Retailers lack of trust undermines predictive personalization’s potential

Discussion
Oct 05, 2017
Nikki Baird

Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.

Predictive personalization’s greatest pitfall is retailers themselves. Why? Because they don’t trust the technology.

Marketers and merchandisers who are considering optimized (“predictive”) personalization have to first overcome their bias towards “gut feel” — as in, “I know what consumers want and I’m going to override this recommendation.” Secondly, they have to consider far more angles to personalization (like consumer behavior or social media trends) than they’re used to when thinking about things like product recommendations or landing pages on the website.

That process challenge is complicated by the fact that personalization, by its very nature, also reveals things about the consumer shopping process that go against the grain of merchants’ and marketers’ gut feel. Part of the challenge is getting used to a more granular view of customers — averages from grouping consumers into segments hide a lot of variability, and anywhere there is variability there is an opportunity to drive more value. Another challenge is a lack of trust in  the recommendations personalization software makes to specific users in the first place.

The trust issue seems to explain why in our latest digital selling benchmark report predictive personalization was at the bottom of retailers’ opportunity list for using personalization.

A host of things can be said about that, for both retailers and personalization providers.

Learning the lessons of price optimization, providers would be wise to open up their black box more and help marketers and merchants understand the reasons behind personalization recommendations, rather than leaving them in the dark and just telling them to trust the math.

For retailers, optimization isn’t going to go away. They have a responsibility to understand what it can do — both its capabilities and strengths and its constraints.

DISCUSSION QUESTIONS: Does personalization have a trust issue in retail? What advice would you have for technology providers working to gain adoption among retailers? What advice would you have for retailers considering predictive personalization solutions?

Braintrust
"Tech vendors can help retailers adopt personalization systems by helping them survey the shoppers. "
"I believe many retailers do not adopt predictive personalization because it changes the way they are used to operating..."
"Personalization at scale is another example of how difficult it is for retailers to move from art to science."

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15 Comments on "Retailers lack of trust undermines predictive personalization’s potential"

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Phil Masiello
BrainTrust

We are not in a retail apocalypse, we are in a bad retailer apocalypse. The market has shifted from a retailer-centric market to a consumer-centric market. Consumers have so many choices that they will spend their hard earned dollars where they get the best value and engage with them appropriately.

Retailers for years have not trusted what the data has told them and made decisions based on what they think they know. This has led to the same approaches to the same problems over and over. No innovation, no engagement, no sales and the customer leaves. The retailer blames it on Amazon.

The best advice anyone can give a retailer is to understand who your customer is on a deeper level. Engage with them on a personal level and provide the value they seek. The tools and the data exist. Stop blaming e-commerce and Amazon. Start looking at how you connect with your customers.

Cynthia Holcomb
BrainTrust

Minute by minute, hour-by-hour, millions and millions of customers speak to their retailer with every purchase they make or do not make. Customers keep speaking and speaking, but retailers do not respond. Retailers can’t hear their customers.

Hiding in plain sight in each retailer’s silos of big data lays a treasure trove of rich, sensory-driven, real-time, customer preference intelligence. Yet, the phone keeps ringing and ringing.

Current, systems of segmentation, inferred behavior, collaborative filtering, and the like, do not transform disconnected data points into relevant individual “customer preference” intelligence.

Yes, the retail industry does need to change its thinking. It is not about the technology, yet technology is the only vehicle able to process and humanize massive amounts of retailer data into individual customer preference intelligence. On the fly, in real time.

Minute by minute, fresh continuous customer insights, why did a product sell or not sell? Knowing your individual customer’s preferences, no more grouping people into buckets. New, human-based cognitive technologies are the future of 21st century retail. What retailer will take the lead?

Charles Dimov
BrainTrust

Personalization works. Today it is hard to think that anyone would not accept it. Tech vendors have to make the case and simultaneously take away the risk … or reduce the risk of bringing in a new technology. For any major technology, the days of coming in with a forklift (rip and replace the whole ERP, WMS or existing technology) needs to be a thing of the past. To get buy-in, explain how the retailer can ease into the solution and try it on a phased approach. Like their consumers, it is important to give retailers options!

Shep Hyken
BrainTrust

Personalization analytics get more accurate based on more data. More customers means better data. The trust issues come from expecting the analytics to be accurate when there is a limited amount of data. The more accurate predictions come when there are enough customers in the pool to make the data accurate. The old expression comes to mind: Don’t count your chickens before they are hatched. In the world of personalization it’s almost the same: Don’t predict the next trend until enough customers have bought into a pattern.

Tom Erskine
BrainTrust
14 days 11 hours ago

Solution providers need to more effectively package their technology to drive business impact without requiring a complete transformation of the existing shopper and associate experience. For example in physical retail, instead of attempting to personalize the offers made by an associate on the floor, they should focus on creating personalized cross-sell and upsell recommendations at checkout. This approach will greatly reduce the disruption of implementing the solution, while still driving an ROI that can be used to justify additional investment.

Manish Chowdhary
BrainTrust
Given the low prioritization of personalization, there is clearly an adoption issue. Why? There can be many reasons: 1.) Because retailers do not believe in the value; 2.) Because retailers don’t trust the recommendations; 3.) Implementation is too expensive or distracting; 4.) They see other initiatives that can generate much higher ROI. Trust is just one possible reason. In order to generate adoption, technology providers must prove: 1.) Clear ROI; 2.) Technology and recommendations that stay “on-brand”; 3.) Related to #2, no downside brand risk. Testing must be easy to implement. A simple API, and the ability to randomly test a relatively small percentage of the shopping universe — e.g. 10 percent — to compare to the general customer population. For retailers, the key is to understand that A/B testing along different dimensions is a standard practice for successful merchants. No matter how well a company is doing, there’s always an opportunity to do better. By parsing out populations and treating them differently, retailers should theoretically win. Removing personal bias and trusting predictive personalization — or any software that can be used for testing and learning — should generate a return. Choosing to not test, when this technology will likely… Read more »
Gib Bassett
BrainTrust

As an analytics use case, personalized marketing exists on a maturity curve. Most retailers are doing very simple personalization using facts about individual customers. When it comes to predicting the best content, offer, call to action, treatment strategy, etc., retailers should test new methods aimed at improving response and sales. It’s not an either/or question, it’s about how you go about exploring the capability and determining its business value before deploying it more broadly.

Nir Manor
BrainTrust

I’m not convinced that the lack of trust is indeed the main issue here. I believe many retailers do not adopt predictive personalization because it changes the way they are used to operate and they need to make changes in order to use it. They need to create many types of very specific campaigns/value proposition for smaller and smaller segments down to the level of a single consumer. Retailers that are used to mass promotions across the board find this change a challenge. The simplest way to try and get acquainted with the value and use case of predictive personalization is to try it at small scale using a type of A/B/C split methodology and see results versus control groups.

Anne Howe
BrainTrust

Tech vendors can help retailers adopt personalization systems by helping them survey the shoppers. If shoppers are interested and trust the retailer, the rest is easy!

Ian Percy
BrainTrust
First, let’s admit to the reality that there is very little that is “personal” in “personalization.” Could it be that predictive personalization technology is undermining trust in the potential of retailers and not the other way around? It gets down to whether you consider people mechanistic beings or spiritual beings. That’s at the core of this discussion. Tech people are in the former camp primarily and so they disparage those who “distrust” their mechanistic algorithms and projections. As you will see in other contributions above, some think the answer is even more data, as though they are trying to program us to be better and more predictable customers. Furthermore, when we don’t “trust” something, that may mean the object isn’t trustworthy; it isn’t always some fault in the “truster.” The opposite of “instinct” is “extinct.” Don’t forget that those icons who created the retail world didn’t do it with analytics. Lest I earn a record number of red thumbs-down, I will quickly add that I’m not advocating for ignorance. Retailers need to be informed and need to know what tools are available to them. Finally re: advice to technology providers … trust is activated ONLY in the presence of risk.… Read more »
James Tenser
BrainTrust

Retailers are a conservative lot when it comes to merchandising and shoppers, so it’s no surprise that they are suspicious of any solution that seems like a black box. Many senior managers have had trouble accepting price optimization and automated replenishment systems too, because such systems may seem to override the intuition they have long cultivated as merchants.

The term “personalization” may sound like an application of the human touch, but the process must be highly automated because it replaces fairly static mass market decisions with millions of dynamic individual decisions. Human managers can’t possibly keep up. The more artificial intelligence is employed in pursuit of this activity, the harder it becomes to visualize or evaluate the choices.

Are retailers untrusting by nature? Or are they struggling to accept the reality that their prized sense of judgment is losing relevancy?

Ralph Jacobson
BrainTrust

Many of the words Nikki used in the article are ones I have used with retailers for years, like “gut feel,” etc. The first challenge is for solution providers to talk with retailers about solving specific business challenges, rather than leading with personalization solutions. For instance, what about simply talking about abandoned carts online? That is a problem that can be solved with the help of personalization technologies that are in the marketplace today and are being used by retailers around the globe. No, there aren’t that many using them at this point, but the innovators are, indeed. Try a proof of concept to address a specific pain and watch the results. This personalization stuff really works.

Patricia Vekich Waldron
BrainTrust

Personalization at scale is another example of how difficult it is for retailers to move from art to science.

Ken Morris
BrainTrust

I don’t think that a lack of trust among retailers is the main obstacle in the adoption of personalization technology. There are several other challenges or obstacles that play a bigger role in limiting the use of personalization: disparate legacy technology, bigger priorities (e.g. payment security) and limited budgets.

As retailer get laser focused on improving the customer experience, which is imperative, personalization is the key to competing effectively. Automating the personalization with associate-facing and customer-facing mobile tools makes total sense. Without visibility to customer context via a mobile device, it is difficult to efficiently personalize the customer without asking the customer 20 questions.

While personalization technology has seen a slow adoption curve among retailers, it will likely be a service that customer soon expect from nearly all retail categories. I don’t believe that this technology is equivalent to automatic ordering and price optimization where my gut had me overriding the system, but I know customer intimacy is far more granular and not about trust but about knowledge of closet, context and math. Adopt or die!

Vahe Katros
Guest

You’ll be losing money on each transaction but that’s okay — you’ll make it up on volume! It’s the Amazon strategy, trust me.

Or as Stanley Marcus never said: “It’s not what it costs, it’s how much my algorithm thinks it can sell it for!”

Just kidding. Discussions around lack of trust are complex and are usually grounded in history. Perhaps these two obvious jokes might be a way for breaking the ice — that’s my advice to those providing this technology, specifically: use unorthodox means to get to the truth.

wpDiscuz
Braintrust
"Tech vendors can help retailers adopt personalization systems by helping them survey the shoppers. "
"I believe many retailers do not adopt predictive personalization because it changes the way they are used to operating..."
"Personalization at scale is another example of how difficult it is for retailers to move from art to science."

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