales.MethodologyAn online survey was completed by 131 merchants in 3Q 2011 representing a range of company sizeswhere online sales accounted for 70%+ of overall business for more than one-third of those surveyed. In which of the following ranges do your What percent of your overall business company’s annual sales fall? do online sales represent? 5% or less $5 million or 19% More than $1 less More than billion 19% 70% 26% 35% 6-10% More than $5 10% $201 million - to 50 million $1 billion 19% 11-20% 16% $51 to 200 51-70% 11% 21-50% million 13% 12% 20%           4    
  5. 5. SECTION III: RELFECTIONS ON PERSONALIZATIONDefining Personalization Starts with Marketing 101Personalization attempts to deliver the right message (product, content, community) at the right time andright place to the right person. Relevancy is the operative word since personalization at the core isabout leveraging what we know to provide more targeted experiences for customers and prospects in anintelligent manner. When shoppers experience relevancy it is our belief that both the experience and thebottom-line benefit.Relevancy can take on many forms as a result of recognizing something about the customer (keywordssearched, IP address, past purchases) where retailers can capture rich customer data. One wonderfulexample shared by a publisher was a desire to tailor a marketing message to families in the path of arecent hurricane. Understanding that these customers would be looking to entertain their children, ideallythey would present books targeted at specific grade levels as digital downloads where personalizedselections would resonate.There are many ways to tackle personalization but it should be kept top-of-mind that the ultimate goal ismost often to sell more. In the early days of ecommerce, merchants could cast a broad net. Currently,however, they find themselves in more of a “harvesting” mode where personalization plays an importantrole for both customer acquisition and particularly for retention. Unleashing incremental salesopportunities with existing customers should be a fringe benefit of personalization as well. In today’scompetitive landscape, if a retailer is merely reactive, relying on customers to come to them, there maybe minimal upside. Those that are proactive are able to stimulate shopping behavior. Knowing wherecustomers are in their buying cycle they can consistently deliver personalized experiences across allchannels including email, stores and even retargeting to optimize customer spend.Potential and PitfallsOf course with richness and relevance marketing can be more risky so balance is important. To avoidpoor experiences, it is also essential to adhere to what customers say they want as click-behavior is notalways a true indicator. Better information about what your customers are doing and personalizing allowsyou to tailor a more “individual” experience.Maintaining brand integrity is of great concern when implementing personalization. It is not thereforesurprising that 40% of retailers surveyed emphasized that they are “very deliberate in theirpersonalization strategies so as not to denigrate the brand in any way.” One in three merchants sharedthat they would test a range of strategies to understand which performed well and fit best with their brandvision. This sentiment was reinforced by one retailer hoping to understand customer expectations, “Wewill test our way into this, looking at purchases and establishing personal rapport while soft sellingpersonalization.” Experimentation is ideal to monitor how your efforts play out by looking at everythingfrom bounce rates to conversion along with personalization touchpoints. Focus groups and usabilitytesting can help merchants to realize the comfort factor they seek from personalization and find the righttipping point for their business. 5    
  6. 6. Thinking about the potential and pitfalls of personalization, please indicate your level of agreement with each of the following statements. (Top-1 Completely Agree) We are very deliberate in our personalization strategies ensuring that we don’t degrade our brand in any way 40% We will test a range of strategies to understand which perform well and fit best with our brand vision 31% Our view of personalization is centered on segmentation of shopping groups or types rather than a true one-to-one vision 23% We are very deliberate in our personalization strategies ensuring that we don’t offend our customers in any way 11% We are pursuing a one-to-one personalization strategy 11% We will pursue personalization but will request our customers’ permission before employing strategies 6% We allow consumers to self-profile their behavior type (Fashionista, soccer mom, metrosexual, etc.) which we then target accordingly 3%Customer ExpectationsIt was essential to understand the current set of customer expectations as the consumer is very much incontrol of the shopping experience today more than at any recent time. Aware of that scenario, each ofthe merchants interviewed was asked, “What do you believe your customers expect from youregarding personalization?Heightened customer expectations set the tone for personalization demands as the majority believe thatcustomers expect you to know them. It is no longer optional and moreover the customer is notoffended by such personalization attempts but rather embraces them through subsequent browse andbuy behavior. At a minimum customers expect that you will target based on their past behavior andideally treat them as individuals, with unique customer tastes and behaviors across channels factored intothe mix.Customers desire relevancy in messaging including where they land for search results. One merchantaptly noted, “If we give them something irrelevant they yell.” A sporting goods retailer concurred that theircustomer is very vocal and those embracing their loyalty program have even higher expectations. Therewill be increased odds of getting them to purchase when serving up relevant content or emphasizingfavored products, while simultaneously increasing the odds of higher satisfaction and a better all-aroundshopping experience. Their customers were not shy about asking why an email for a bike was sent whenthey had just recently made a bike purchase. Obviously customers expect their relationship with you to bemanifested in more sophisticated shopping experiences, preferring not to be resold on something theyalready own. One manufacturer lamented that without a CRM system they send offers that arent relevantfor their customers, but simply don’t have the team or the resources, a challenge mentioned by manyothers too.Merchants must still cautiously drive experiences, especially when dynamic. Both resources and businesslogic need to be in place to implement strategies with careful guidelines considered. There are timeswhen retailers can go overboard on personalization and miss the big picture where the right product atthe right time still remains the winning mantra. For example, a cataloger tested personalization against agift-with-purchase Valentine’s promotion of a dozen roses which trumped all personalization efforts. It isthis combination of merchants knowing their brand and the ability to turn on and off personalization thatshould produce the best results. 6    
  7. 7. Merchant Self-Assessment of PersonalizationMerchants reported, on average, only a 3.8 out of 10 sophistication level when it came to personalization. On a scale of 1-10 where 10 is very sophisticated and 1 is not at all sophisticated, how would you rate your current personalization efforts? 7-10 13% 1-3 54% 4-6 33%Most find themselves in early stages of personalization where despite a belief in its value they do notalways have the resources or technical architecture to engineer. Additionally, several suggested that theyare not looking to achieve a “10” when it comes to personalization, but merely a “toe-in-the-water.” Othersspoke of limited efforts given their particular category. One interesting story came from a jewelrycataloger who gave his company a 4.5 noting they do not have a personalized home page. After years ofexperience, he knows the next purchase of a jewelry customer is unpredictable; they don’t always go forthe “matchy-matchy” items although that is counterintuitive shopper behavior. Instead, winningmerchandising has a price-point orientation, featuring 15 items (including best sellers) where call centerCSRs can highlight those same products.Another retailer, who graded themselves a “4” mused, “We have a number of triggers around geographiclocations, purchase history, inbound source, past loyalty and more. These tie universally through our frontend, call center, email service provider and order management system. I think there’s a great deal moreto figure out which entails giving customers persistent filters around a certain style or price-point whilealso pulling in data from the social graph. While we do a lot of simple things, I don’t think we’ve found away to differentially improve the user experience yet and I won’t feel like we’ve mastered personalizationuntil users really take notice and love what we’re doing.” For many, personalization is the sum of littleexperiences and an additive process by its very nature where directional improvements are prioritizedrather than perfectionist models.Where Personalization Takes PlacePost-order email is where most personalization occurs as 77% of merchants reported tapping into thosecommuniqués followed by the shopping cart (52%). Much of this appears to be facilitated via technologysupporting alerts and effective placement. Merchants go for the winners, taking advantage of some of themost popular pages. Beyond the cart, product page up-sells/cross-sells and even product alternativesmerit attention. Depending upon one’s category, the likelihood of consumers taking advantage of add-onproduct varies immensely so merchants are advised to handle on a one-off basis. Emulating Amazon’shome page personalization, more merchants are making efforts to compete at the initial shopper point-of-entry. Home pages can begin to be filtered by category. Assumptions are made such as one retailerknowing that products for kids have been purchased subsequently displaying DVDs in future visits in anattempt to personalize the experience. 7    
  8. 8. Where do you currently personalize today’s onsite and post-order experience? Check all that apply. Post order email 77% Shopping cart 52% Product page 44% Home page 41% Category page 21% Search results 17%  Technology can also suggest new models or encourage retailers to revisit old ways of doing business.For one cataloger the iPad flipped around their design process, where previously untested opportunitieswere now finally under consideration. From better segmentation to personalized pages onsite and viaFacebook, they are looking at a myriad of ways to connect their passionate customers to the brand. Bylistening to their customer via every means possible, including Facebook, they take advantage ofcrowdsourcing to get ideas and suggestions. Their customers are continually evolving and willing to seekout content through all available means including mobile versus having to rely solely on the website as inthe past. 8    
  9. 9. Personalization Tactics PerformFrom an ROI perspective, triggered cart abandonment emails have seen the greatest success as theycan be isolated and are often the simplest to deploy. Email follows a similar pattern and from there theproduct page and retargeting see some success. Given the array of personalization tactics available to you, how would you describe the success of each tactic from an ROI perspective? (Top-2 Very/Somewhat Successful) Triggered shopping cart abandonment emails 26% Personalized product recommendations via email 14% Personalized product recommendations on the product page 12% Retargeting 11% Personalized product recommendations in the shopping cart 8% Home page personalized based on past browse and buy behavior 6% Recently viewed product 5%    The Role of Loyalty ProgramsOver the years in outreach interviews merchants with loyalty programs have acknowledged being in aprime position to take advantage of robust data, particularly when support systems are ample. Our latestinterviews concurred with previous merchant survey results as among  those  with  loyalty  programs  almost  one-­‐half  (47%)  view  them  as  critical/very  important  to  personalization  efforts.  Additionally,  those  retailers  with  well-­‐established  programs  see  strong  participation,  making  many  of  their  visits  eligible  for  such  personalized  shopping  experiences.     How important is your loyalty program for understanding your customer and personalizing the shopper experience? Somewhat Unimportant/ Not at All Important 16% Critical/Very Important 47% Somewhat Important 37%     9    
  10. 10. SECTION IV: EIGHT STEPS TO MASTERING PERSONALIZATIONRetailers were asked a series of questions around unrealized opportunities, their personalizationroadmap and what personalization nirvana would be for their company. It is from this targeted group ofquestions that a series of “Eight Steps to Master Personalization” emanated.STEP 1: UNDERSTAND PERSONALIZATION IS A PROCESSPersonalization requires retailers to create a culture where they attempt to be one step ahead of theircustomers, always anticipating their needs. Within such cultures retailers need to establish a set ofbusiness objectives that continually affirm why their customers should buy from them. Layering inelements of personalization is the modus operandi of the majority due to constraints in funding andtechnology. Database challenges in particular prohibit growth. Every step in the process allowscompanies to learn in advance of moving forward but the iterative nature requires time and patience.While many merchants are skeptical by nature and therefore not sure everything will work,personalization is a moving target, with constantly evolving supporting technology where one cannot just“set it and forget it.”Rest assured, small incremental gains add up but expect more hits than home runs along the way,though it is still best to be in the game. To start the process retailers often layer in personalization fromemail segmentation to purchase history. While some acknowledged that despite being data-rich, theirability to access and market effectively has been a challenge to date. “We must keep working at it,”shared one retailer, “There are always things we can do to optimize the experience for both relevancyand satisfaction.” Removing obstacles that inhibit a simple shopping experience must be the winningstrategy.Talk centered on making choices about automated personalization deployment to serve up more relevantresults in hopes of driving higher conversion. For some it has been a savior and quite successful whileothers reported a disconnect trying to create personalization via automation and instead find it akin tomixing oil and water. In that regard, “watch out for being overly dynamic” was another piece of adviceshared where erring on the side of caution is advisable.A Range of Experiences Starts with the BasicsCapitalizing on customer intelligence to deliver efficient shopping experiences forms the foundation of thisprocess. That means knowing who your customers are and, at a minimum, storing account information(including order history) to facilitate purchasing as shoppers see no need to reinvent the wheel each time.Tweaking the site to be relevant to individuals has many meanings from “welcome [name]”, showingbanners, sorting products, geo-targeting, changing prices or much more. A presentation of marketing andmerchandising specific to an individual that factors in their wants and behaviors is ideal. Many merchantstouched on providing search and browse efficiencies based on past activity as intrinsic to theirpersonalization vision. Making relevant suggestions based on past purchases is also seen as baseline for98% of the EG100 merchants in our Annual Mystery Shopping Survey that employ this practice at theproduct page while 87% promote within the shopping cart. At the same time, seasonality is an elementthat should be factored into the mix like a recently mailed catalog advising how to prepare for winter thatincluded the temperature of last year’s coldest day, personalized for each recipient’s city.Aggregating Personalization by GroupsPersonalizing to groups who share similar behavior is common practice for many as 23% of retailerscompletely agree that their personalization efforts are based on shopper segmentation by group ratherthan a one-to-one vision which may be more difficult to achieve. It is acceptable for consumers to begrouped with like-minded individuals (dog owners, professional bakers, snowboarders, etc.) but thebigger concern should be sending inappropriate content. Some even expect that you will empower these 10    
  11. 11. “control-minded” individuals to set your site to behave how they prefer rather than pre-programmed for anaverage consumer.Taking it one step further, the height of personalization was shared by one sporting goods multi-channelmerchant where nirvana would be creating experiences relevant to a unique customer’s specifications,overlaying historical online browse and purchase patterns. “This would allow us to move beyond showinga hiker all new available backpacks and only highlighting those most often purchased in their city byhikers who share the same level of expertise and upcoming camping trips customized for their winterclimate.” Such a degree of sophistication and insight could really allow this retailer to deliver the mostrelevant experience, thus ensuring the greatest likelihood for conversion. Lastly, merchants must factor incross-channel components that address stores, mobile and email experiences for consistentpersonalization across all of their channels.STEP 2: ALIGN INTERNALLY TO ENSURE SUCCESSWe heard from merchants time and again, “Personalization should be deployed because it is right for thebusiness not just for personalization’s sake.” It is imperative that the effort be pragmatic and wellexecuted for one’s customers to ensure the right end results. Not surprisingly, as we conversed withretailers we learned that many do not have a defined vision for personalization and well-conceivedcorporate perceptions were not forthcoming. Thus our second step shared is that alignment within thecompany regarding personalization is required before starting this journey, or if already on the wayrevisited to get everyone on board. With organizations often defining needs differently, companies mustbe in agreement on its role and relevancy for their brand, their category and where it is most appropriatefor deployment.The organization structure required to institutionalize personalization and ensure brands follow suit iscomplex despite readily available technology. Personalization touches so many business units that it isoften tough to operationalize and still have focused priorities; putting it into action can be complicated.Consensus is also core to success. Leadership with the right people in place to drive the process isimperative. Multiple merchants suggested that a senior driver of personalization efforts be assigned asthere is significant responsibility and accountability in this role. It’s not a “two month and dump” initiativeemphasized one retailer as it affects design, merchandising, customer service and more. Technology alsoneeds to support personalization with systems integration where more funding may need to flow into theinitiative as a result. A pureplay advised that they went from two web designers to seven plus an artdirector with elevated personalization skills that include versioning and placement. He cannot emphasizeenough that it takes people (copy, design, photography) as well as analysis of all efforts and a strongsense of timing to best position personalization. Additionally personalization must be aligned with rapidlygrowing mobile and social efforts while in-store opportunities are already a given.STEP 3: FOSTER A PERSONALIZATION CULTUREStart with the OrganizationWe felt it was vital to understand who within the organization drives personalization. As we spoke toindividual retailers we subsequently learned that personalization spans the organization making it morecomplicated to unilaterally implement across all channels and touch-points. According to our survey,eCommerce Marketing is most often responsible for personalization ROI which may have originated fromemail being the first personalization workhorse. For another, one in three merchants (35%) the VicePresident/Director/Manager of eCommerce spearheads this effort. In a multi-channel environment wewould have to assume that all of these individuals would be working with their counterparts at retail for amore synergistic experience as holistic deployment should deliver superior results. 11    
  12. 12. Who within your organization is responsible for the ROI relative to personalization? Check all that apply. eCommerce Marketing 56% Vice President/Director/Manager, eCommerce 35% eCommerce Merchandising 23% Corporate marketing 15% CRM team 8% Owner 2%  Many Technologies in Play to Support PersonalizationThe next chart shows that email providers lead the way in supporting personalization. Due to the uniquerequirements often put forth by retailers, many have resorted to using internally developed tools by simplytaking advantage of cookies and internal tagging. At the same time analytics/marketing firms likeAdobe/Omniture see strong success as top-3 tech sources to assist with personalization efforts.Retargeting vendors are moving to the forefront and performance has been powerful, according to someof the retailers we interviewed. Recommendation engines have also been aggressive in their pursuit ofthe retail vertical and here one in three merchants has tapped into their services. We would expect moretransition among technology companies as new vendors emerge and others evolve their offering.As you can see, merchants already have an array of personalization technologies at their disposal andmany are in play, often at the same time. One TV retailer alluded to the fact that they had sevenapplications they could employ. With every one of them poised for personalization, they must decidewhere to start and to date have not fed those engines with data. They need to understand the right way tohandle it opportunistically and in the meantime are deploying search results via a testing company asthere is no IT dependency. What technologies have you employed to assist you in your personalization efforts? Check all that apply. Email service providers (Responsys, 56% ExactTarget, etc.) Internally developed tools 53% Analytics/marketing solutions companies 50% (Adobe/Omniture, CoreMetrics, etc.) Retargeting vendors (Fetchback, Dotomi, etc.) 45% Recommendation engines (Adobe, Certona, 36% MyBuys, Rich Relevance, etc.) eCommerce platforms (ATG/Oracle, 26% Demandware, MarketLive, etc.) Personalization vendors (Webtrends, Adobe/ 14% Omniture, Maxymizer, SiteSpect, etc.) 12    
  13. 13. Performance Stems from Optimization EffortsAfter watching personalization for many years, it is clear that it must be prioritized to perform. Evolvingtechnologies and initiatives will always attempt to demote personalization on the retailer’s roadmap. Thus,a look at what personalization can deliver provides the ammunition retailers need to stay the course.Brand DifferentiationCompetition for the consumer dollar is fierce and retailers must understand the role personalization canplay in brand differentiation. This is over and above shoppers adding incremental product to your cart buttruly presents an opportunity to build customer relationships in support of loyalty and future revenuegrowth. In a world of retail that often lacks differentiation, personalization can power experiences from theright recommendations to the personal touch where retailers assume an advisory role in elevating theshopping experience.To make shopping as intuitive as possible in the intimate apparel world, one merchant discussed theaddition of a feature called “how it fits” including the ability to “see it under” a top or to better experiencethe shoulder treatment. Between their internal experts, well trained CSRs and peer-to-peercommunication they are able to personalize their processes in what can be a very intimidating category.Libraries of reviews helped to build extensive tools that support these efforts as well.Word-of-mouth plays an all-important role in today’s social society as feedback from customers who havean amazing experience with a company can be used to help brand a business. While we acknowledgethat it is hard to execute personalization well, when done right, consumers will take notice and share theirsentiments with others..Vital to GrowthPersonalization can play an integral role in growing one’s business as one retailer stated, “It clearly canbe a revenue driver once we understand what motivates customers to shop and spend money with us.”Perception of the brand is also improved when consumers believe retailers know them and purchasingfollows suit.As merchants extend their assortments into more categories, personalization presents an opportunity toleverage their existing customer base through relevant offers. At the same time, they can cater tocustomers by segmenting and marketing to them based on their history. Another growth example was theexpansion beyond one’s core catalog with items that in the past received poor visibility now receivinggreater display potential. A music company reported increased sales due to personalization where bestseller status has been achieved among otherwise fringe product from their 190,000 SKU catalog.Conversely, the ability to squeeze the most revenue from niche consumer groups allows retailers to sellmore products while engaging shoppers for longer periods of time. Each of these personalization effortsare important predictors of future revenue and can help retailers to max out every customer’s lifetimevalue. 13    
  14. 14. Elevating PerformanceSurveyed retailers offered a number of solutions to elevate their performance and we aggregated theiranswers into the top-3 areas ripe for improvement. First this means taking advantage of every effort tomake the user experience targeted, specific and ultimately relevant to one’s customers. Secondly, itrequires IT involvement or better management of third parties to ensure success. Thirdly, CRM post-salemust be in place and then subsequently managed to attain results. What is the one thing you would do to elevate personalization for your customers and your bottom-line performance? (Top-3 areas per open-ended responses) Improve CRM, post-sale follow-up, analysis Make it more 12% user specific; Involve IT, relevant add functionality, 20% better manage 3rd party vendors 13%  Consumers are expecting fewer clicks to desired end results so onsite search is central to deliveringnimble experiences for shoppers and desired conversion rate increases are a byproduct of those efforts.By building more fulfilling experiences with the end user through efficient execution of the browse and buyfunnel, shopper satisfaction is seen in both initial purchases and subsequent retention. Beyond findingproduct through keyword search, browsers are discovering products they were not looking for or onesthey never knew existed and are inspired to purchase beyond their original selection.Improved KPIs are the goal of most initiatives where retailers have seen strong results in conversion,AOV, customer retention and order frequency. Nirvana is seeing KPIs rise from all personalization effortsbut still appreciating that it is a process. Testing is also useful and assists retailers in figuring out whatworks for their business. Nobody wants to over-personalize and under-deliver so avoiding being overlycute or aggressive with the rules are important considerations.Extracting personalization learning and infusing it across channels will be a reality for more retailers asthose who have or are planning to implement CRM systems will be able to deliver an experience trulytailored to the individual rather than being limited to a more aggregated model. Learning can then takeplace across all channels and findings subsequently applied to maintain performance momentum.STEP 4: LISTEN TO THE CUSTOMERSMany philosophies come to mind as merchants strive to deliver a personalization strategy that is right fortheir business. This must begin with identifying thought processes customers go through when usingproduct and their shopping patterns including search styles and pricing preferences. When we embarkedon this topic, we anticipated more merchants and customers would express concern about the invasivenature of personalization. Instead, given Amazon’s pioneering role in personalization, an acceptance ofintelligent personalization is seen where shoppers voice little concern in its employment and retailersunderstand it is merely one’s ticket to the game. 14    
  15. 15. There is still a balancing act between the art and the science but this good advice was shared to supportpositive experiences: Ø “Let customers guide themselves; allow them to choose their desired level of personalization.” Ø “Treat consumers like you want to be treated; shopping means walking a fine line in the experience you put forth.” Ø “Dont make any assumptions and make sure the supporting data is right; if you get too personal you may anger a customer; they will let you know so merchants must tread with caution.”One merchant suggested that their general philosophy is to keep pushing for sales at any cost until theyhit a wall and then pull back. Most however, alternatively recommended erring on the side of caution andsome cited a “sniff” test that they use when setting personalization levels. Another retailer noted, "It’s notan issue if you stay behind the bleeding edge where personalization is often seen as a service. You dontwant to remember more about them than they remember about your site,” He also warned other retailersnot to get out of the box too fast. The general sentiment was that the customer is comfortable withpersonalization. If one factors in the customer point-of-view, the odds are that the experience willresonate. A smart practice shared by another retailer was, “Never make it look personalized, just a greatexperience.”Business objectives should always be balanced with consumer demands, understanding projected ROIwhile exploring improvements to the brand experience. The suggestion most often made was, “Alwaysput yourself in the customer’s shoes.” Beyond the customer, inquire internally from those on the frontlinesas one merchant did, taking the lead from their in-house CSR agents who “listen to customers” in hopesof doing the right thing. From an opposing vantage point, bad personalization was equated to the salesguy who doesnt listen. Avoid bombarding customers with irrelevant information because abandonmentand high unsubscribe rates can result. Lastly, don’t push higher profit margins at the expense of the rightproduct.Solicit customer feedback, always paying attention and more importantly acting on what is learned.Qualitative feedback gleaned by talking to your customers via surveys, phone interviews and focusgroups ensures being both responsive and proactive. Technology facilitates knowing your customers andyour market, with some finding chat interaction to be particularly effective.Transparency CountsIt is imperative that merchants be straightforward and transparent as any covert behavior may limit thechance for a return visit. Anticipating shopper needs through self-selected preferences and purchasebehavior should frame the experience. Everyone enjoys being treated as a valued customer and it is inthis regard that "feel good" clientelling can be both effective and appreciated. One such approach,described by a retailer, set the tone for receptivity where receiving a call from a personal associate at astore you frequent is powerful yet receiving a robo call advising you of an upcoming sale might beperceived as an annoyance.Categories must be factored into the equation as one merchant explained that shoppers dont expect thesame degree of personalization in the luxury category. With limited SKUs and a desire to see thecomplete assortment, a discovered versus guided experience is likely to be more appealing. The finishingtouches will be appreciated from the nature of the order confirmation to the package itself. From anevolution standpoint, new tools become important to shoppers for personalizing their own experiencessuch as outfit creation and sharing made available through Polyvore.Customers and Technology EvolveThere was some sentiment that non-site experiences, such as retargeting, can become “too personal”though many merchants are seeing great success in this area as prior results suggested. Acceptablemarketing moves with the times; as customs and customers evolve what was once considered intrusive is 15    
  16. 16. now labeled a service. The evolution of abandoned cart emails is a perfect example, shared by several.There are always grey areas and ways to monetize one’s customer base but rather than take a short-termview retailers recommended a long-term vision. The importance of being earnest was discussed,reaffirming that savvy customers will know if you are blurring the lines solely to secure the sale. Anothermerchant shared their belief that people come first, and that helping the customer accomplish his or hergoal was paramount. “Getting to where customers feel you are invasive isn’t a good experience so wejust don’t do it even if potential sales are lost. We hear from them if there are features or questions thatpush the limit.” One should not make too many assumptions. A lingerie company noted that a customer’ssizing can change, often triggering new purchases and that more importantly customers simply dont buyeverything they bought before so caution is always a good course of action. It is best to balance behaviorand transactions and therein lies the art of personalization.STEP 5: DELIVER AN EXPERIENCE THAT IS HELPFULCustomer EfficienciesProviding a good edit makes the shopping experience more efficient, likely saving shoppers time in theprocess. The positive news for one manufacturer was that a CRM system is on the horizon so theyexpect that future offers would soon be relevant and complementary to past behavior. Helpful can berendered from a variety of means ranging from efficient shopping to curated assortments.Curated assortments are an exciting opportunity employed most often by showcasing new and productfavorites a customer is likely to enjoy. Nirvana for one retailer would be only showing the customerproducts with relevant styling, price and function, eliminating the clutter of the other 90% of theassortment. Unfortunately, in reality there is no way of knowing this, plus people are highly individualistic,where some like seeing what they dislike as a way of validating what they do like. While one merchantacknowledged that their website is not highly personalized, they were proud that their experienceimproves with each step including shop by brand or drilldowns via attributes of choice thus grading theirsite a 3 on technology but an 8 on the more important experience aspect.“It’s not just about product recommendations and cross-selling: personalization should emulate a salesassociate who alerts you when an item that is right for you has arrived in the store,” pointed out oneluxury goods manufacturer. Under that scenario shoppers don’t have to dig through new arrivals or entirecategories. Filtered search also contributes to efficiency models where sophisticated onsite searchpersonalizes and directs the shopper experience.An understanding of what keywords are browsed along with specific versus general terms allows retailersto slice behavior across similar groups for more effective merchandising. Monitoring the visitor browsepatterns enables retailers to understand where shoppers are within their buying process in hopes ofachieving better timing.One merchant reminded us that, “Simple is elegant and personalized solutions that facilitate purchasingdon’t have to be complex to perform.” They have a custom sign generator but do not offer 50,000 fonts,knowing that providing limitations sometimes serves the customer better than those that are morecomplex in nature. Another expounded on a similar approach suggesting, “Dont overcomplicate it, butrather go for the top two things from which customers will get benefit.” Both are good pieces of advice forretailers.While search can be tweaked and evolved, moving beyond directed shoppers to deliver a better browseexperience can also be elevated via personalization. Suggestions were made for using product finders orsupplying virtual salespeople who could guide shoppers through more targeted and personalizedselections. Positioning this as a service is powerful so messaging really matters. One example thatleveraged technology was an abandoned cart email letting the shopper know items shown were still instock, serving as a benefit rather than a sales pitch. 16    
  17. 17. Enabling wish lists to edit or save for later are incredibly helpful, providing just the level of cross-channelservice and flexibility many shoppers seek. For apparel such lists can serve as the equivalent of a virtualcloset involving store associates and call center reps to effectively tie channels together. For example, abrowsing customer might like a product but is not ready to make the purchase now. Available tools allowthem to take a picture of the shoe, upload it to their phone, print an item online and bring it to a store oremail an associate to schedule an appointment for pickup. Mobile will ultimately be a huge factor infacilitating transactions of this nature.STEP 6: PUT THE PERSONAL IN PERSONALIZATIONThere is a subtlety that supports personalization where the “personal touch” is important to shoppers anda differentiator for retailers. Shoppers are time-starved and dont enjoy starting over in any way once theyhave engaged with your company. A positive experience welcomes a shopper and assists them ingetting from point A to point B in their shopping experience in the most efficient way possible withoutbeing pushy and always cognizant of individual needs. .People realize that to make gains they have to improve the experience and service part ofpersonalization. When they hear personalization many think only about product recommendations and itssuccess. In fact, there is so much more beyond these baseline efforts like providing information/advicespecific to non-technical needs. One lingerie pureplay referenced the myriad of support tactics theyemploy including data based on purchases or manufacturer discontinue notifications, all triggered byemail. In terms of customer retention, they, along with several others, emphasized the personal touchesof a perfectly packaged product including supporting product information and care instructions, a thankyou card and clear, respectful return information.Modeling ClientellingReferences to positive retail experiences were mentioned such as one consumer’s experience at NeimanMarcus. Knowing that she always wears brand “x,” she is often contacted by her favorite salesperson withalerts that new shoes are in or receives an email when her favorites go on sale. Successful in-storeclientelling here, and at Nordstrom, demonstrate how personalization seeks to model really “knowingone’s customer.” A sporting goods retailer also spoke of “anticipating” customer needs. His story revealedideal personalization where someone bought a bike and then a month later received an email about hisbike suggesting related accessories. “Such communications would be more relevant based on bettercapturing data we could act upon, and do something with it, growing future transactions from pasthistory.” One seasoned apparel veteran has long wished for “intelligent” storage of everything a customerhas done, imagining one’s closet where total consumption by brand could be noted. Personalizationefforts would then match up existing product in their closet with new items in the line. Such brandintelligence could be valuable to both the end-consumer and the retailer ensuring an on-trend, efficientshopping experience. It is this VIP feeling elicited from personalization that makes customers feel specialand elevates loyal customer behavior to the next level. Consumer comfort and confidence propels apersonalized shopping experience to the point shoppers spend more.STEP 7: APPLY A CROSS-CHANNEL LENSRecognizing customers across channels, whether it be at the point-of-sale or certainly via the call centeris another desire of shoppers. One retailer said, “Customers want us to know them when they come tothe register, expecting a personal greeting and access into their loyalty status. Through surveys they areopen to content tailored to them and category affinities that extend beyond the web.”Shoppers want to feel connected to the companies they frequent, and cared for to facilitate futuretransactions. That connection starts with being helpful in the true sense of the word rather than in aclichéd manner. Anticipation of their needs, buttressed by a personal shopper clientelling mentalityreceives the warmest embrace. One specialty department store, known for its quality of service, reportedcustomers expecting to receive their one-on-one store shopping experiences translated to digital 17    
  18. 18. experiences with the same handholding for long-term customers along with transitioning of their newervisitors via appropriate means that fosters future loyalty.Cross-channel may afford the biggest opportunities if one can figure out the right personalization equationbetween channels by tying service to shopper needs. A pet multi-channel retailer noted, “It’s not merelycollecting data but combining offline and online as well as transactional and behavioral insights to thestores from onsite activity.” She gave an example of looking above and beyond standard purchasing byconnecting reading of specific reviews to the service offering seen in the stores. That means systemsmust be well integrated and mobile must leverage geo-targeting to quickly detail local service offeringswhere every touchpoint directs shoppers to their channel of choice.“Learning how she behaves in each channel and using all of that to inform personalization is optimal,”declared one department store spokesperson. “In-store she may only buy accessories while onlineapparel is favored.” This knowledge allows retailers to begin to build a comprehensive customer profile tobetter target across all cross-channel transactions. Such information can also educate store associatesand serve as a reminder on POS systems where email communication and social initiatives can then bedeployed in a more holistic fashion.The more you align customer segments across channels, the more you can leverage in your media mix.Marketing creative can be efficiently incorporated across relevant media where both online and retailtransaction data are captured. A shopper who purchased a North Face pack might see a matchingsleeping bag for an upcoming trip when they seek out store hours on their smartphone. From a storeperspective, receipts can serve as an excellent tool. Recently a receipt from my local Barnes and Noblestore included personalized offers based on books I had just purchased.A universal ID is the key to success where the underlying loyalty program allows retailers to serve uprelevant marketing across multiple layers of content. Relevancy in real-time must be delivered so onedoes not send an online shirt promotion when the customer has just purchased shirts at retail. Payingattention is paramount and doing 2-3 things really well trumps testing 15 tactics in a subpar manner. CRMsystems have to be put in place for this tall order with one common backend and sophisticated datamanagement that puts merchants in a position to deliver personalized strategies, yielding positive results.As the needs of each retailer surely will vary, merchants must determine which investments are right byunderstanding and augmenting existing programs. This should include carefully vetting new technologiesfor their business presuming that personalization strategies will be supported across all channels whereresources are aligned internally and roadmaps designed for superior integration.STEP 8: TEST, MEASURE, EVOLVETesting cannot be emphasized enough. Merchants are encouraged to get in the game rather than wait forperfect data. In this study, and many others we completed this year, data rose to the forefront, ripe forimprovement. Relative to personalization, several retailers expressed challenges mining previous orderdata and adjusting product recommendation algorithms accordingly, noting that getting that right can bedifficult. Other retailers discussed its importance and related challenges integrating data in the right way.They referenced onsite behavior and integrating orders from the call center to garner a 360-degree viewof the customer. Several spoke of the costly nature of resources. In order to drive conversion, they hopeto get increased frequency of orders with more relevant messaging, moving beyond current “spray andpray” methodology. By targeting smart they may not need to add an incentive for purchasing and marginscan be preserved. Sufficiently satisfied with onsite targeting, one sought a more robust user cookie. Datatheir customers already self-select could serve as the basis of an integrated record. That includespurchase behavior (what, where and when they bought) as well as customer behavior (traditionalcategory activities, most purchased categories, propensity for price level, big spender vs. nominal oraffinity to buy other products). 18    
  19. 19. It is fundamental that retailers have a unified view of the customer to bring to bear interactions from allchannels and that systems are in place to facilitate those needs. A last lesson shared is that retailersmust make sure data is right. When inaccuracies exist, customers can become angry and will let youknow if you’re taking personalization too far. That said, knowing when to draw the line on how much is toomuch is an invaluable lesson most learn the hard way.Once you see how customers respond, seek out solutions with the greatest impact but avoid putting uproadblocks in the process. Formulas will continually need to be adjusted to the levels and approachesthat make personalization work best. Testing low-level personalization to 11% of customers, one retailerreported seeing a 10% conversion increase which equated to $5 more per customer. When usingtargeted product recommendations, shoppers spent $18 more so understanding business needs and yourcustomer base can set the stage for achieving perfection.Measuring Behavior DataNext we looked at personalization measurement based on our survey results. Merchants rely on an arrayof behavior data to garner that 360-degree view of their customers just as they do for running theirbusinesses on a day-to-day basis. For evaluation purposes we broke out the usage into those leveragedby the majority including new/return visitor, previous purchase, acquisition source and their status as acustomer or prospect. From there, metric usage seems to take a “merchant’s choice” approach asdemographics and browse and buy behavior comprise the second tier. The third area, seeing penetrationby fewer than 20% of those surveyed, has challenges likely due to their cross-channel nature or difficultyin securing the measurement data.           What behavior data do you include when attempting to garner a 360-degree view of the customer? Check all that apply. >56% 40-26% <20% New/return visitor Previous product interests Point-of-sale Previous online purchases Searches Previous campaign exposure Acquisition source (search, Facebook, SEO) Customer demographics Customer psychographics Customer/prospect RFM data (recency, frequency) Mobile usage patterns Previous visit patterns Previous offline sales Previous campaign responses  Simple testing via quick iterations is recommended though of course it is easy to launch and move on.One seasoned veteran summed up, “Testing can never be fast enough nor creative enough and we oftenfear we cant launch or re-launch if everything is not perfect, but we have learned that we can’t start outwith a 1000% batting average.” No one has perfected personalization but small incrementalimprovements emanate from testing and targeting. Efforts must be pushed to the extent that it works toquantify and improve based on results. For one specialty toy merchant, that meant personalizing thehome page with dolls for girls, rather than video games, and better accessorizing across the site ongender and a range of relevant behavior patterns. ”We havent found the Holy Grail but at least we have atool to monitor. Simultaneously we are testing via mobile where gains are not as fast as we might like.”Many test via their technology partners and results can be mixed. As one retailer offered, “Being flexiblein testing and targeting is recommended, followed by shifts in strategy. You won’t likely be right the firsttime out so don’t assume anything until you’ve put each of the tests to work. It is the process that mattersand the improvements realized along the way.” 19    
  20. 20. SECTION V: FINAL THOUGHTSIt is our belief that when retailers invest in personalization, they will reap rewards from their labors.Aligning their organizations sets the tone and puts merchants in the best position to deliver against itsearly promise. The diligence put forth to build processes and embed the soul of personalization into theircultures will yield results in perpetuity. Continuing to listen to one’s customers and being cognizant ofdelivering the right experience ensures success. Helpful, personal experiences and cross-channelexecution should be the orientation. Testing must be part of the ongoing evolution while measurementand learning build a supporting environment for prioritized and profitable personalization.Keeping these eight steps in mind will best position your company in the coming years as you prioritizepersonalization for growth: Ø Understand Personalization is a Process Ø Align Internally to Ensure Success Ø Foster a Personalization Culture Ø Listen to your Customers Ø Deliver an Experience that is Helpful Ø Put the Personal in Personalization Ø Apply a Cross-Channel Lens Ø Test, Measure, Evolve 20    
  21. 21. SECTION VI: ABOUT THE COMPANIESABOUT THE E-TAILING GROUPthe e-tailing group is a niche ecommerce consultancy that helps merchants deliver the right customerexperience on their websites and across all of their channels while adeptly assisting technologycompanies to create and execute go-to-market strategies that simultaneously educate the retailcommunity and deliver cost-effective thought leadership and lead generation. For more background aboutour research or for additional information on the e-tailing group, inc. please contact Lauren Freedman viaemail at, by phone to 773-975-7280 or visit the e-tailing group website www.e-tailing.comABOUT ADOBEAdobe is changing the world through digital experiences. For more information, visit ADOBE DIGITAL MARKETING SUITEThe Adobe Digital Marketing Suite offers an integrated and open platform for online businessoptimization, a strategy for using customer insight to drive innovation throughout the business andenhance marketing efficiency. The Digital Marketing Suite consists of integrated applications to collectand unleash the power of customer insight to optimize customer acquisition, conversion, and retentionefforts as well as the creation and distribution of content. For example, marketers can identify the mosteffective marketing strategies and ad placements as well as create relevant, personalized, and consistentcustomer experiences across digital marketing channels. Marketers can make quick adjustments,automate certain customer interactions, and better maximize marketing ROI. 21