Retail’s personalization efforts are subpar

Consumers aren’t too happy with the "personalized" offers and communications they’re getting from retailers. But is it the retailers’ or consumers’ fault?

A survey conducted by Econsultancy for IBM found only 22 percent of consumers believed the average retailer understands them as an individual, with only 21 percent finding their communications "usually relevant." Even at their "preferred retailer," only 37 percent believed they were understood, with 35 percent finding related communications "usually relevant."

One explanation for the relevancy void, according to IBM, is that only 34 percent of marketers at consumer brands in a separate survey admitted they do a good job of linking their online and offline customer experiences. IBM said in a statement, "With the vast majority of dollars spent offline and the majority of product research happening on the Internet, the two are already linked for consumers but this gulf must close for marketers if they are to advance."

Technology is also a hurdle. Only 37 percent of the marketers agree they "have the tools … to provide exceptional customer service and experience."

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But personalization efforts are also being challenged by limited access to shopper data. For example, a recent Accenture survey found that 60 percent of consumers want real-time promotions and offers, yet only 20 percent want retailers to know their current location and only 14 percent want to share their browsing history.

As a result, few of the personalization efforts are moving beyond shoppers’ purchases and online browsing behavior.

On the positive side, consumers, more so Millennials over Boomers, are open to exchanging data for exclusive deals and loyalty points. Raising trust levels would also ease privacy concerns. The Accenture study found a wide majority of consumers would prefer to determine how personal data can be used and want to review and correct information.

Personalization approaches are also being enhanced to incorporate when a consumer opens or clicks their e-mail, reads a company blog post or redeems a past coupon, according to a Washington Post article.

A BuzzFeed article further said many retailers are focusing more on relevancy than personalization to improve such targeting.

Helen Vaid, VP of customer experience at Walmart.com, told BuzzFeed that personalization is about "relevant contextually" at a point in time rather than the stream of algorithmically driven product pitches. She said, "It’s ‘Do you help my shopping experience the way I want to shop,’ as opposed to ‘Well, I know you did this and this and this, so I’m going to show you those, those, and those items.’"

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Discussion Questions

Why are retailers’ personalization efforts getting such a low rating from consumers? Are existing technologies, privacy concerns, marketers’ tendencies or some other factor(s) the biggest hurdles toward more customized offers and communications?

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Dr. Stephen Needel
Dr. Stephen Needel
8 years ago

We ask people if they want more personalization, they say sure. We ask them to give us the data we need to make this happen, they say hold on there. There is a pervasive belief that because we can, in theory, personalize a lot of marketing messages that a. we should, b. they’ll be as effective as or more effective than broadcast messages, and c. shoppers actually want the intrusion.

I’m not sure this is really true. While it feeds one’s ego to think that [insert your favorite store or product] has tailored a message for you, the reality is not so much—you’re just the appropriate target for this message that’s going to millions of others. The hurdle is that I don’t believe people want as much intrusion as marketers feel they are justified to impose.

Adrian Weidmann
Adrian Weidmann
8 years ago

Generally speaking, marketers are looking for a silver bullet rather than the broader contextual relevancy as noted by Ms. Vaid. Once again technologists have hijacked the conversation around data and have driven the bus towards “algorithmically-driven product pitches.” In the same way that people don’t like (or appreciate) others finishing their sentences, shoppers don’t like brands or retailers telling them what they believe shoppers will be interested in. Shoppers want retailers and brands to understand how and why they shop—their journey, their emotional shopping journey. That is what shoppers expect. They don’t value a retailer’s attempt to play sorcerer and look into the crystal ball.

Max Goldberg
Max Goldberg
8 years ago

This situation is a classic ying/yang. Consumers want personalized offers, but are unwilling to give up much of the information necessary to get them. They distrust retailers and brands. This is a result of receiving too many irrelevant offers and too many security breeches. Retailers and brands need to earn back consumer trust, which won’t be easy to do. Offers need to made more relevant. Security needs to be improved. And most importantly, a dialogue about the perceived flaws needs to be initiated.

Nikki Baird
Nikki Baird
8 years ago

I think the arguments laid out in the article go a long way toward explaining the issues. It’s not a technology issue. You can “personalize” and “predict” and “optimize” offers to consumers six ways to Sunday. But if you don’t have the right objectives or weight the right inputs properly, you’re getting garbage in/garbage out issues.

And I still strongly believe that, rather than guessing, the best way to know what consumers want from you is to ask them. “I made you this offer. Did you like this offer or not?” Even that simple level of dialogue can provide far richer insights into what consumers want from you than snooping after them, following them through digital and physical channels, throwing things at them to see if they stick.

Vaid is right, but I would alter her statement just slightly: It’s not about what you want to promote, it’s about what consumers want you to promote to them. If you’re not prepared to make that commitment—to only communicate relevant things—then you have no business trying to personalize anything.

Joan Treistman
Joan Treistman
8 years ago

Retailers are driven by technology rather than marketing strategy. I get that sometimes technology we didn’t know we wanted or needed actually improves our ability to accomplish things. However if we are driven to grab each new advancement as the Holy Grail, consumers will develop immunity to retailer communication. That seems to be the current direction.

Customized offers that are relevant make sense. But retailers toss offers like they are petals in the wind. Will they settle on receptive consumers? If not, throw some more. I think that “valuable” is an important aspect of “relevant.” Just because I have expressed some interest for some reason in a particular product category doesn’t mean that your offer aligns with that interest or is seen as a value add.

For many retailers buying into a new technology is about reach and frequency. Those are the numbers on which their investment is made. When relevancy is not even a consideration the return is less and the “turn off” can be great.

Chris Petersen, PhD
Chris Petersen, PhD
8 years ago

When examining personalization in retail, there are a number of different facets to both the process and the outcomes. The consumer decides what is relevant and valuable.

The data in this article focuses primarily on communication and offers. As Tom Ryan points out, retailers are lacking the technology to personalize, primarily due to a historical legacy of pitching and promoting products.

To be valued by the consumer, personalization has to be contextually relevant at the moment in time and the place where the consumer is shopping—a worthwhile goal, but definitely NOT easy to execute with retailers’ current systems.

Yet 80 percent of consumers still visit and purchase in stores! The most powerful and significant opportunity to personalize is to have staff proactively engage consumers in the aisles to help them personalize a solution for their lifestyle.

Personalization on the retail store floor is a huge lost opportunity because there are typically not enough RSPs, and they are not trained in how to engage and understand how to personalize solutions vs. selling products.

Ben Ball
Ben Ball
8 years ago

Retailer and marketer attempts at mass-personalization are steadily improving but must, by definition, always fall short of the standard set by a truly competent human retailer.

Think about it. We ask computers and algorithms and data and programmers to exceed the personalization that can be delivered by my tailor at Brooks Brothers. Really? Not gonna happen.

A big barrier is trust in data sharing to be sure. I may trust details of my preferences to a well-known salesperson, but I am only going to trust a machine so far. Other people always have access to that machine, people I don’t know, and I know it. Publicized data breaches see to that. But when you have allowed a man to measure your inseam without just a touch of queasiness in your gut—that’s trust. The only machine I can ever trust that much is one I fully control.

So in the end, GREAT personal service will always beat the very best that mass-personalization can do. That’s an edge the right kind of retailers can exploit.

Ian Percy
Ian Percy
8 years ago

When you cut through all the jargon and marketing/techno-speak aren’t we talking about developing a relationship between people? Aren’t we missing the very fundamental principles that led to our earliest childhood friendships right up to who we now spend our lives with?

What we are doing instead borders on the inhuman. We try to categorize customers, develop technical systems to get them to do what we want them to do. Ask yourself this question: Would you be proud to show your customers the details of your CRM program and point out where they each fit into it? Make sure you point out how you rank their relative revenue value to your store and what “perks” you’re prepared to give each customer caste. If you aren’t proud to show your relationship strategy to your customers, I respectfully suggest you’re doing it wrong.

It’s also interesting how “trust” seems to be an issue. There’s got to be an app for that; One that will produce ads “relevant contextually at a point in time rather than the stream of algorithmically driven product pitches.” Ahhhh, finally I’m feeling the love.

The gap being talked about isn’t between technologies and algorithms, it’s between human hearts.

Cathy Hotka
Cathy Hotka
8 years ago

Too many retailers think that personalization means sending an email EVERY. SINGLE. DAY.

There’s a big gap between the kinds of interactions that retailers want to have with customers and what customers actually see. It might be helpful to have more transparency around what retailers are doing with PII, and how they’d like to create deeper relationships.

Mohamed Amer
Mohamed Amer
8 years ago

The core issues of this topic will continue to be with us into the next decade. It’s more than just personalization vs. relevancy. Privacy vs. personalization is the core issue and it’s about who owns the data, where it’s stored, who has access to that data and what permissions are associated with that data. Reaching that point technology will be integral as will be an evolving meaning of, and operationalization of, customer loyalty. The relationship between retailer and consumer is undergoing fundamental changes that we are just beginning to understand.

There are consumers that are perfectly happy to share data in return for personalization and they have high expectations on what they get in return—highly relevant, contextual and desirable offers that understand who the consumer is and not just what s/he’s purchased in a store or on a website. On the other end of the spectrum, some consumers will not share data and attempts by retailers to guess their likes will fail miserably on both sides of the experience—don’t do it.

In between is the real dilemma, is the data available only for online activities at one or more websites or social media sites? Is it only available from in-store purchases across a family of brands? Do I want anonymity in this instance due to the nature of my purchase? What about purchases I’m making for others (gifts) vs. for myself which I would never want a retailer to tie to my own history? Adding to this puzzle is the different treatment of data privacy in the E.U. vs. in the U.S. or elsewhere.

How do we turn on and off, or better yet, apply gradations of our 21st century social sharing gene to suit each consumer’s life needs and wishes and simultaneously advance the state of retailing here and elsewhere?

Peter J. Charness
Peter J. Charness
8 years ago

There are still some fundamentals unanswered. Firstly if the promos available are only those authorized by the merchants then your “personal” offer is one of the 10 available, not so personal. Secondly if you always buy, say, Coke, do I send you an offer you’ll like (a discount on Coke) and give you a discount on something you would have bought anyways and make you feel loyal, or try something else? Or do I go the route of assuming that people who buy one kind of product will also buy this other one and hope I’m right? The number of retailers who have that kind of technology (and merchants who will support a random machine-generated promotion they haven’t authorized) is still pretty small.

Ralph Jacobson
Ralph Jacobson
8 years ago

Some great comments on this research here. I also think merchants, both retailers and direct-to-consumer CPG brands, need to be ready for what they are asking. Effective execution of the targeted promotions is critical. Certainly there are some great tools in the marketplace today to help you gain valuable insights into shopper patterns, however all the technology in the world will not guarantee that you execute at the local level to capture your audience. Additionally, although every consumer will respond strongly when asked if they have privacy concerns, we also find in other studies that shoppers are more than willing to provide personal information to a brand if they have trust in that brand. How do they get trust? That’s what we are finding to be something called “brand enthusiasm.” This is something beyond loyalty and moves toward a close personal relationship between the shopper and the brand.

Gordon Arnold
Gordon Arnold
8 years ago

For retailers that have very large numbers of customers the cost of acquiring and managing personalized data without consumer data input is largely cost prohibitive without third-party help and support. The options of letting consumers supply the information they wish to provide is for the most part incomplete and/or erroneous. While this may seem to indicate that existing technologies are to blame, a close look at the results will include the other two culprits, marketer’s tendencies and privacy concerns, as well.

It may then be discovered that the concerns identified in this discussion are in fact simply symptoms of a greater cause for our poor consumer information gathering endeavors. There may be something as simple as indifference or perhaps even consumer confidence as the cause. If so then we are working on improving the tools we use when they might be the wrong tools for the job at hand.

Gene Detroyer
Gene Detroyer
8 years ago

If I could go into a retail marketer and tell them I have developed one single message they could send out which would make every customer feel like the message was uniquely personalized, would they buy it? Of course, even if in their hearts they knew it was impossible.

Marketers are interested in mass. They do not want to think of each customer as an individual. I am not sure if it is ego or ability, but the more personalization that goes into a program, the less value marketing opinion has in the program.

Until retailers truly reset their mindset to selling what people want rather than selling what we want them to buy, they will never solve the personalization challenge.

Alan Lipson
Alan Lipson
8 years ago

It seems that much of the discussion is around what offer to provide to the customer. In most cases, this offer is a discount and it has already been discussed by others around whether to provide a discount to someone who is going to buy the product anyway just so that they feel the “loyalty” from the brand.

However, as Gene discusses, is it really about helping customers buy what they want to buy, rather than selling what the brand wants to sell? In other words, is the retailer the customer’s buying agent, helping them find the products and services they need to solve their problem? Or is the retailer the vendor’s selling agent, finding customers that will purchase whatever they have to sell?

I just bought a new lawnmower from a major home improvement retailer. Rather than continuing to send me offers to purchase products, it would possibly make more sense to send me some lawn care articles, or links to information. Then follow up with maybe an offer for fertilizer or seed. This would lend itself to providing me value based on the assumption that because I bought a lawnmower, I would be interested in improving my lawn.

It may not always be this simple, but as a consumer I’m interested in how the retailers that I choose to do business with can help me. That in turn will earn my loyalty and my willingness to bring them my business and potentially recommend others, thus becoming a brand advocate.

The technology exists to do pretty much anything we want to do today. It’s a question of whether we want to do the hard work or just take the easy way out and send out the offer of the week and call it personalized.

Martin Mehalchin
Martin Mehalchin
8 years ago

Some of the best personalization mimics old school retail clienteling. Combine the data with the skill of a seasoned sales associate to act on it. Well implemented technology eases access to the data and should combine online and in-store histories. The most important thing is to start with a customer centric view and not one centered around a retailer driven promotion calendar.

Ed Rosenbaum
Ed Rosenbaum
8 years ago

Here is a good indicator of that single word we always hear before the word marketing…mass. There is no way a single ad will appeal to the masses. What the retailers are doing is called the “shotgun effect.” Throw out enough bullets and some of them are going to hit something. Let’s admit it. Retailers cannot put out any marketing piece that will appeal to all those of us on this panel. So how can what they do be anything more than the good old “shotgun”?

Doug Garnett
Doug Garnett
8 years ago

I find it ironic that marketers today want to build a belief (demand) among consumers that a large bureaucratic or automated process can be “personal.” It simply cannot be delivered—no how and no way.

Maybe we need to find a different term than “personalization” to mean offering people things we think might be useful to them. Or the process of periodically touching base so they don’t forget us.

And I’m struck in the wording of the study that the researchers with IBM have bought the theory of personalization far too seriously.

And this is another area (similar to “exceptional customer service”) where the most companies raise consumer expectations for that level of value, the most companies will disappoint their consumers. We must not promise what can’t be delivered or we determine our own future failure.

Kai Clarke
Kai Clarke
8 years ago

Personal privacy concerns are at the core of the problems with retailing personalization. The other main issue is data mining and how to collect, use, and reflect the data of a retailer, to their target markets, with the differentiated products which they place on their shelves…oh yeah, and the basics of product positioning, placement, pricing, and promotions….

Carlos Arámbula
Carlos Arámbula
8 years ago

I believe the retailer and consumer definition of personalization are not the same.

My grocer uses past purchases to personalize offers, but it’s under the assumption that I do not shop elsewhere. If it knew where else I shop and what categories, they would have a more effective program to target me. Same goes for my airline programs, banks, hotels and rental car companies. But they don’t ask.

Privacy concerns aside, customers want better service and they will reward companies that provide it. Perhaps data gathering can be supplemented by human interaction with the consumer, these would increase the “personalization” effort and alleviate any privacy concerns.

Vahe Katros
Vahe Katros
8 years ago

Seems like there are three ways to personalize, via machine learning/computer/algorithms, via rules created by marketers based on some extra parameters that add some extra dimensions, and via the feelings of their customers or the market—what’s trending, selling, being liked, shared, and loved.

The machine can do things like people who bought this, bought that, or here’s what’s trending, people who like this author, artist, band, like this author, artist, band. This kind of thing works well, I recall, in categories where the nearest neighbor algorithm works, and I suppose it works best when folks are in the browsing mode or when the product is one that is usually purchased with other products. All this stuff of cross sells, upsells, etc., are familiar to all, but one cannot argue that occasionally, there are some winning affinities.

Regarding the rules based messaging—the marketer might follow a system that starts with quant analysis, sprinkles in some qual insights, and then includes some back of envelope cost/benefit analysis to see if it’s worth it to spend the time and money for humans to wrap the insight in a package that can be delivered to the customer. This is a campaign, and it requires deeper thought about what’s really the source of the demand creation. Knowing what to say, when to say it, and how, and within what context requires working with IT people and requires publishing work like image sourcing, writing headlines and text, perhaps writing several versions, and so on. There are tools being developed like Adobe Experience Manager or things of that ilk that can put the complete lifecycle in the hands of the marketers but these tools are expensive and can get complex, but they do aim to get the developers out of the loop.

Regarding customer based marketing via reviews, comments, likes, number of stars, shares, recommendations, or making it real easy for the customer to curate via social tools like Pinterest—that’s another way—in that case, I suppose the eco system can help itself by providing the metadata (tags, descriptions and so on).

Then there’s whole new methods like product hunt that I suppose is a byproduct of fragmentation and irrelevance. 

For now, it’s easier to leave it up to customers or the machine to make the choices and with that goes the fortunes and franchises of the current generation of retailers. Only a few will make it—same as it ever was.

larry Wilson
larry Wilson
8 years ago

It still amazes me that with all of our technological advances we still haven’t developed a better way for a shopper to communicate what they truly want. Digging through years of POS history is so antiquated, and quite honestly ineffective (as consumers state). The opportunity is to build a communication platform (wish I knew what that looked like) that is built for the shopper and allows them to communicate what they want, putting them at the beginning of the conversation instead of at the end of it. Facebook has a lot of the foundation in place for this, but doesn’t appear to be the vehicle. Lots of start-ups are hitting the fringes of this, so it will be exciting to see how this conversation evolves.