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Personalization 2.0 in a digital-first economy

(Image credit: Future)

The idea of personalization 2.0, or hyper-personalization, is nothing new; particularly in the retail industry.

Hyper-personalization is the concept of brands listening and communicating with customers at every touchpoint. It helps predict behavior to provide customers with what they want, when they want it.

More importantly, it is a big player in one of the potential goldmines for retailers: anticipatory shopping. This is the ability to offer something to consumers without them actually ordering it and something that Amazon, one of the leaders in the retail technology space, has long talked about. Proactive inspiration will allow brands and organizations to anticipate customer needs and streamline the purchasing experience.

However, as the trend becomes more popular, larger and more established businesses are finding it tougher to accommodate their customers’ increasing expectations. This has allowed some organizations to take advantage of their competitors’ weak underbellies.

Customers are now less loyal to brands than they are to service, with 75 percent of shoppers claiming they wish that retailers offered the same services as Amazon. So, unencumbered by legacy systems and cultural blockades like red tape and layers of hierarchy, these newcomers have been able to move closer to customers and listen.

Amazon, Google and Facebook don’t focus on creating their own products. They’ve all become what they are today by providing incredible services through the effective use of customer data.

This is opposite to how large companies have tended to operate, previously choosing to invest in brand equity and product development.

In an age where COVID-19 has had a detrimental impact on consumer confidence, hyper-personalized experiences will likely be put on hold for those goods that aren’t deemed essential. But it will undoubtedly play an important role in the retail industry’s post-pandemic recovery.

We live in an omnichannel world. And the pressure is on for these organizations to transform their business models to accommodate this new way of commerce.

The Amazon era

Start-ups have managed to become customer favorites through an effective use of omnichannel retailing. But also important to their model are new zero UI (User Interface) methods such as voice and automated purchasing.

Amazon is a prime example of a company that has mastered this. First, the eCommerce titan made sure it covered every digital channel possible: web, mobile, content and hosting.

Then it slowly began to move into the physical world with the purchase of Whole Foods, its 4-star stores and Amazon books. Its latest venture in physical retailing is only the next step towards retail domination.

But what is its overarching goal in having so many touchpoints? Ultimately, the key is to become the default choice for whatever the customer wants to do.

This allows it to ‘own the customer’ through the control of interfaces – something we call ‘interface imperialism’. This is effective because if you own the interface, you own the customer. If you own the customer, you own the data.

And if you own the data – you own the future.

This strategy has also allowed Amazon to increase the proximity to the purchase across the various phases of the purchase funnel – inspiration, search and purchase itself.

The theory goes that if you can move a customer through these various stages faster, they’re less likely to purchase elsewhere.

And it’s clearly working. In the UK, 81 percent of all product searches now start on Amazon, with 27 percent of all online spend spent with the company.

Thanks to its vast amounts of data, Amazon has enabled easier search, better ratings, faster checkout and smoother logistics. And hyper-personalization will soon follow. As a result, it has become the clear leader in online retail.

An automated shopping list

While personalization is all about the interactions between the customer and the website, in the future personalization will be the very opposite. Customers will only receive the goods, services and interactions they need or want.

Take Programmatic Commerce™ – also known as machine-automated ordering. Personalization will eventually be so far advanced that organizations will know when to replenish what you’re running out of at the right time.

With the increasing connectivity of devices to the internet, this is highly possible. Just imagine your smart fridge alerted to the fact you’re low on milk before you even realize and automatically adding your favorite branded milk to your online shopping order. Essentially, this will be a personal, just-in-time stock system.

This will move the concept of personalization away from ‘recognition’ towards ‘knowledge’. Data can be used by businesses to proactively inspire customers at the right time.

This is why we’re seeing the likes of Amazon and Google trying to embed themselves in their customers’ lives through voice assistants in homes, cars and phones.

It’s personalization, just not as we know it.

The future of personalization

In a world of disruption, knowing what to do next can be frightening. But the best incumbent brands focus on what their strengths are – which isn’t necessarily data.

Personalization has worked to an extent up until now, but does not always equate into conversion – with just 11 percent of online consumers in the UK saying that personalized products would draw them towards a brands website.

A lot of that frustration is down to its rudimentary implementation. For many customers, the personalized products they see are based on what they have searched for or purchased already. It’s clear that for the next stage of personalization to be successful, it needs to go beyond reactive content to proactive and anticipatory science.

Walmart, for example, used its 90 percent coverage of the US as an advantage by offering customers added convenience through services such as pick up in store towers and kerbside pickups.

At the end of the day, the answer is simple but effective. Get the basics right:

  • Listen to your customers
  • Identify key touchpoints
  • Create a single unified data record for customers that works across channels
  • Drive actionable insights from your data
  • Act on them

For many retailers, the current climate is all about survival. Projections for the year ahead have in the blink of an eye gone out the window. But part of the survival process will be based on how they can bounce back once lockdown measures are relaxed and consumers begin to return to old spending habits.

And when that comes, it will be important to use more automated methods of providing customers with services, promoting ease, speed and convenience.

But ultimately, you’ll need the heart of a retailer and the brain of a start-up to succeed in a competitive digital commerce landscape.

Hugh Fletcher, Global Head of Consultancy and Innovation. Wunderman Thompson Commerce