Personalization is the New Loyalty, Research Says

Around the globe, retailers are deploying personalization tactics at an accelerating pace to address the growth of digital marketing. This trend is driven by competition from both physical and digital rivals, and the dramatic changes in shopper behavior, and means companies need to challenge traditional approaches to interacting with the customer or risk losing them.

Recent research conducted by IDC Retail Insights, sponsored by Precima with retailers in the U.S., U.K., France, Italy and Spain shows they have much in common but also some differences in priorities when it comes to pursuing various activities under the broader heading of “personalization.” These include tactics like personalized auto-replenishment services, presentation of online content and assortments, product recommendations and tips, prices and deals and offers

The good news is the retailers in the five countries have a strong commitment to personalization, with 73% identifying it as a top-three marketing initiative. They view it as contributing to their financial performance, now (72%) and in the future (86%).

Personalization is an integral part of loyalty, and more and more personalization IS the new loyalty. It is tied to digital retailing and has impact within stores as well as a connection to loyalty programs, because loyalty enables personalization and building relationships at a customer level – requiring the most comprehensive understanding of shopper needs, behaviors and value.

Food retailers see personalization as essential for achieving their financial goals in the next three years. To achieve this objective, it is critical to differentiate and personalize value to engage individual customers.

Customers demand personalization as table stakes from retailers and will choose grocery stores of choice based on those that best understand their needs.  As a best practice, leading retailers are extending personalization from communications across all channels to personalization of price and promotion and driving customer-centric assortment.

The research focused on personalized deals and offers and product recommendations online, which typically intersect with loyalty programs and digital retailing. Retailers were asked to rate the importance of these activities to the overall customer experience and the results revealed some differences among the countries studied. U.S. retailers ascribed highest importance to auto-replenishment, while online product recommendations rated most important by U.K. retailers. Personalized offers and deals were almost equally valued in the U.S. and U.K.

In the companion consumer survey conducted as part of this research, more than nine-in-10 responding shoppers (93%) say they participate in their primary grocery retailer’s loyalty program. “The right promotions and discounts” were cited most often as the feature that makes this retailer better meet their needs, with 64.9% rating them as top or high significance.

Some other forms of personalization, such as product recommendations, are uniquely suited for the digital shopping environment. Product recommendations and other personally relevant content for shoppers are prime examples. Overall, 78% of retailers rated this as important or very important to customer experience.

The delivery of relevant, personalized product suggestions is dependent upon the retailer maintaining a record of each shopper’s behavioral history along with an analytics engine that can intelligently compare individual patterns against norms. Product suggestions typically fall into two major categories:

1. Recommendations based on stated or inferred preferences, such as gluten-free, halal, vegan or other consumption patterns
2.  Recommendations based on comparison with big data patterns, such as “others who bought this, also bought that.” Here again, shopper participation in a loyalty program is a foundational requirement.

Retailers regard personalization to be an important part of marketing strategy. In the five countries studied, more than half rank personalization as the first or second most important initiative. Responses vary significantly between countries, however, with U.S. retailers rating personalization initiatives were lower in importance for marketing. Compared with retailers from the other four countries, this reflects a more conservative approach to personalized marketing among U.S. retailers.  This result also means greater attention is being paid to other forms of marketing by those same retailers, including trade promotion, social media marketing, circulars and media advertising.

Overall, retailers are well-aware of the importance of personalization and they are actively engaged in providing it to their shoppers. While they are not always be in lock-step with respect to priorities, the pattern is consistent:

• Personalization is now mainstream. Personalization practices are viewed as a bottom-line essential among retailers in the five countries in the IDC survey.
• Retailers regard personalized coupons/offers as a key element of customer experience. 85% of retailers rate personalized offers as important or very important. Personalization is no longer exotic; it is a core activity and consumers expect it to be done very well.
• Shoppers prize personalized deals. More than nine-in-10 responding shoppers say they participate in their primary grocery retailer’s loyalty program. The right promotions and discounts were cited most often as the feature that makes their primary retailer better meet their needs.
• Retailers regard personalized online product recommendations as an important part of customer experience. 78% of retailers rated this personalized product recommendations as important or very important to customer experience.

Personalization practices continue to be an area of significant innovation and investment for food retailers. Commitment is growing, impelled by the shift to digital and reinforced by trends in shopper behavior.

Brian Ross is president of Precima, a Nielsen company. Precima is a global retail strategy and analytics company. For more information: www.precima.com