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PRIORITIZING PERSONALIZATION FOR GROWTH

By Lauren Freedman

President, the e-tailing group

November, 2011

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Table of Contents

Section I Introduction

Section II Survey Objectives and Methodology

Section III Reflections on Personalization

Section 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, Evolve

Section V: Final Thoughts

Section VI: About the Companies

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SECTION I: INTRODUCTION

Personalization has long been a promise of the Internet however its execution among the merchant community has not yet met the elevated expectations of consumers. Today’s consumer is more comfortable than ever before with personalization so may once again be ahead of the merchant’s desire and ability to deliver on its promise. A great deal of confusion and angst remains around this very important topic as retailers resist taking advantage of the tools and technology that are often at their fingertips. Rather than starting with realistic philosophies, they seem to take on personalization from a macro 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’s qualitative 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 small steps per the list we compiled of eight “not to be missed” initiatives in pursuit of personalization. These are a must read for any merchant already entrenched in personalization as well as those who may be bantering internally about the optimal solution for their business. The results are tangible from a monetary and 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 but much remains surprisingly stagnant. One milestone achieved, upon which this paper is predicated, is consensus among merchants regarding the definition of personalization. Despite that progress, internal confusion still reigns where one department store executive shared, “Even when it comes to internal meetings about personalization there are a wide variety of expectations and some individuals can’t see personalization beyond product recommendations.” A discussion of philosophies, the complexity of personalization, 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 personalization particularly as many are accustomed to the Amazon model and its requisite sophistication. We then provide a brief overview of the state of personalization as merchants acknowledge their efforts are still early stage, even among larger retailers. Deployment onsite and post-order are addressed and those lucky 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 brand differentiation, to conversion and ultimately bottom-line performance. Success starts with leadership, responsive cultural dynamics and alignment within the organization. Tapping into technologies that support personalization needs can be intimidating for some; powerful for others. Once deployed, measuring personalization will enable retailers to ensure their efforts are optimized. While personalization nirvana may be a longer road, small wins are incremental and will set merchants down a performance path that meets and exceeds expectations.

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SECTION II: SURVEY OBJECTIVES AND METHODOLOGY

We 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 prevent personalization from realizing its cross-channel potential. Additionally, knowing that the premise of personalization has been discussed since the web’s introduction, we wanted to understand if it is playing a growing role in driving loyalty and bottom-line sales.

Methodology

An online survey was completed by 131 merchants in 3Q 2011 representing a range of company sizes where online sales accounted for 70%+ of overall business for more than one-third of those surveyed.

$5 million or less19%

More than $5 to 50 million

19%$51 to 200

million20%

$201 million -$1 billion

16%

More than $1 billion26%

In which of the following ranges do yourcompany’s annual sales fall?

   

5% or less19%

6-10%10%

11-20%11%

21-50%12%

51-70%13%

More than 70%35%

What percent of your overall businessdo online sales represent?

 

 

 

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SECTION III: RELFECTIONS ON PERSONALIZATION Defining Personalization Starts with Marketing 101 Personalization attempts to deliver the right message (product, content, community) at the right time and right place to the right person. Relevancy is the operative word since personalization at the core is about leveraging what we know to provide more targeted experiences for customers and prospects in an intelligent manner. When shoppers experience relevancy it is our belief that both the experience and the bottom-line benefit. Relevancy can take on many forms as a result of recognizing something about the customer (keywords searched, IP address, past purchases) where retailers can capture rich customer data. One wonderful example shared by a publisher was a desire to tailor a marketing message to families in the path of a recent hurricane. Understanding that these customers would be looking to entertain their children, ideally they would present books targeted at specific grade levels as digital downloads where personalized selections would resonate. There are many ways to tackle personalization but it should be kept top-of-mind that the ultimate goal is most 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 important role for both customer acquisition and particularly for retention. Unleashing incremental sales opportunities with existing customers should be a fringe benefit of personalization as well. In today’s competitive landscape, if a retailer is merely reactive, relying on customers to come to them, there may be minimal upside. Those that are proactive are able to stimulate shopping behavior. Knowing where customers are in their buying cycle they can consistently deliver personalized experiences across all channels including email, stores and even retargeting to optimize customer spend. Potential and Pitfalls Of course with richness and relevance marketing can be more risky so balance is important. To avoid poor experiences, it is also essential to adhere to what customers say they want as click-behavior is not always a true indicator. Better information about what your customers are doing and personalizing allows you to tailor a more “individual” experience. Maintaining brand integrity is of great concern when implementing personalization. It is not therefore surprising that 40% of retailers surveyed emphasized that they are “very deliberate in their personalization strategies so as not to denigrate the brand in any way.” One in three merchants shared that they would test a range of strategies to understand which performed well and fit best with their brand vision. This sentiment was reinforced by one retailer hoping to understand customer expectations, “We will test our way into this, looking at purchases and establishing personal rapport while soft selling personalization.” Experimentation is ideal to monitor how your efforts play out by looking at everything from bounce rates to conversion along with personalization touchpoints. Focus groups and usability testing can help merchants to realize the comfort factor they seek from personalization and find the right tipping point for their business.

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40%

31%

23%

11%

11%

6%

3%

We are very deliberate in our personalization strategies ensuring that we don’t degrade our brand in any way

We will test a range of strategies to understand which perform well and fit best with our brand vision

Our view of personalization is centered on segmentation of shopping groups or types rather than a true one-to-one vision

We are very deliberate in our personalization strategies ensuring that we don’t offend our customers in any way

We are pursuing a one-to-one personalization strategy

We will pursue personalization but will request our customers’ permission before employing strategies

We allow consumers to self-profile their behavior type (Fashionista, soccer mom, metrosexual, etc.) which we then target accordingly

Thinking about the potential and pitfalls of personalization, please indicate your level of agreement with each of the following statements.

(Top-1 Completely Agree)

Customer Expectations It was essential to understand the current set of customer expectations as the consumer is very much in control of the shopping experience today more than at any recent time. Aware of that scenario, each of the merchants interviewed was asked, “What do you believe your customers expect from you regarding personalization? Heightened customer expectations set the tone for personalization demands as the majority believe that customers expect you to know them. It is no longer optional and moreover the customer is not offended by such personalization attempts but rather embraces them through subsequent browse and buy behavior. At a minimum customers expect that you will target based on their past behavior and ideally treat them as individuals, with unique customer tastes and behaviors across channels factored into the mix. Customers desire relevancy in messaging including where they land for search results. One merchant aptly noted, “If we give them something irrelevant they yell.” A sporting goods retailer concurred that their customer is very vocal and those embracing their loyalty program have even higher expectations. There will be increased odds of getting them to purchase when serving up relevant content or emphasizing favored products, while simultaneously increasing the odds of higher satisfaction and a better all-around shopping experience. Their customers were not shy about asking why an email for a bike was sent when they had just recently made a bike purchase. Obviously customers expect their relationship with you to be manifested in more sophisticated shopping experiences, preferring not to be resold on something they already own. One manufacturer lamented that without a CRM system they send offers that aren't relevant for their customers, but simply don’t have the team or the resources, a challenge mentioned by many others too. Merchants must still cautiously drive experiences, especially when dynamic. Both resources and business logic need to be in place to implement strategies with careful guidelines considered. There are times when retailers can go overboard on personalization and miss the big picture where the right product at the right time still remains the winning mantra. For example, a cataloger tested personalization against a gift-with-purchase Valentine’s promotion of a dozen roses which trumped all personalization efforts. It is this combination of merchants knowing their brand and the ability to turn on and off personalization that should produce the best results.

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Merchant Self-Assessment of Personalization

Merchants reported, on average, only a 3.8 out of 10 sophistication level when it came to personalization.

Most find themselves in early stages of personalization where despite a belief in its value they do not always have the resources or technical architecture to engineer. Additionally, several suggested that they are not looking to achieve a “10” when it comes to personalization, but merely a “toe-in-the-water.” Others spoke of limited efforts given their particular category. One interesting story came from a jewelry cataloger who gave his company a 4.5 noting they do not have a personalized home page. After years of experience, he knows the next purchase of a jewelry customer is unpredictable; they don’t always go for the “matchy-matchy” items although that is counterintuitive shopper behavior. Instead, winning merchandising has a price-point orientation, featuring 15 items (including best sellers) where call center CSRs can highlight those same products.

Another retailer, who graded themselves a “4” mused, “We have a number of triggers around geographic locations, purchase history, inbound source, past loyalty and more. These tie universally through our front end, call center, email service provider and order management system. I think there’s a great deal more to figure out which entails giving customers persistent filters around a certain style or price-point while also pulling in data from the social graph. While we do a lot of simple things, I don’t think we’ve found a way to differentially improve the user experience yet and I won’t feel like we’ve mastered personalization until users really take notice and love what we’re doing.” For many, personalization is the sum of little experiences and an additive process by its very nature where directional improvements are prioritized rather than perfectionist models. Where Personalization Takes Place Post-order email is where most personalization occurs as 77% of merchants reported tapping into those communiqués followed by the shopping cart (52%). Much of this appears to be facilitated via technology supporting alerts and effective placement. Merchants go for the winners, taking advantage of some of the most popular pages. Beyond the cart, product page up-sells/cross-sells and even product alternatives merit attention. Depending upon one’s category, the likelihood of consumers taking advantage of add-on product varies immensely so merchants are advised to handle on a one-off basis. Emulating Amazon’s home 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 retailer knowing that products for kids have been purchased subsequently displaying DVDs in future visits in an attempt to personalize the experience.

7-10 13%

4-6 33%

1-3 54%

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?

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77%

52%

44%

41%

21%

17%

Post order email

Shopping cart

Product page

Home page

Category page

Search results

Where do you currently personalize today’s onsite and post-order experience? Check all that apply.

 

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 opportunities were now finally under consideration. From better segmentation to personalized pages onsite and via Facebook, they are looking at a myriad of ways to connect their passionate customers to the brand. By listening to their customer via every means possible, including Facebook, they take advantage of crowdsourcing to get ideas and suggestions. Their customers are continually evolving and willing to seek out content through all available means including mobile versus having to rely solely on the website as in the past.

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Personalization Tactics Perform From an ROI perspective, triggered cart abandonment emails have seen the greatest success as they can be isolated and are often the simplest to deploy. Email follows a similar pattern and from there the product page and retargeting see some success.

26%

14%

12%

11%

8%

6%

5%

Triggered shopping cart abandonment emails

Personalized product recommendations via email

Personalized product recommendations on the product page

Retargeting

Personalized product recommendations in the shopping cart

Home page personalized based on past browse and buy behavior

Recently viewed product

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)

   The Role of Loyalty Programs Over the years in outreach interviews merchants with loyalty programs have acknowledged being in a prime position to take advantage of robust data, particularly when support systems are ample. Our latest interviews 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.    

Critical/Very Important

47%Somewhat Important

37%

Somewhat Unimportant/

Not at All Important16%

How important is your loyalty program for understanding your customer and personalizing the shopper experience?

   

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SECTION IV: EIGHT STEPS TO MASTERING PERSONALIZATION Retailers were asked a series of questions around unrealized opportunities, their personalization roadmap and what personalization nirvana would be for their company. It is from this targeted group of questions that a series of “Eight Steps to Master Personalization” emanated.

STEP 1: UNDERSTAND PERSONALIZATION IS A PROCESS Personalization requires retailers to create a culture where they attempt to be one step ahead of their customers, always anticipating their needs. Within such cultures retailers need to establish a set of business objectives that continually affirm why their customers should buy from them. Layering in elements of personalization is the modus operandi of the majority due to constraints in funding and technology. Database challenges in particular prohibit growth. Every step in the process allows companies 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 from email segmentation to purchase history. While some acknowledged that despite being data-rich, their ability 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 relevancy and satisfaction.” Removing obstacles that inhibit a simple shopping experience must be the winning strategy. Talk centered on making choices about automated personalization deployment to serve up more relevant results in hopes of driving higher conversion. For some it has been a savior and quite successful while others reported a disconnect trying to create personalization via automation and instead find it akin to mixing oil and water. In that regard, “watch out for being overly dynamic” was another piece of advice shared where erring on the side of caution is advisable. A Range of Experiences Starts with the Basics Capitalizing on customer intelligence to deliver efficient shopping experiences forms the foundation of this process. 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]”, showing banners, sorting products, geo-targeting, changing prices or much more. A presentation of marketing and merchandising specific to an individual that factors in their wants and behaviors is ideal. Many merchants touched on providing search and browse efficiencies based on past activity as intrinsic to their personalization vision. Making relevant suggestions based on past purchases is also seen as baseline for 98% of the EG100 merchants in our Annual Mystery Shopping Survey that employ this practice at the product page while 87% promote within the shopping cart. At the same time, seasonality is an element that should be factored into the mix like a recently mailed catalog advising how to prepare for winter that included the temperature of last year’s coldest day, personalized for each recipient’s city. Aggregating Personalization by Groups Personalizing to groups who share similar behavior is common practice for many as 23% of retailers completely agree that their personalization efforts are based on shopper segmentation by group rather than a one-to-one vision which may be more difficult to achieve. It is acceptable for consumers to be grouped with like-minded individuals (dog owners, professional bakers, snowboarders, etc.) but the bigger concern should be sending inappropriate content. Some even expect that you will empower these

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“control-minded” individuals to set your site to behave how they prefer rather than pre-programmed for an average consumer. Taking it one step further, the height of personalization was shared by one sporting goods multi-channel merchant 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 showing a hiker all new available backpacks and only highlighting those most often purchased in their city by hikers who share the same level of expertise and upcoming camping trips customized for their winter climate.” Such a degree of sophistication and insight could really allow this retailer to deliver the most relevant experience, thus ensuring the greatest likelihood for conversion. Lastly, merchants must factor in cross-channel components that address stores, mobile and email experiences for consistent personalization across all of their channels. STEP 2: ALIGN INTERNALLY TO ENSURE SUCCESS We heard from merchants time and again, “Personalization should be deployed because it is right for the business not just for personalization’s sake.” It is imperative that the effort be pragmatic and well executed for one’s customers to ensure the right end results. Not surprisingly, as we conversed with retailers we learned that many do not have a defined vision for personalization and well-conceived corporate perceptions were not forthcoming. Thus our second step shared is that alignment within the company regarding personalization is required before starting this journey, or if already on the way revisited to get everyone on board. With organizations often defining needs differently, companies must be in agreement on its role and relevancy for their brand, their category and where it is most appropriate for deployment. The organization structure required to institutionalize personalization and ensure brands follow suit is complex despite readily available technology. Personalization touches so many business units that it is often 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 is imperative. Multiple merchants suggested that a senior driver of personalization efforts be assigned as there is significant responsibility and accountability in this role. It’s not a “two month and dump” initiative emphasized one retailer as it affects design, merchandising, customer service and more. Technology also needs to support personalization with systems integration where more funding may need to flow into the initiative as a result. A pureplay advised that they went from two web designers to seven plus an art director with elevated personalization skills that include versioning and placement. He cannot emphasize enough that it takes people (copy, design, photography) as well as analysis of all efforts and a strong sense of timing to best position personalization. Additionally personalization must be aligned with rapidly growing mobile and social efforts while in-store opportunities are already a given. STEP 3: FOSTER A PERSONALIZATION CULTURE Start with the Organization We felt it was vital to understand who within the organization drives personalization. As we spoke to individual retailers we subsequently learned that personalization spans the organization making it more complicated 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 from email being the first personalization workhorse. For another, one in three merchants (35%) the Vice President/Director/Manager of eCommerce spearheads this effort. In a multi-channel environment we would have to assume that all of these individuals would be working with their counterparts at retail for a more synergistic experience as holistic deployment should deliver superior results.

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56%

35%

23%

15%

8%

2%

eCommerce Marketing

Vice President/Director/Manager, eCommerce

eCommerce Merchandising

Corporate marketing

CRM team

Owner

Who within your organization is responsible for the ROI relative to personalization? Check all that apply.

 

Many Technologies in Play to Support Personalization The next chart shows that email providers lead the way in supporting personalization. Due to the unique requirements often put forth by retailers, many have resorted to using internally developed tools by simply taking advantage of cookies and internal tagging. At the same time analytics/marketing firms like Adobe/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 some of the retailers we interviewed. Recommendation engines have also been aggressive in their pursuit of the retail vertical and here one in three merchants has tapped into their services. We would expect more transition 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 and many are in play, often at the same time. One TV retailer alluded to the fact that they had seven applications they could employ. With every one of them poised for personalization, they must decide where to start and to date have not fed those engines with data. They need to understand the right way to handle it opportunistically and in the meantime are deploying search results via a testing company as there is no IT dependency.

56%

53%

50%

45%

36%

26%

14%

Email service providers (Responsys, ExactTarget, etc.)

Internally developed tools

Analytics/marketing solutions companies (Adobe/Omniture, CoreMetrics, etc.)

Retargeting vendors (Fetchback, Dotomi, etc.)

Recommendation engines (Adobe, Certona, MyBuys, Rich Relevance, etc.)

eCommerce platforms (ATG/Oracle, Demandware, MarketLive, etc.)

Personalization vendors (Webtrends, Adobe/Omniture, Maxymizer, SiteSpect, etc.)

What technologies have you employed to assist you in your personalization efforts? Check all that apply.

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Performance Stems from Optimization Efforts After watching personalization for many years, it is clear that it must be prioritized to perform. Evolving technologies 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 Differentiation Competition for the consumer dollar is fierce and retailers must understand the role personalization can play in brand differentiation. This is over and above shoppers adding incremental product to your cart but truly presents an opportunity to build customer relationships in support of loyalty and future revenue growth. In a world of retail that often lacks differentiation, personalization can power experiences from the right recommendations to the personal touch where retailers assume an advisory role in elevating the shopping experience.

To make shopping as intuitive as possible in the intimate apparel world, one merchant discussed the addition of a feature called “how it fits” including the ability to “see it under” a top or to better experience the shoulder treatment. Between their internal experts, well trained CSRs and peer-to-peer communication 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 have an amazing experience with a company can be used to help brand a business. While we acknowledge that it is hard to execute personalization well, when done right, consumers will take notice and share their sentiments with others. . Vital to Growth Personalization can play an integral role in growing one’s business as one retailer stated, “It clearly can be 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 purchasing follows suit. As merchants extend their assortments into more categories, personalization presents an opportunity to leverage their existing customer base through relevant offers. At the same time, they can cater to customers by segmenting and marketing to them based on their history. Another growth example was the expansion beyond one’s core catalog with items that in the past received poor visibility now receiving greater display potential. A music company reported increased sales due to personalization where best seller 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 sell more products while engaging shoppers for longer periods of time. Each of these personalization efforts are important predictors of future revenue and can help retailers to max out every customer’s lifetime value.

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Elevating Performance Surveyed retailers offered a number of solutions to elevate their performance and we aggregated their answers into the top-3 areas ripe for improvement. First this means taking advantage of every effort to make the user experience targeted, specific and ultimately relevant to one’s customers. Secondly, it requires IT involvement or better management of third parties to ensure success. Thirdly, CRM post-sale must be in place and then subsequently managed to attain results.

Make it more user specific;

relevant20%

Involve IT, add functionality,

better manage 3rd party vendors

13%

Improve CRM,post-salefollow-up, analysis

12%

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)

 

Consumers are expecting fewer clicks to desired end results so onsite search is central to delivering nimble 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 buy funnel, shopper satisfaction is seen in both initial purchases and subsequent retention. Beyond finding product through keyword search, browsers are discovering products they were not looking for or ones they 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 efforts but still appreciating that it is a process. Testing is also useful and assists retailers in figuring out what works for their business. Nobody wants to over-personalize and under-deliver so avoiding being overly cute or aggressive with the rules are important considerations.

Extracting personalization learning and infusing it across channels will be a reality for more retailers as those who have or are planning to implement CRM systems will be able to deliver an experience truly tailored to the individual rather than being limited to a more aggregated model. Learning can then take place across all channels and findings subsequently applied to maintain performance momentum. STEP 4: LISTEN TO THE CUSTOMERS

Many philosophies come to mind as merchants strive to deliver a personalization strategy that is right for their business. This must begin with identifying thought processes customers go through when using product and their shopping patterns including search styles and pricing preferences. When we embarked on this topic, we anticipated more merchants and customers would express concern about the invasive nature of personalization. Instead, given Amazon’s pioneering role in personalization, an acceptance of intelligent personalization is seen where shoppers voice little concern in its employment and retailers understand it is merely one’s ticket to the game.

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There is still a balancing act between the art and the science but this good advice was shared to support positive 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 “Don't 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 they hit a wall and then pull back. Most however, alternatively recommended erring on the side of caution and some cited a “sniff” test that they use when setting personalization levels. Another retailer noted, "It’s not an issue if you stay behind the bleeding edge where personalization is often seen as a service. You don't want to remember more about them than they remember about your site,” He also warned other retailers not to get out of the box too fast. The general sentiment was that the customer is comfortable with personalization. If one factors in the customer point-of-view, the odds are that the experience will resonate. A smart practice shared by another retailer was, “Never make it look personalized, just a great experience.” Business objectives should always be balanced with consumer demands, understanding projected ROI while exploring improvements to the brand experience. The suggestion most often made was, “Always put yourself in the customer’s shoes.” Beyond the customer, inquire internally from those on the frontlines as one merchant did, taking the lead from their in-house CSR agents who “listen to customers” in hopes of doing the right thing. From an opposing vantage point, bad personalization was equated to the sales guy who doesn't listen. Avoid bombarding customers with irrelevant information because abandonment and high unsubscribe rates can result. Lastly, don’t push higher profit margins at the expense of the right product. 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 focus groups ensures being both responsive and proactive. Technology facilitates knowing your customers and your market, with some finding chat interaction to be particularly effective. Transparency Counts It is imperative that merchants be straightforward and transparent as any covert behavior may limit the chance for a return visit. Anticipating shopper needs through self-selected preferences and purchase behavior should frame the experience. Everyone enjoys being treated as a valued customer and it is in this 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 a store you frequent is powerful yet receiving a robo call advising you of an upcoming sale might be perceived as an annoyance. Categories must be factored into the equation as one merchant explained that shoppers don't expect the same degree of personalization in the luxury category. With limited SKUs and a desire to see the complete assortment, a discovered versus guided experience is likely to be more appealing. The finishing touches will be appreciated from the nature of the order confirmation to the package itself. From an evolution standpoint, new tools become important to shoppers for personalizing their own experiences such as outfit creation and sharing made available through Polyvore.

Customers and Technology Evolve There 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. Acceptable marketing moves with the times; as customs and customers evolve what was once considered intrusive is

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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-term view 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. Another merchant shared their belief that people come first, and that helping the customer accomplish his or her goal was paramount. “Getting to where customers feel you are invasive isn’t a good experience so we just don’t do it even if potential sales are lost. We hear from them if there are features or questions that push the limit.” One should not make too many assumptions. A lingerie company noted that a customer’s sizing can change, often triggering new purchases and that more importantly customers simply don't buy everything they bought before so caution is always a good course of action. It is best to balance behavior and transactions and therein lies the art of personalization. STEP 5: DELIVER AN EXPERIENCE THAT IS HELPFUL Customer Efficiencies Providing a good edit makes the shopping experience more efficient, likely saving shoppers time in the process. The positive news for one manufacturer was that a CRM system is on the horizon so they expect that future offers would soon be relevant and complementary to past behavior. Helpful can be rendered 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 product favorites a customer is likely to enjoy. Nirvana for one retailer would be only showing the customer products with relevant styling, price and function, eliminating the clutter of the other 90% of the assortment. 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 merchant acknowledged that their website is not highly personalized, they were proud that their experience improves with each step including shop by brand or drilldowns via attributes of choice thus grading their site 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 sales associate who alerts you when an item that is right for you has arrived in the store,” pointed out one luxury goods manufacturer. Under that scenario shoppers don’t have to dig through new arrivals or entire categories. Filtered search also contributes to efficiency models where sophisticated onsite search personalizes and directs the shopper experience. An understanding of what keywords are browsed along with specific versus general terms allows retailers to slice behavior across similar groups for more effective merchandising. Monitoring the visitor browse patterns enables retailers to understand where shoppers are within their buying process in hopes of achieving better timing. One merchant reminded us that, “Simple is elegant and personalized solutions that facilitate purchasing don’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 more complex in nature. Another expounded on a similar approach suggesting, “Don't overcomplicate it, but rather go for the top two things from which customers will get benefit.” Both are good pieces of advice for retailers. While search can be tweaked and evolved, moving beyond directed shoppers to deliver a better browse experience can also be elevated via personalization. Suggestions were made for using product finders or supplying virtual salespeople who could guide shoppers through more targeted and personalized selections. Positioning this as a service is powerful so messaging really matters. One example that leveraged technology was an abandoned cart email letting the shopper know items shown were still in stock, serving as a benefit rather than a sales pitch.

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Enabling wish lists to edit or save for later are incredibly helpful, providing just the level of cross-channel service and flexibility many shoppers seek. For apparel such lists can serve as the equivalent of a virtual closet involving store associates and call center reps to effectively tie channels together. For example, a browsing customer might like a product but is not ready to make the purchase now. Available tools allow them to take a picture of the shoe, upload it to their phone, print an item online and bring it to a store or email an associate to schedule an appointment for pickup. Mobile will ultimately be a huge factor in facilitating transactions of this nature. STEP 6: PUT THE PERSONAL IN PERSONALIZATION There is a subtlety that supports personalization where the “personal touch” is important to shoppers and a differentiator for retailers. Shoppers are time-starved and don't enjoy starting over in any way once they have engaged with your company. A positive experience welcomes a shopper and assists them in getting from point A to point B in their shopping experience in the most efficient way possible without being pushy and always cognizant of individual needs.

. People realize that to make gains they have to improve the experience and service part of personalization. When they hear personalization many think only about product recommendations and its success. In fact, there is so much more beyond these baseline efforts like providing information/advice specific to non-technical needs. One lingerie pureplay referenced the myriad of support tactics they employ including data based on purchases or manufacturer discontinue notifications, all triggered by email. In terms of customer retention, they, along with several others, emphasized the personal touches of a perfectly packaged product including supporting product information and care instructions, a thank you card and clear, respectful return information. Modeling Clientelling References to positive retail experiences were mentioned such as one consumer’s experience at Neiman Marcus. Knowing that she always wears brand “x,” she is often contacted by her favorite salesperson with alerts that new shoes are in or receives an email when her favorites go on sale. Successful in-store clientelling here, and at Nordstrom, demonstrate how personalization seeks to model really “knowing one’s customer.” A sporting goods retailer also spoke of “anticipating” customer needs. His story revealed ideal personalization where someone bought a bike and then a month later received an email about his bike suggesting related accessories. “Such communications would be more relevant based on better capturing data we could act upon, and do something with it, growing future transactions from past history.” One seasoned apparel veteran has long wished for “intelligent” storage of everything a customer has done, imagining one’s closet where total consumption by brand could be noted. Personalization efforts would then match up existing product in their closet with new items in the line. Such brand intelligence could be valuable to both the end-consumer and the retailer ensuring an on-trend, efficient shopping experience. It is this VIP feeling elicited from personalization that makes customers feel special and elevates loyal customer behavior to the next level. Consumer comfort and confidence propels a personalized shopping experience to the point shoppers spend more. STEP 7: APPLY A CROSS-CHANNEL LENS Recognizing customers across channels, whether it be at the point-of-sale or certainly via the call center is another desire of shoppers. One retailer said, “Customers want us to know them when they come to the register, expecting a personal greeting and access into their loyalty status. Through surveys they are open 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 future transactions. That connection starts with being helpful in the true sense of the word rather than in a clichéd manner. Anticipation of their needs, buttressed by a personal shopper clientelling mentality receives the warmest embrace. One specialty department store, known for its quality of service, reported customers expecting to receive their one-on-one store shopping experiences translated to digital

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experiences with the same handholding for long-term customers along with transitioning of their newer visitors via appropriate means that fosters future loyalty. Cross-channel may afford the biggest opportunities if one can figure out the right personalization equation between channels by tying service to shopper needs. A pet multi-channel retailer noted, “It’s not merely collecting data but combining offline and online as well as transactional and behavioral insights to the stores from onsite activity.” She gave an example of looking above and beyond standard purchasing by connecting reading of specific reviews to the service offering seen in the stores. That means systems must be well integrated and mobile must leverage geo-targeting to quickly detail local service offerings where 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 online apparel is favored.” This knowledge allows retailers to begin to build a comprehensive customer profile to better target across all cross-channel transactions. Such information can also educate store associates and serve as a reminder on POS systems where email communication and social initiatives can then be deployed 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 retail transaction data are captured. A shopper who purchased a North Face pack might see a matching sleeping bag for an upcoming trip when they seek out store hours on their smartphone. From a store perspective, receipts can serve as an excellent tool. Recently a receipt from my local Barnes and Noble store 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 up relevant marketing across multiple layers of content. Relevancy in real-time must be delivered so one does not send an online shirt promotion when the customer has just purchased shirts at retail. Paying attention is paramount and doing 2-3 things really well trumps testing 15 tactics in a subpar manner. CRM systems have to be put in place for this tall order with one common backend and sophisticated data management 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 by understanding and augmenting existing programs. This should include carefully vetting new technologies for their business presuming that personalization strategies will be supported across all channels where resources are aligned internally and roadmaps designed for superior integration. STEP 8: TEST, MEASURE, EVOLVE

Testing cannot be emphasized enough. Merchants are encouraged to get in the game rather than wait for perfect data. In this study, and many others we completed this year, data rose to the forefront, ripe for improvement. Relative to personalization, several retailers expressed challenges mining previous order data and adjusting product recommendation algorithms accordingly, noting that getting that right can be difficult. 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 view of the customer. Several spoke of the costly nature of resources. In order to drive conversion, they hope to get increased frequency of orders with more relevant messaging, moving beyond current “spray and pray” methodology. By targeting smart they may not need to add an incentive for purchasing and margins can be preserved. Sufficiently satisfied with onsite targeting, one sought a more robust user cookie. Data their customers already self-select could serve as the basis of an integrated record. That includes purchase behavior (what, where and when they bought) as well as customer behavior (traditional category activities, most purchased categories, propensity for price level, big spender vs. nominal or affinity to buy other products).

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It is fundamental that retailers have a unified view of the customer to bring to bear interactions from all channels and that systems are in place to facilitate those needs. A last lesson shared is that retailers must make sure data is right. When inaccuracies exist, customers can become angry and will let you know if you’re taking personalization too far. That said, knowing when to draw the line on how much is too much 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 up roadblocks in the process. Formulas will continually need to be adjusted to the levels and approaches that make personalization work best. Testing low-level personalization to 11% of customers, one retailer reported seeing a 10% conversion increase which equated to $5 more per customer. When using targeted product recommendations, shoppers spent $18 more so understanding business needs and your customer base can set the stage for achieving perfection.

Measuring Behavior Data Next we looked at personalization measurement based on our survey results. Merchants rely on an array of behavior data to garner that 360-degree view of their customers just as they do for running their businesses on a day-to-day basis. For evaluation purposes we broke out the usage into those leveraged by the majority including new/return visitor, previous purchase, acquisition source and their status as a customer or prospect. From there, metric usage seems to take a “merchant’s choice” approach as demographics and browse and buy behavior comprise the second tier. The third area, seeing penetration by fewer than 20% of those surveyed, has challenges likely due to their cross-channel nature or difficulty in securing the measurement data.          

>56% 40-26% <20%New/return visitor Previous product interests Point-of-salePrevious online purchases Searches Previous campaign exposureAcquisition source (search, Facebook, SEO) Customer demographics Customer psychographicsCustomer/prospect RFM data (recency, frequency) Mobile usage patterns

Previous visit patternsPrevious offline salesPrevious campaign responses

What behavior data do you include when attempting to garner a 360-degree view of the customer? Check all that apply.

 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 often fear we can't launch or re-launch if everything is not perfect, but we have learned that we can’t start out with a 1000% batting average.” No one has perfected personalization but small incremental improvements emanate from testing and targeting. Efforts must be pushed to the extent that it works to quantify and improve based on results. For one specialty toy merchant, that meant personalizing the home page with dolls for girls, rather than video games, and better accessorizing across the site on gender and a range of relevant behavior patterns. ”We haven't found the Holy Grail but at least we have a tool 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 flexible in testing and targeting is recommended, followed by shifts in strategy. You won’t likely be right the first time out so don’t assume anything until you’ve put each of the tests to work. It is the process that matters and the improvements realized along the way.”

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SECTION V: FINAL THOUGHTS It 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 its early promise. The diligence put forth to build processes and embed the soul of personalization into their cultures will yield results in perpetuity. Continuing to listen to one’s customers and being cognizant of delivering the right experience ensures success. Helpful, personal experiences and cross-channel execution should be the orientation. Testing must be part of the ongoing evolution while measurement and 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 prioritize personalization 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

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SECTION VI: ABOUT THE COMPANIES ABOUT THE E-TAILING GROUP the e-tailing group is a niche ecommerce consultancy that helps merchants deliver the right customer experience on their websites and across all of their channels while adeptly assisting technology companies to create and execute go-to-market strategies that simultaneously educate the retail community and deliver cost-effective thought leadership and lead generation. For more background about our research or for additional information on the e-tailing group, inc. please contact Lauren Freedman via email at LF@e-tailing.com, by phone to 773-975-7280 or visit the e-tailing group website www.e-tailing.com

ABOUT ADOBE Adobe is changing the world through digital experiences. For more information, visit www.adobe.com. ABOUT ADOBE DIGITAL MARKETING SUITE The Adobe Digital Marketing Suite offers an integrated and open platform for online business optimization, a strategy for using customer insight to drive innovation throughout the business and enhance marketing efficiency. The Digital Marketing Suite consists of integrated applications to collect and unleash the power of customer insight to optimize customer acquisition, conversion, and retention efforts as well as the creation and distribution of content. For example, marketers can identify the most effective marketing strategies and ad placements as well as create relevant, personalized, and consistent customer experiences across digital marketing channels. Marketers can make quick adjustments, automate certain customer interactions, and better maximize marketing ROI.