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Responding to Changing Customer Behavior Through Personalization

Beau Gutierrez, Prasad Kadiyala, Renjit Mathew

How can you create a truly personalized experience and deliver what is needed to drive a successful personalization initiative?

Recently, we compiled a list of key questions that marketers across our client base have been pondering over. Not surprisingly, ‘personalizing customer experience’ is at the top of the list. Personalization has been a hot topic for the past few years; however, the dilemma has transitioned from “How to personalize?” to “How to personalize successfully?” While predicting a majority of personalization efforts to be abandoned by 2025, a recent Gartner article[1] also provides a list of recommendations leaders can use to evaluate their personalization efforts.

The on-going COVID-19 pandemic has caused major changes in customer behavior. Nike has experienced a 36% increase in direct to customer revenue, with Digital sales in China, one of the hardest-hit regions, rising by 30%. According to Nike’s CFO, Andy Compton, online spending in the US has surged by nearly triple digits[2]. Lululemon, an athletic apparel retailer, has similar contributions from online sales with a 41% increase YoY. A quick look through their financial statements indicates a nearly 2x increase in spending in digital infrastructure[3].

These trends bring us back to the key question:

 

“How do we personalize the customer experience to increase conversion rates and ultimately impact success?”

 

Based on our experience with leading retailers and fast-moving consumer goods (FMCG) companies, we have put together a framework that can lead to successful personalization efforts:

1. Business Case Development:

Personalization efforts have tremendous value when implemented correctly. Personalization initiatives often need executive sponsorship, which can be gained through a strong business case that accurately quantifies success. For example, a leading European retailer that we work with identified EUR 30m impact due to digital personalization, and those results built a strong business case. This was split further across six key components, each with its own value adds. This helped our client prioritize key initiatives and obtain approval from the senior stakeholders.

2. Technology and Vendor Evaluation:

Data and technology are at the heart of personalization initiatives. It is important for solutions to be customized to the organization’s needs, processes, and people. Evaluating the existing tech-stack, processes, and people and their skill sets will enable firms to identify key gaps where they might need external support. Technology and service providers can then be evaluated based on their expertise across four key pillars– History of successfully delivering personalization initiatives, Expertise with multiple technology platforms, Cross-pollination of ideas from various industries, and End-to-End analytical capability.

3. Content Syndication and Team Synergies:

Successful personalization initiatives can be measured in multiple ways. When it comes to digital channels, personalization necessitates serving the right content to the customer at the right time. This involves close collaboration between content development, data science, customer insight, and web development teams. For example, a major UK client of ours has implemented a process wherein data science, campaign operations, and content creators are part of the same team and report to a single manager. This has enabled closer collaboration, quick resolution of issues, and rapid prototyping resulting in personalized customer experiences with high ROI.

4. Conversion Rate Optimization (CRO) Experiments:

Experimentation is a great tool to hedge your bets, test your assumptions, and ensure that you have the most optimal solution. You are taking a thoughtful approach with little risk, tracking results, and learning from what works (or does not). A few steps that are crucial yet often omitted are Minimum Detectable Effect (Measuring demand effectiveness), measuring the traffic needed, and performing time duration calculations. These are important calculations because the information gained helps determine how soon and what is needed for an experiment to render significant results. We went through this exercise with one of our major financial clients recently and exposed experiments that would not render results for months. Not to mention, these experiments tied up optimization resources that affected velocity and momentum. Instead, we shifted focus toward experiments such as moving CTAs above the fold writing clearer section headings, developing more helpful messaging for their section help icons, and repositioning CTAs by the section heading as opposed to the far right of the screen. These experiments generated results in a couple of weeks and provided incremental learnings.

4. Analytics for CRO and Personalization:

A successful analytics program needs to be governed by great metrics and KPI strategy. It is imperative that organizations clearly map out impact and influencer metrics. The impact metrics will determine if CRO efforts are successful, and the influencer metrics serve as levers to optimize and improve customer experience. Keep in mind that impact could be several micro-conversions, like subscribing to an email list, cart additions, etc. The next step would be to know for whom, where, and what to optimize. This can be achieved by utilizing data-driven approaches to learn about your audience, creating relevant segments, and building look-alike models by leveraging customer profiles and behavioural data. This will then be subject to a comprehensive testing program to improve CRO. Working with a leading U.S. Apparel retailer, we leveraged this approach to send personalized communications to ~28M customers resulting in a 150% improvement in conversion rate.

5. Evangelization and Scaling Up:

Most personalization efforts tend to start as small projects. This will enable firms to identify the right data elements, effectively evaluate objectives, and establish success. However, the true success of personalization efforts lies in creating a repeatable, scalable process that can give high returns at a low cost. In our work with a major U.K. retailer, we helped set up an automated process to enable campaign personalization. This involved combining a hybrid delivery model with automation through analytical tools and establishing a measurement framework that generates key insights. A process that started as a small test on a few thousand customers has now scaled up to handle more than 10M customers. In our experience, a truly scaled personalization effort can deliver $6 in incremental revenue for each $1 in variable campaign costs.

By investing in technology and taking a structured approach to personalization, firms can derive significant benefits. Personalization efforts can bring about changes in customer behavior, enable us to react quickly to business challenges, and above all, deliver significant returns over the long run.

Prasad Kadiyala, Beau Gutierrez, and Renjit Mathew are lead strategists based out of eClerx’s  London, ATX, and Atlanta offices. They are currently focused on analytics for Retail, Media and Technology Industries.

References

[1] https://www.gartner.com/en/newsroom/press-releases/2019-12-02-gartner-predicts-80–of-marketers-will-abandon-person

[2] https://www.forbes.com/sites/andriacheng/2020/03/24/nike-stock-surges-as-results-suggest-coronavirus-hasnt-killed–consumers-discretionary-spending/#7d13f08f156f

[3] http://investor.lululemon.com/static-files/bf14dfeb-0a89-4cb1-ae8c-eaa5777cfd30

 

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