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The new customer intimacy: Personalization dominates as retail and eCommerce converge An EXL whitepaper Written by Namit Sureka Head of Retail Analytics Practice Co-Head Banking Analytics Practice [email protected] An EXL whitepaper Written by Asif Ghatala Vice President Retail Analytics Practice An EXL whitepaper Written by Rahul Lath Engagement Manager EXL Analytics, New York Office
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Page 1: The new customer intimacy: Personalization dominates as ... · It’s critical to retail survival. Personalization then vs. personalization now Although personalization is not a new

The new customer intimacy:Personalization dominates

as retail andeCommerce converge

An EXL whitepaper

Written by

Namit SurekaHead of Retail Analytics PracticeCo-Head Banking Analytics [email protected]

An EXL whitepaper

Written by

Asif GhatalaVice PresidentRetail Analytics Practice

An EXL whitepaper

Written by

Rahul LathEngagement ManagerEXL Analytics, New York Office

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1 © 2016 ExlService Holdings, Inc.

[ The new customer intimacy ]

Most physical retailers, large and small,

now have websites, mobile apps and

multiple ways to purchase product. Some

eCommerce sellers are adding “click and

collect” options, so buyers can pick up

their online purchases at a local locker or

warehouse, instead of opting for delivery.

Others are opening showrooms, so

consumers can both see the merchandise

and, literally, try it on for size before placing

their orders online.

But, the blurred lines of physical and digital

are only part of this retail transformation.

Not only do consumers want to move

seamlessly between channels, but, they

want to make their shopping experiences

personal. Whether browsing online or

in store, today’s buyers won’t settle for

an item, or an interaction, that’s one size

fits all. No matter how they choose to

interact with a retailer, shoppers want

that experience tailored to their individual

tastes, preferences and needs. And, they’re

willing to spend money with companies

that deliver on that promise.

Digital Trends reports that 73 percent of

consumers prefer to do business with

brands that use their personal information

to make their shopping experience more

relevant.1 Forty percent of consumers

actually buy more from retailers that

personalize the shopping experience

across channels.2

For years, it’s been a battleground: brick-and-mortar retail vs. eCommerce, fighting for relevance in a world where consumer behavior changes as quickly as a Millennial swipes right. But, after all the punches and pivots, that fight for domination ended with an outcome that few saw coming. Instead of one existing player emerging victorious, physical retail and eCommerce are converging, forming a new, hybrid “unified commerce” model with customer engagement at its core.

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2 © 2016 ExlService Holdings, Inc.

[ The new customer intimacy ]

single apartment dwellers got different

messages and images than 50-year-

old, married homeowners. Better than

generic marketing, yes; but reliant on

an assumptive pack mentality. Instead

of zoning in on the individual, retailers

marketed to a collective of peers who may

or may not think and behave alike.

Today, the type of personalization

customers seek extends well beyond the

offer of a similar product or a home page

festooned with banner ads. Buyers want

a seamless, custom-tailored experience

across all channels. They want to walk into

a retail store and get an offer for a product

they looked at on line; and suggestions

of other items of interest. They want

pure eCommerce companies to engage

in new ways, like one U.K.-based etailer

that shows a custom homepage for each

returning customer. In a world that is

decidedly “all about me,” retailers that use

every interaction to continuously refine the

individual customer experience will be the

ones that come out on top.

Thankfully, a number of sociological

and technological shifts make this

transformation possible for nearly every

seller, regardless of size.

Failing to provide this personalization

appears to have the opposite effect. The

CMO Council reported that more than

half of U.S. and Canadian consumers

consider ending their loyalties to retailers

who do not give tailored, relevant offers.3

Translation? In today’s environment,

customization is no longer a differentiator.

It’s critical to retail survival.

Personalization then vs. personalization nowAlthough personalization is not a new

concept, its interpretation has dramatically

changed. Not that long ago, it meant

pushing out offers based on demographics;

segmenting the buyer population by

age, community, marital status and

other factors. Twenty-five-year-old,

Buyers want a seamless, custom-tailored experience across all channels.

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3 © 2016 ExlService Holdings, Inc.

[ The new customer intimacy ]

Data collection in a “to know me is to love me” worldEffective personalization efforts begin with

quality, comprehensive data, collected

across all channels: physical, virtual and

social. What did the customer look at? How

much time was spent browsing a certain

type of item? What was purchased? What

was returned? Do purchases increase

when specific motivators are in place, like

a sale, a limited-time discount offer, or free

shipping?

The more data collected, the more

potential to truly understand the individual

customer; from how he or she shops, to

favorite colors to personal style. Not only

do people know that retailers, eCommerce

sites and other vendors are tracking

their interactions, but, most customers

embrace the attention. We’ve moved

from a very private world to one in which

nearly everyone is happy to share—what

they’re eating, what they’re thinking and

what’s going on around them. By capturing

and analyzing channel interactions, sales

transactions and social posts over time,

retailers can fast-forward customer

relationships from casual acquaintance to

the commerce equivalent of BFF status

in record time, and reap the subsequent

financial benefits.

Some individual stores, as well as shopping

malls, are taking data collection to a whole

new level with proximity beacons. These

Bluetooth-enabled devices, installed at

strategic points, track customer movement

via smartphone app, and can even transmit

personalized messages to those individual

customers in real time, if they opt in for

these offers.

From a single store perspective, this

data provides a clear picture of how that

customer navigates through the various

departments, how long he or she spends

in each area; and what that shopper looks

at versus what he or she eventually buys. It

also sheds light on aspirational purchases.

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4 © 2016 ExlService Holdings, Inc.

[ The new customer intimacy ]

Shopper X may always visit the handbag

department to check out the Louis Vuittons,

then continue on her way. Shopper Y may

start in the luggage department, then head

to resort wear, indicating a vacation in the

offing. Not only do beacons help retailers

understand shopping patterns, but give

them the option to push out real-time

offers to help close the sale before that

customer heads out the door.

Many malls are now installing beacons to

track how customers shop on a grander

scale. The data illustrates specific patterns;

like whether customers walk the entire

mall, or consistently visit only a handful

of stores. Do they visit the stores in any

particular order? What’s the average time

in the mall versus time in each store? Even

documenting whether or not a shopper

stops for a latte or pretzel while pondering

a purchase provides useful insight, and

could become the catalyst for cross-

promotional activities.

Beacons level the playing field because

they give retailers of all types the

same window into customer activity as

eCommerce sites have had since their

inception. When a person logs onto a

site, the etailer can track that activity. Until

recently, when a person walked into any

physical retailer, from department store to

drugstore, the only trackable transaction

was the customer purchase.

Of course, collecting customer information

is one thing. The real test comes in how

effectively sellers can use that information

to impact revenue and loyalty.

Insight for everyone: More agile, affordable data analytics optionsIn the past, sophisticated analytics

programs were cost-prohibitive to all but

the largest physical and online retailers. As

analytics matured, not only has the price

come down substantially, but the model

has become far more agile. Instead of

requiring a massive budget and a year or

more to affect outcome, now, sellers can

start small, quickly test out concepts and

track results before scaling up. These

“sprint” programs reduce risk, but also

allow retailers to test multiple ideas at one

time, without making a large financial or

time commitment.

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[ The new customer intimacy ]

For example, one large online retailer

wanted to reduce the number of abandon

carts by understanding the root cause.

Using analytics, this company was able

to test numerous solutions, ranging from

sending out multiple reminders instead

of one, to optimizing the mix of products

suggested in those abandon cart emails—

more accurately matching suggestions

to the customer’s unique browsing and

purchase history. This seller also tried

reordering the way they showcased the

abandon items in the follow-up email.

Instead of presenting the items historically,

with the oldest item appearing first, it

reversed the order. This seemingly simple

change alone made a significant impact.

Another company had invested in artificial

intelligence (AI) tools to help customers

choose the right size, but still had a high

return rate on apparel and footwear. By

analyzing return reason codes, the use of

the AI tools, as well as each customer’s

propensity to buy, this retailer had the

insight to proactively turn its returns into

sales.

If the customer returned the item because

the style was unflattering, the retailer

included other style options, based

on previous purchases, along with the

follow-up email. When the data indicated

frequent size and style returns from the

same customer, the follow-up encouraged

the buyer to leverage the AI tool for highly

personal recommendations. And, if the

customer appeared to return the item

because it was priced beyond his or her

budget, the retailer offered free shipping

on a subsequent purchase, even if that

purchase was a lower-priced item.

In addition to solving problems, companies

are employing analytics to personalize the

customer journey from the first interaction

on, to more effectively advance them to the

next step in the purchase lifecycle. These

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[ The new customer intimacy ]

techniques include everything from follow-

up emails based on gallery pages and

showcasing specific items for unregistered

visitors, to adding credit options for those

customers whose online search began with

key words linked to credit.

But, it’s not only online where analytics are

making an impact.

Some retailers are now equipping their

stores with tablets so shoppers can log in,

get a virtual tour or be guided to products

they were looking at online. They’re also

using analytics to arm their sales associates

with in-depth customer intelligence, so

they’re up-to-speed on the customer in

their area by the time they say “hello.”

Others are applying analytics to improve

internal functions, from optimizing store

layout and merchandising to combatting

fraud.

Although cyber attacks are on the rise,

employee theft still accounts for a

significant percentage of loss throughout

the retail industry. Although more concrete

conclusions typically require a few months

of refinement, expert analytics can identify

patterns in a matter of weeks—specifically,

which employees and managers are

repeatedly on duty during periods in which

fraud occurs.

That’s the real beauty of analytics programs

today. Whether the company is trying to

increase sales, reduce abandonments

or improve engagement, they can get

actionable insight within the first 90 days.

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7 © 2016 ExlService Holdings, Inc.

[ The new customer intimacy ]

Getting started: Moving from the present state to your personal bestIf you’re part of the retail commerce

ecosystem, you’ve seen the trend yourself.

The days of generic marketing and your-

name-here interactions are as out of date

as the cash register. But, how do you move

your organization from where it is today

to an analytics-driven enterprise with the

customer journey at its core?

Begin with the basics:

Start with what’s NOT working

In a perfect world, a retail analytics

program would start with A, B, C and D

goals, clearly laid out based on company

objectives. In the real world, these

programs typically begin because the

retailer wants to fix a problem:

• We’re spending more on blanket marketing campaigns and aren’t seeing a lift.

• We have data but we can’t put it together for meaningful output.

• Our last five marketing campaigns have failed.

• We’re losing market share and want to stop the bleeding.

• Our abandon cart rates are escalating and we don’t know why.

• We’re discounting our way to margin erosion.

• Our customers look here and buy somewhere else.

• Our customer satisfaction ratings are lower than ever.

• We’re not effectively competing and we

don’t know why.

Using analytics to solve a problem first is

an excellent proof of concept.

Develop a strategy

Where are you today with your customer

journey and where do you want to go? Start

with seamless channel integration and then

create your vision for the ultimate customer

journey. Design your analytics program

around that vision, with the flexibility to

change and refocus that vision, based on

customer response, as you go.

Where are you today with your customer journey and where do you want to go?

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[ The new customer intimacy ]

Refine your data collection methodology

Effective analytics programs depend on

good, comprehensive data. Examine your

current data collection process. Are you

collecting customer interactions from

every channel and funneling this into one

database? When was the last time that data

was scrubbed to ensure you’re working with

accurate information? If you can’t answer

these questions, engage with a qualified

third-party provider to set up a database

and data collection process for you.

Create structure

Analytics is a science, requiring a well-

defined structure for acquiring and

analyzing information, and an environment

that tracks customer feedback, documents

improvements and identifies needs. Putting

that structure in place from day one is

critical to success.

Test multiple options

Although offering a personal customer

experience is now table stakes, companies

can differentiate themselves by getting

creative, and testing out new ideas. With

the agility and affordability of today’s

analytic programs, many retailers pilot

10, 20, or more offers and options

simultaneously and track response. When

they execute a full roll-out, they know they

have something that really resonates with

their customers.

Keep a close eye on social media

In the pre-mobile world, the contact center

was the barometer of customer satisfaction.

Today, it’s social media. If something goes

wrong, or goes right, chances are, it will

be shared, and re-shared before anyone

at your organization knows what’s going

on. Carefully tracking customer sentiment

on social media, and responding quickly

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[ The new customer intimacy ]

to issues, is critical to maintaining brand

integrity. The most engaging website

or optimized in-store experience mean

nothing if the retailer reacts poorly, or not

at all, to negative posts. Make sure you

not only make following social media a

priority, but integrate this information into

your database, as well, to round out your

customer personas.

Perhaps more than any other time in its

history, the retail industry is undergoing

a radical change. The convergence

of physical and digital channels, in

combination with consumer demand

for personalization, shift the retail focus

from “product, price and promotion,” to

optimizing the customer experience.

Through skillful application of analytics, and

go-forward strategies that put customers at

the core, retailers can build loyalty, improve

sales and connect with their buyers in a

new, very profitable way.

References1. Digital Trends

http://www.gigya.com/blog/5-

stats-that-prove-businesses-must-

personalize-to-win-customers/

2. Monetate

http://www.gigya.com/blog/5-

stats-that-prove-businesses-must-

personalize-to-win-customers/

3. http://www.datamentors.com/blog/

how-personalize-retail-experience-data

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