Personalization is radically changing the face of retail, both online and in store. In a previous blog, I wrote about the importance of personalizing the customer experience. To date, a good deal of focus has been on customer experience but personalization can make a major impact in both increased revenue and customer loyalty. Personalized products are still in their infancy but I think represent the future of retail.
When you think about it, ‘off the shelf’ is a bizarre concept. You get to choose from a range of things that never quite fit or suit you. But, hey, it’s the best you’re going to get, right? You can’t afford to get all your stuff custom-made and the retailers can’t afford to individualize items. That’s all changing and it’s changing fast.
Online stores like Amazon have been personalizing their offering for some time and traditional retailers are beginning to follow suit. Brands such as Wild Things are introducing features like their design-your-own Insulight jackets. The personalization technologies that have driven online services are equally applicable to an in-store environment. In fact, the ability to combine in-store and digital to deliver an omnichannel personalization experience is a distinct advantage for brick and mortar retailers.
The power of personalization
The figures speak for themselves. The Boston Consulting Group has found that ‘brands that create personalized experiences…are seeing revenues increase by 6% to 10%’. This represents, according to BCG, a revenue shift of $800 billion to the 15% of companies that get personalization right. In terms of product personalization, research from Deloitte found that at least one in three consumers want the ability to personalize their products. Forbes estimates that if just a quarter of shoe sales were customized, that would add up to a market of $2 billion each year.
The financial benefits of product personalization are only one part of the equation. Retailers that are able to move into the mass customization of products are able to drive customer engagement and loyalty, gain invaluable insight into buying trends and enhance customer advocacy.
4 key benefits of product personalization
In truth, customers today expect personalization, but meeting customer demand is only one reason that retailers need to embrace this trend.
1. You can increase your prices
Personalized products have a price premium that customers are willing to pay. Indeed, Deloitte found that consumers were willing to pay around 20% more for personalized products as opposed to standard ones. This becomes even more emphasized when we look at the Millennials. Almost 60% of Millennials say they are willing to pay more for personalized fashion and luxury items.
2. You build brand recognition and customer loyalty
Customers are used to comparing standard items so the ability to personalize their products acts as a point of differentiation for brands and retailers that can offer this service. The ability to give the customer exactly what they want – and involve them in the creative process – helps drive customer loyalty in all age groups. A survey showed that 40% of baby boomers said that it was the foundation for loyalty, growing to 54% for Generation K.
3. You gain much more granular insight
Personalized products are amongst the best possible sources of data on what customers actually want and how trends are changing. The design preferences they set and the design styles they choose reveals much about what the consumer wants and needs. By collecting and analyzing data across every personalized product purchase, you have greater insight into market trends. As you are customizing the product, you can react quicker than ever before to tweak ranges and keep up-to-date with the latest developments. It’s not inconceivable that traditional events like seasonal ranges in fashion will gradually become less important.
4. You have better inventory control and fewer returns
The first part of this may sound a little obvious. If every product is personalized and made to order, inventory is clearly reduced as there is no reason to hold items in stock. However, few retailers are going to fully customize every product. Instead, most retailers will deliver a range of complementary products that can be bought in combination – allowing the customer to personalize their purchase if not the actual products within it. Analyzing the point of sale data collected allows you to ensure you have a clear insight into which products are being purchased so you can make informed inventory decisions. In addition, the ability to customize product has been show to significantly reduce returns.
3 technology implications of personalized products
While there is a range of personalization engines becoming available, there is a series of other technology considerations that need to be addressed as you begin your journey towards personalized products.
1. Advanced analytics
To personalize at scale requires the ability to access and process large amounts of data from different sources – including customer, transaction and supply chain data. You must be able to bring all relevant data together, including text and other unstructured data, normalize it, perform advanced analytics and deliver it as actionable insight to the correct people. This insight must be easy to understand and accessible in near real time. The application of artificial intelligence and machine learning can further help to automatically identify patterns and trends across all personalized experiences. A new generation of AI-power analytics platforms – such as OpenText™ Magellan™ – help facilitate the personalization process.
2. Supply chain collaboration
For many retailers, product personalization can only be achieved through intimate cooperation with suppliers and supply chain partners. While the customer personalizes their product, it is the supplier that needs to be able to fulfill on the order. This requires highly effective supply chain collaboration. The efficient transfer of data across the supply chain – using global B2B integration such as OpenText Business Network – is essential for the correct product to be customized and delivered to meet customer expectations.
3. Scalable EIM platform
A scalable Enterprise Information Management platform should sit at the heart of your personalized product capabilities that can deliver integrated functions such as Customer Experience Management, Digital Asset Management, Content Management and Analytics. In addition, the platform must enable open integration into complementary solutions such as the personalization engine, ERP and accounting packages. In this way, personalization can be managed as an end-to-end business process that can be delivered over any channel and on any device.
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