Companies Use Multiple Metrics to Measure the Impact of Personalisation Initiatives
When asked which metrics organisations use to evaluate their personalisation activities, more survey respondents (42%) cite “customer satisfaction” than any other. The next most common metrics relate to the impact on customer loyalty/repeat business and total revenue. Only about one in five are effectively measuring the impact on profit per customer or profit per sale, although that level of precision would ultimately provide the best insights into how to construct their personalisation strategies.
Similarly, only a small minority of survey respondents say their organisations are able to calculate a formal return on investment for specific personalisation tactics: about a third say they can do so for the in-person customer experience, product offerings and recommendations, and pricing strategies. Only about a quarter or less can do it in most other areas, including marketing via email, print, and events.
Interestingly, those first three areas are also the ones where survey respondents say their organisations are capturing the highest ROI—perhaps suggesting they’re seeing the best returns there simply because that’s where they can measure. Survey respondents expect those three areas will still be delivering the highest returns by 2020, as will one other area of interest: the online customer experience.
How companies measure the impact of their personalisation efforts also varies. Synchrony routinely compares results for customers who receive personalised experiences with results for those who don’t—as does South African retailer Pick n Pay, which operates 1,600 supermarkets across southern Africa. Using a best-in-class data analytics platform provided by a global payments processing company, Pick n Pay sends personalised emails to members of its loyalty program, offering discounts or vouchers on products that, based on their shopping history, they are likely to buy within the next two weeks.
The company routinely compares the results with those for a small control group of customers who don’t receive targeted offers. John Bradshaw, Pick n Pay’s head of marketing, says the personalisation program is working well both for the company and for the manufacturers whose products line its store shelves. “It’s created a significant uplift for both of us,” Bradshaw says. “Because of that, we’ve been able to get the majority of our largest manufacturers on board with co-funding these offers on their products.”
“The way we measure our return on those initiatives is by monitoring customer satisfaction through user reviews and social media,” says Isabelle Birem, senior vice president of loyalty, Accor S.A.
Both Costa Coffee and Accor, meanwhile, track traditional performance indicators linked to email promotions, such as click-through and conversion rates, to see what’s working and to inform future initiatives. “Maybe eight of 10 times we get the results we were expecting, but not always,” says Costa Coffee’s Kaur. “Sometimes, even when an initiative works on one level—maybe it’s good for customer engagement—the margins aren’t where they need to be. So we continually perform trials of new initiatives and learn from those experiences.”
Accor’s Birem says her organisation can see that its returns are “much higher on personalised emails” than on non-personalised communications. One example of the company’s personalisation efforts, she says, involves sending emails to Accor loyalty program members who are about to lose their program points due to inactivity, and letting them know they can preserve their points by staying at an Accor property. If they fail to respond, they eventually get an offer allowing them to reclaim their points by booking a stay with Accor. “We see the pure extra revenue that’s generated when customers who were at risk of losing their points reengage with us— often, more than once,” Birem says. “We can really measure our return on investment from that activity.”
Where ROI becomes less easy to track, she says, is with some other initiatives the company has launched, such as pushing customer information to the front-desk staff at the company’s hotels so they can look for opportunities to personalise their interactions with guests. “The way we measure our return on those initiatives is by monitoring customer satisfaction through user reviews and social media,” Birem says. “We also measure it through the customer experience community we’ve created for our hotel employees, which is an online community where employees can share stories about delivering personalised attention to their guests, and how that was received. The feedback we get is that guests treated this way are happier, and do come back to our properties.”
Good Data Underpins Successful Personalisation Initiatives
Companies getting good results from their personalisation initiatives know those initiatives are dependent on access to timely, accurate data about their customers’ behaviors and preferences—often supplied by customers themselves when creating an online account or joining a company’s loyalty program. They also know it’s important to trust their data.
“I think the biggest shift we’ve had in our personalisation activities relates to our mindset around data,” says Costa Coffee’s Kaur. “It evolved from a situation in which we’d form a hypothesis about what our customers wanted and then look for data to back it up, to deciding that we are just going to see what the data is telling us about our customers and use it to figure out what we can do to make their lives better. Once we began to take that approach and got everyone invested in thinking that way, it made personalisation—and just being a more customer-centric business—easier.” For some time now, Costa Coffee has been using customer data to reward customers with bonus loyalty program points or with product discounts aimed at saving customers money, with the aim of delivering a better customer experience and driving increased customer visits and purchases.
Right now, half of all survey respondents say their organisations rely exclusively on internal data to drive their personalisation initiatives. That’s a logical first step, but it means they have opportunities to do much more on the personalisation front by taking advantage of the many external data sources that could more fully inform their views of their customers. Those external sources include census data, weather data, and a wide range of data collected by third-party aggregators that can help organisations better understand their market share, develop customer segments, and refine their personalisation strategies.
“Those who leverage classic and emerging analytical techniques using first-party, second-party and thirdparty data, blended in with both customer service and marketing outreach data, will absolutely find that it’s a competitive differentiator going forward,” says Synchrony’s Hudzik. In fact, she says one of her company’s most valuable data sources is its business partners.
“Beyond just access to the data, we are also making infrastructure investments in creating client datasharing environments that will allow us to better optimise decisions across the customer life cycle in real time— including creating personalised marketing offers, customising credit line increase strategies, and improving our fraud detection and prevention strategies. That’s when we get the true power of both brands coming to life to not only drive not only drive financing but also buying
HALF OF ALL SURVEY RESPONDENTS SAY THEIR ORGANISATIONS RELY EXCLUSIVELY ON INTERNAL DATA TO DRIVE THEIR PERSONALISATION INITIATIVES.
behavior and loyalty across our brands and our partner brands, as well as our Synchrony-branded solutions and products,” Hudzik says. Synchrony also uses third-party data to optimise ad placements and search, and to better understand wallet share by brand as well as by both geographic and specific retailer location. “Thanks to external sources merged with our data, we have the ability to analyse data from thousands of marketing campaigns,” Hudzik says. “Using that, we’re constantly testing to identify what our customers are telling us is the most relevant product offer for them. And as we use those signals, we’ve been able to merge them with attribution and media mix data and our offer strategy—all leading to a truly personalised experience that drives quite a bit more uptake and life cycle spend within our card base.”
WHAT TYPES OF DATA DO ORGANISATIONS USE TO INFORM PERSONALISATION STRATEGIES?
Which types of data are you using to drive personalisation? [SELECT ALL THAT APPLY]
Challenges to Personalisation Include Pace of Technological Change, Outdated Legacy Systems
What’s holding back organisations that haven’t fully embraced the personalisation revolution? One explanation may be that although the technology to enable it is in many respects fully formed, not every organisation is ready to take advantage of it. Pick n Pay’s Bradshaw notes that it was only thanks to his company’s significant investment in its core IT infrastructure over the past five years that it was able to begin personalising its loyalty card program in 2017.
“Retailers operate low-margin businesses, and the capex required to get the necessary IT systems in place to facilitate a personalised pricing system, coordinated with point-of-sale and underlying ERP systems, can be daunting,” Bradshaw observes. “Many retailers spend years eking the last bit of life out of their legacy information systems, and that makes it hard for them to get a single view of the customer and implement something like this—even if they are able to predict what their customers are going to buy next.”
Indeed, 70% of survey respondents concede that their organisations are struggling to keep pace with digital change. The technologies they consider most critical to enabling personalisation initiatives are customer data analytics (cited by 70% of respondents), predictive analytics (53%), and web analytics (38%). Often, these are sourced today under a software-as-a-service platform.
Companies also can find it challenging to find the people with the right skill sets to drive personalisation initiatives, or to implement them on the front lines where organisations and their customers interact in person.
The good news, for those organisations that are keeping their information systems up to date, is that technology— from advanced data analytics systems armed with predictive algorithms to mobile devices that enable connectivity and geo-tracking—makes personalisation far easier and less costly to implement than it ever was in the past. Nearly 90% of respondents say that as most business models shift to digital channels it will present greater opportunities to implement personalisation.
The risks of lagging behind—and the potential benefits of joining the personalisation revolution—help explain why personalisation initiatives are expected to become even more commonplace in the years ahead.
COMPANIES CAN FIND IT CHALLENGING TO FIND THE PEOPLE WITH THE RIGHT SKILL SETS TO DRIVE PERSONALISATION INITIATIVES, OR TO IMPLEMENT THEM ON THE FRONT LINES WHERE ORGANISATIONS AND THEIR CUSTOMERS INTERACT IN PERSON.
Best Practices: Focus on the Customer, Measure Results, Rely On Data
Input from the new survey and discussions with organisations that are already making extensive use of personalisation suggest a number of best-practice measures that companies can use to improve their chances of successfully implementing their own personalisation programs.
Start with the customer in mind.
It’s easy for an organisation to think about personalisation in terms of what it can do to boost revenue and profits. But focusing on how it will benefit customers is likely to drive better results. In Pick n Pay’s case, says Bradshaw, it wasn’t intuitive to manufacturers of packaged foods and household products to offer discounts on items customers were likely to buy anyway. A more logical approach, it seemed, would have been to reach out to customer segments that were buying a competitor’s product, in hopes of winning them over and expanding market share. But doing that could have made it seem like Pick n Pay didn’t really know its customers’ preferences. In the end, the company conducted a successful three-month test run to prove its concept, demonstrating, Bradshaw says, that “people weren’t as loyal to brands as everyone thought they were, that they bought heavily in response to deals, and that they didn’t buy nearly as frequently as we had thought.”
The program has only grown since then. “I think where companies can go wrong is by asking at the outset how they can use personalisation for themselves, rather than starting with the customer,” Bradshaw says. “They end up doing things that may hurt the customer relationship in ways that are hard to measure. Ultimately, they risk killing the goose that lays the golden egg. By using what you know about the customer to make the shopping experience, or value delivered, better for them, you can build long and really strong relationships.” Perhaps the most important point to note about Pick n Pay’s experience is not what it discovered about brand loyalty—many studies show quite the opposite—but rather the importance of conducting tests on a regular basis to ensure that organisations are making the right choices for their customers.
“If you’re not finding the reason why something is happening, you can’t use it to create a more customer-centric business. Data is rich, but you have to be curious and have a bit of tenacity,” says Costa Coffee’s Kaur.
Make personalisation an enterprise-wide strategic initiative.
Personalisation is too powerful a tool to be limited to marketing. Opportunities also exist in areas like call center interactions, advertising, customer service, and both the online and in-person customer experience. Indeed, 56% of survey respondents say their organisations are already using personalisation as a way to unify the customer experience across all functional areas. Additionally, 47% say their organisations are already executing tailored customer communications successfully across all channels.
Embrace curiosity, and ask the right questions.
“If you see something unusual or interesting in your data, ask why, and what it might mean for the business,” says Costa Coffee’s Kaur. “The beauty of living in the era of big data is that you can find numbers for anything. But if you’re not finding the reason why something is happening, you can’t use it to create a more customer-centric business. Data is rich, but you have to be curious and have a bit of tenacity.” Predictive analytics can help on this front; it’s technology that can help organisations explore potential answers to their questions. And as previously noted, it’s one of the technologies survey respondents find most critical to enabling personalisation tactics.
Measure results accurately, and rely on data.
Measuring results helps organisations understand where personalisation adds value and where it doesn’t. And as the Pick n Pay experience demonstrates, data can be a better driver of results than intuition. To get the most value from their personalisation initiatives, companies should be sure to establish a reliable system for measurement and build a baseline to use for comparison purposes. Synchrony’s Hudzik recommends standardising metrics so that results from different projects are comparable. Accor’s Birem adds that companies also should use control groups to improve the accuracy of their findings. The fact that 74% of survey respondents expect personalisation to be boosting their organisation’s revenue by 2020, up from 44% today, underlines the importance of being able to measure results accurately.
Learn to tell data’s story in a way that resonates with other decision makers.
Data analysts often have to explain to their colleagues in marketing and other functions, including finance, what the data is telling them and how it can be used to inform personalisation initiatives. Sometimes, what the data is saying isn’t what those colleagues want to hear—nor is it entirely obvious to them if they’re not accustomed to analysing data. “Personalisation is all about understanding the data and using it to connect with customers,” says Kaur. “So make sure you can tell a story at a high level for those colleagues in a way that allows them to follow it and get behind the findings.”
Digital technology makes it possible to tweak personalisation efforts quickly, as early results come in. Embracing that kind of agility is valuable in fast moving markets. “Our competition is constantly moving, so we need to allow ourselves the flexibility to test, fail fast, learn as we go, and continue to move forward,” Hudzik says. “We are committed to being agile.”
Leave room for common sense.
While many consumers may welcome personalisation—many like receiving offers or experiences that are relevant and valuable—businesses need to be wary of becoming off-putting and triggering privacy concerns. 92% of respondents agree that customer trust in their brand is their organisation’s greatest asset, and 84% say their customers are more concerned about data privacy today than two years ago. All this reinforces the imperative of ensuring compliance with data privacy rules and regulations, like the European Union’s new General Data Protection Regulation (GDPR), and similar regulations expected over time in other parts of the world (see sidebar: Staying on Top of Data Privacy). And, while data-driven personalisation programs can be remarkably precise and successful, Birem suggests that companies also use common sense and not make assumptions beyond what the data is telling them.
Moving Forward with Personalisation
Organisations that wish to remain competitive in this new age of personalisation have many opportunities to sharpen their capabilities in this area, and by doing so improve the customer experience. In fact, customers expect it. And competitors that are already doing it are seeing material benefit from their investments in personalisation. In short, organisations that don’t know what their customers want risk harming relationships and even losing them, rather than driving ongoing value for both the consumer and the organisation.
TO GET THE MOST VALUE FROM THEIR PERSONALISATION INITIATIVES, COMPANIES SHOULD BE SURE TO ESTABLISH A RELIABLE SYSTEM FOR MEASUREMENT AND BUILD A BASELINE TO USE FOR COMPARISON PURPOSES.
METHODOLOGY AND PARTICIPANT PROFILE
A total of 625 respondents drawn from the HBR audience of readers (magazine/newsletter readers, customers, HBR.org users) completed the survey.