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Personalization in retail: 8 steps to get it right

Jessica Farelly
By Jessica Farrelly

One-size-fits all shopping experiences no longer meet customer expectations. Today’s consumer craves customization. Personalization in retail is changing how people shop, and it’s helping companies target customers more effectively. 

While personalized services and recommendations were once reserved for luxury retailers, customers now expect a tailored experience wherever and however they shop. Retail personalization is part of the omnichannel revolution.

But what exactly is personalization in retail, and how can you ensure you get it right? We have the scoop on how to give shoppers a bespoke experience, featuring McKinsey & Company’s eight components of successful retail personalization.

What is personalization in retail?

Personalization in retail means offering a customized customer experience at every touchpoint. Here’s how that can play out through the different aspects of your business:

  • Ecommerce retail: Instead of everyone seeing the same content, online shoppers see targeted messaging and “curated for you” recommendations based on their browsing and purchase history.
  • Brick-and-mortar retail: With retail personalization, customers can do things like browse garment samples on the floor, then log into their loyalty accounts through a digital catalog to add items to a fitting room. An associate can use the customer’s account details to put the requested items into their fitting room in the right size, and add some suggestions based on past purchases and style preferences.
  • Marketing: Customers are on the receiving end of highly-targeted omnichannel marketing campaigns that tailor messaging, products, and offers to their behavior.
  • Customer service: As soon as a customer reaches out with an inquiry, the support team already knows the customer’s name, their past interactions with the business, and the products they’re considering or reaching out about.

Why is retail personalization important?

Retail personalization is becoming essential to running a competitive, modern business. A bespoke customer experience is critical for several reasons.

Customers expect individualized experiences

First, shoppers have grown to expect personalization. According to a survey by Epsilon, nine in 10 consumers enjoy personalization in retail, while four in five consumers say they’re more likely to shop with a company if it offers a customized experience. 

What does that mean for retailers? Shoppers have seen it all: BOGO promotions are old hat, mass marketing is considered spam, and unenthused sales associates won’t cut it. You need to individualize every customer touchpoint to stand out. 

Personalization in retail makes people spend more

That brings us to point number two: not only does customization get shoppers excited, it also gets them to shop more. According to a report by McKinsey & Company, personalization in retail increases conversion rates by 10-15%. A unique experience makes shoppers more likely to add items to their physical or digital carts.

Targeting reduces marketing costs

According to the same report, retail personalization reduces marketing costs by 10-20%. How is that possible? Through personalization efforts, retailers learn their customers’ habits, behaviors, and preferences. When companies know their customers, they can save money by precisely targeting those who are the most likely to interact with the company or make a purchase. 

For example, rather than casting a wide net and sending a high-cost promotional postcard to any address they can get a hold of, a company can send postcards only to loyal customers who respond well to direct mail, while potential customers who may not yet be ready to make a purchase receive email newsletters.

Easy access to customer data

Worried that your customers won’t tell you what you need to know to create a bespoke experience? Don’t sweat it. According to a report by Accenture, 83% of shoppers are happy to share their personal information if it means they’ll get a customized experience.

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McKinsey’s 8 elements of successful personalization in retail

Before we send you on your way to dominate retail through personalization, we want to give you actionable tips that you can implement today. By studying how leading businesses put retail personalization into practice, McKinsey & Company discovered eight key steps to getting it right. Here’s an overview:

1. Collect customer data

Knowledge is power, and the key to personalization. In your CRM, collect customer contact information, demographics, interactions with your company, and purchase history. McKinsey recommends starting small and focusing on gathering high-quality data to help you understand customers. 

2. Segment and analyze your customers

All customers are not created equal in a personalized retail approach. Analyze your customer database, segment shoppers into groups, and assign scores to customers to improve personalization and targeted marketing efforts. On your ecommerce store, monitor shopper behavior patterns through your reporting and insights.

3. Build a campaign library

Next, create a playbook of campaigns you can deploy for customers who belong to certain segments or exhibit certain behaviors, like visiting your ecommerce site often or redeeming coupons. McKinsey says your playbook should start with several hundred offers in total, and then grow.

4. Coordinate personalization strategies

When you have hundreds of personalization tactics that can be used at any time, it’s critical to have a system in place to make sure that customers never receive conflicting offers.

5. Build a multidisciplinary team

Retail personalization doesn’t succeed when it’s siloed. Create an agile, cross-functional team of merchandisers, marketers, and brick-and-mortar managers to ensure smooth collaboration and quick progress.

6. Find the right people for the job

After you decide what mix of disciplines you want on your cross-functional team, it’s crucial to choose the right people for this team. Pay special attention to leadership roles, as they set the culture for the group and can therefore make or break your personalization efforts.

7. Choose technology wisely

You won’t be able to offer personalization at scale without the right technology. Start by leveraging your existing tech stack, then add new personalization capabilities to help you refine and enhance your efforts.

8. Start with an MVP and iterate

Don’t let your competition get too far ahead of you. Instead of taking years to build the perfect personalization strategy, it’s better to start with a minimum viable product (MVP) and improve it as your customers experience it. When it comes to analyzing shopper behavior, the sooner you start, the better.

You can read more details about this eight-step approach here

Personalization in retail is here to stay

Retail changes rapidly. Future-proof your business by adding retail personalization to your omnichannel strategy. When you build a strong foundation for personalization, you can engage and delight your shoppers at every customer touchpoint. Ready to get started with your personalization journey? Let’s talk tactics.