Personalized shopping experiences keep consumers coming back
What this means: As consumers transform at lightning speed, the retail industry must keep pace with shoppers, which is proving to be far more challenging within traditional go-to-market strategies. Retailers and brands want to be relevant to consumers, and in many ways that can be done through building personal connections with shoppers before, during and after a shopping occasion. Future strategies need to be hyper-localized to understand nuances between buying centers and tailored assortments, messaging and experiences to those groups.
Consumers’ desire personalization across retail channels and marketing formats: 84% of consumers will come back to retailers’ sites if they feel like they know them and understand their preferences, according to a Dressipi’s survey. By 2030, more than 80% of shoppers will expect experiences curated just for them, Synchrony reported. Companies that excel at personalization also generate 40% more revenue than other organizations, McKinsey research found.
Synchrony’s study showed that the proliferation of retail channels, formats, platforms and intermediaries has fragmented the shopping landscape during the past few years, creating stress for shoppers. Moving forward, the focus will be on developing more connected experiences across channels and brands, both online and in-store. Outstanding customer service and brand ambassadors are key to helping consumers gain insights and drive loyalty, Synchrony found. Of the shoppers surveyed by Synchrony:
- 52% of shoppers said they would be interested in an in-store experience in which the associate leverages crowd-sourced ratings combined with customer preferences to deliver recommendations in real-time to their phone.
- 67% believed a world where multiple brands created joint offers would enhance their experiences across channels.
- 42% of consumers would be likely to register or participate in future experiences if brands offered a range of connected shopping options, such as an app that connects a concert ticket purchase to customer’s calendar and suggests an outfit for the event and where to buy it.
Retailers are taking notice, adding personalization in multiple ways throughout their organization. For example, Natural Grocers last month introduced free personalized shopping experiences with a nutritional health coach to guide consumers as they shop and offer expert product recommendations to support personal goals. Walmart also last month integrated personalization and artificial intelligence (AI) within Walmart DSP, the demand-side platform of its retail media network Walmart Connect, to enable advertisers to enhance content and ad creative in real time.
Personalized marketing
In regard to marketing to consumers, 52% of U.S. shoppers disliked advertisements for products and services that were not related to them, according to a survey conducted by Infosurv Research and published by Deepintent. At the same time, 54% of those surveyed said they liked ads of products and services that were highly relevant to them.
In terms of U.S. consumers who prefer personalized ads by generation, 81% of Gen Z like personalized ads, followed by the majority of millennials and Gen X consumers.
Additionally, one of the leading factors that motivated U.S. Gen Z consumers to engage with a new brand on social media was relevant or personalized ads, according to MarketingCharts.
Personalized online shopping
The same personalization is expected from retailers’ e-commerce platforms. The majority of consumers (70%) agree that they expect personalized recommendations from retailers, Dressipi said. Interestingly, the entirety of the youngest generations surveyed agree that they expect personalization and 67% “strongly agreed.”
“Everywhere you go now, personalization is the norm, whether that’s fitness apps, diet apps, movies, music, i.e., Netflix and Spotify, etc.,” Sarah McVittie, Dressipi’s co-founder, told Retail Leader Pro. “Younger consumers have had huge exposure to a high level of personalization from these other industries from a young age.”
As behaviors around purchases continue to change across all industries, Dressipi’s consumer survey found retailers will need to adapt and innovate to keep up with this new group of tech-native consumers.
“If you don’t offer these high levels of personalization, there is a good chance you won't exist in the years to come when the younger consumer eventually becomes your main one,” McVittie said.
Looking at all generations, more than a quarter of U.S. consumers (26%) said they are “much more” likely to continue shopping on retailer sites that have personalized customer experiences followed by one-third who said they were somewhat more likely, according to VentureBeat. Additionally, 68% of consumers are happy to share more details about themselves in return for a more personalized online experience, and that number jumped to 77% for consumers under 24 years old, Dressipi reported.
“Consumers want to see what is relevant for them as quickly as possible, so when it comes to personalization, retailers need to think about the product discovery process that genuinely delivers for each and every consumer,” McVittie said. “To do this, retailers cannot confuse segmentation with hyper-personalization. Segmentation still leads to unhappy shoppers and missed revenue. Compare this to the value of personalization which delivers significant revenue and profit uplifts and amazing customer experiences. Personalizing to the individual is a must, and what is apparent now is that if retailers don’t give this level of hyper-personalization, they will get left behind.”
Personalization challenges
While consumers crave personalized experiences, current offerings often frustrate them. Instead of engaging consumers, recommendations lead to frustrated consumers, and only 21% of consumers think personalized recommendations are improving, according to Dressipi.
“This is because they are based on ‘people like you also bought,’” McVittie explained.
Poor recommendations also affect loyalty, and Dressipi’s survey found:
- 64% of consumers find it frustrating when a retailer shows products that are not relevant.
- 64% of consumers shop with another retailer if they couldn’t find the right product quickly.
- 55% of consumers frequently find that retailers show products that are not relevant.
“Poor recommendations that are not personalized lead to lower conversion, higher bounce rates, unhappy shoppers and missed revenue when they quickly swap websites,” McVittie said.
Retailers need to think about the product discovery process that delivers for individual consumers. This again means going beyond segmentation to hyper-personalization, Dressipi’s report said.
Additionally, 82% of consumers have been led to an out-of-stock product, the survey found. Recommendations that lead consumers to out-of-stock items ultimately lead to a poor customer experience, McVittie explained.
Personalization with AI
Looking to the future, with the continued growth of e-commerce, Dressipi said an engaging digital experience is paramount, and retailers will be pushed into considering virtual reality and AI — technologies with which consumers have said they are comfortable.
Like other aspects of the retail industry, ChatGPT will have an effect on personalization as well. ChatGPT content, while impressive and fluent, leans toward being generic, McVittie said.
“This is just one example of why domain knowledge and getting the data right in the first place is key,” she explained. “Better data will allow AI to be more predictive and enable retailers to offer consumers highly personalized experiences and become more efficient. Hyper-personalization will accelerate with retailers launching entirely unique experiences to each consumer.”
What’s next: AI is a key tool in helping retailers bring personalization to life for consumers online and in-store. While the technology may not bring all of the answers that retailers and brands need, it is the first step in putting data into action to improve the customer journey and improve satisfaction during a retail experience. Retailers are also investing in better ways to monetize first-party data, and using that data to enhance consumer loyalty and rewards may deepen the relationship with shoppers.