It pays to be personal. Azurium's James Stewart looks at personalisation strategies.
While technology has enhanced retailers' ability to gather data and engage customers, those who use that data to scale personalisation are experiencing the benefits.
Personalisation has become a buzzword among retailers. Whether it’s through tailored recommendations, products, content or service, customers are increasingly demanding personalised experiences, and are willing to pay more for the privilege (Forbes, 2017). Boston Consulting Group estimates retailers’ personalisation strategies generate revenue increases of between 6 to 10%.
The personalisation trend runs in contrast to the traditional retail environment of mass marketing and production, forcing brands to shift away from ‘one size fits all’ approaches. In their place, we are seeing personalisation strategies that span the entirety of retailers’ businesses, from marketing to final product design.
By their nature, boutique retailers have the advantage in providing personalised shopping experiences. While scaling personalisation is difficult for established players, there’s a clear advantage for those who can.
Nike is one of the leading retailers adopting and implementing a comprehensive personalisation approach. One of the fundamentals of Nike's strategy is to be more 'personal at scale'. Underpinning this strategy, Nike purchased leading consumer analytics firm Zodiac earlier this year (Quartz, 2018). The purchase increases Nike's ability to leverage its data to interact with each customer as an individual.
The brand's NIKEiD is a core component of Nike's personalisation strategy. The service offers customers the ability to design their own personalised merchandise through an online platform or in selected stores. While this service is not new, Nike continues to experiment with the experience. In one of its London stores, the service uses augmented video-mapping technology to project chosen materials and colours onto a new white pair of Nike's. The personalised experience engages consumers as they immerse themselves in the design process on an iPad and can see a clear, instant representation of the final product.
Nike also engages with its customers on a personal level through its Nike+ apps. Nike uses data collected through these apps to provide customers around the globe with a range of personalised content, features and rewards. As a result, Nike+ users spend nearly triple that of regular shoppers on the brand’s website (Digiday, 2017).
While customisation can add value for traditional retailers, it recently faced headwinds as a standalone business model. Australian start-ups Shoes of Prey and Mon Purse both had their business models challenged this year after initial success in Australia and overseas. While both those businesses were facing broader issues, Nike’s model avoids some of the challenges of personalisation that can deter purchases. Consumers who want instant gratification can have fun playing with Nike’s tech but still walk out of the store with new kicks.
Sephora is a glowing example of the relationship between personalisation and customer loyalty. Topping Sailthru’s 2018 Retail Personalisation Index for the second year in a row, Sephora has a coherent personalisation strategy across all consumer touch points. From its personalised email strategy to its ‘beauty insider’ loyalty program (which accounts for ~80% of all transactions), Sephora utilises its customer data to deliver a personalised experience that keeps consumers engaging with the brand.
What’s most impressive is their Colour IQ system, a beauty service that uses technology to scan the surface of the skin and assign it with a ‘colour IQ’. This is cross-referenced with its products to provide a scientifically accurate foundation, lip and concealer match. The experience resonates with customers and has created a loyal following of users around the globe.
Azurium is a specialist management consulting and advisory firm owned by Ferrier Hodgson.