While some retailers are forging ahead with their personalisation efforts and initiatives, others are grappling to transform their marketing organisation’s capabilities so they can engage with customers in a more targeted way. That is what Periscope By McKinsey found when we recently surveyed retail decision makers about their attitudes towards personalised marketing; where they are on the personalisation journey; and the challenges they are experiencing along the way.
Many retailers are still in the early stages of experimenting with personalised marketing. As such, they are only beginning to see the impact this is making to their businesses. Our own experience shows that there are both short and long-term gains to be made in both performance and health. For example, retailers can expect to see more efficient marketing and cost savings, alongside increased customer retention and revenue. Personalisation can also play a key role in generating a larger customer base that is more engaged and satisfied with their brand experience.
What retailers told us
Personalisation is becoming more important, with 95% of retailers surveyed stating it is a strategic priority for their business – 64% consider it a top three priority. Yet only 15% admit to being fully implemented, with 43% saying personalisation efforts and initiatives are on the roadmap for 2017/18. This suggests that whilst many retailers are at the start of their journey towards personalisation, and recognise its strategic importance, their efforts towards implementing it are lagging considerably behind what their customers have been demanding for some time.
Many of the retailers we spoke with said implementing personalisation did increase their opportunities to generate additional revenue streams. 41% stated that they experienced a 50%-100% positive impact on their revenue streams, especially in cross-sell conversions. 15% reported even higher impact with 100-300% improvement in revenue, especially in new customer conversions.
80% of those that had switched to personalised promotions said it was having a direct impact on the volume of customer visits they were receiving compared to the previous year. 59% said they saw a 25%-50% increase, with the remaining 21% seeing customer visits as high as double.
Getting on the journey
So, personalisation can have a directly measurable impact on the performance of a business in many areas, but it can be a daunting journey to get there. 67% said gathering, integrating, and synthesising data was their greatest challenge, with the same saying they did not have the correct tools to execute personalised offers and marketing.
The key to success is being able to bridge the gap between data and creating an automated near real-time environment. In addition, to have impact on the customer journey, promotions must be both journey context relevant and delivered quickly after a trigger is detected, before the moment is gone.
To be successful with personalisation there are six essential components that need to be in place in your organisation:
- Democratise your data – make sure you have a complete view of the customer: what they want, what they’ve bought in the past, their preferred engagement channels, what they’re trying to do right now
- Vendor funding – this has to be right, so involve manufacturers in the process of generating offers early. If they understand the benefits to them, they will be incentivised to help you create an amazing offer bank
- Journeys are key – Understand the different journeys your customers make, both in and across channels. This is essential to building a strong brand relationship with your customers.
- Break down internal walls – Agile marketing can help you rapidly accelerate and build marketing campaigns, but to achieve this you need to build cross-functional teams
- Customer-specific context – Your marketing has to be customer, behaviour and location-sensitive. The challenge is to transform the marketing organisation’s processes and practices to achieve the full potential personalisation offers.
- Scale things that work – Having identified which offers generate the best returns, distribution needs to be automated to execute at scale.
A journey starts with a single step
Retailers acknowledge that consumer demand for more personalised interactions continues to intensify. Yet, many are struggling to begin – or complete – their own efforts at personalisation. Those already on their journey are confirming that the ability to tailor messages or offers to individuals, based on their known needs and behaviours, opens the door to new value. That value includes enhanced revenue and greater customer loyalty. Done well, improved margins can also help to fund the transformation, from optimising marketing spend to achieve cost savings or requiring fewer markdowns. Personalised marketing is a journey on which no retailer can afford to be left behind.
Brian Elliott is the managing partner of Periscope™ By McKinsey. As an entrepreneur and inventor, Brian has grown and led the global consumer pricing practice for eight of his almost 20 years with McKinsey. He is a founding board member of Periscope™, and serves as its managing partner since 2012. During his leadership, Periscope™ scaled from a startup environment into one of the top global revenue growth solutions in the market with accolades from Gartner, Forrester, IDC, ALM Intelligence, Promotion Optimization Institute, and CIO Review. Brian holds a PhD in materials science from Northwestern University as well as two bachelor degrees in mechanical and materials engineering from Cornell University.