Providing an excellent customer experience is becoming a priority for retailers globally. According to the IDC 2018 Retail Innovation Survey, 37 per cent of retailers are already investing in artificial intelligence (AI) for defining and executing personalisation activities, and a staggering 50 per cent are considering internet of things (IoT) platforms a key innovation priority. IDC researcher Andrea Sangalli talks to THRIVE about the changes in the industry and the expectations that real-time contextual discovery experiences will be key for retailers’ strategies.
Q: What is customer experience personalisation, and why is it important for retailers?
A: Customer experience personalisation is the focal point for changing the way retailers do business, merging physical and digital experiences with an individualised value proposition. Individual personalisation is the trigger for innovation and profitable growth and is fundamental to driving the paradigm shift in which recurring clients become high spenders and engaged shoppers become active customers.
Alibaba is a prime example of how personalisation can change business results. Their strategy aims to leverage data to enable personalisation and to empower search, security and customer service. We are talking about shopping habits data, which doesn’t come only from shopping websites but also from store transactions, geo-location apps, financial services, social media and other sources. By applying AI across key areas, such as supply chain, logistics, product search and recommendations, customer service and customer experience (CX) personalisation, Alibaba effectively handles up to 95 per cent of customer service inquiries. Moreover, the company manages to personalise 6.7 billion shopping pages in one day, with a 20 per cent higher conversion rate than non-personalised pages. The key opportunity for retailers is to deliver CX personalisation at scale.
Q: Why do you believe that CX personalisation is an opportunity for retailers?
A: Although retailers know how critical relevance, relationships and reciprocity are to customer experience, the level of market maturity remains low. The IDC Global Retail Innovation survey 2018 shows that only 5 per cent of retail organisations are approaching CX through contextual experiences, leveraging real-time data and hyper-personalising the customer journey. Most retailers are still building customer experience strategies on segments and personas. They need to start a virtuous circle that can help them track and analyse customer-product-associate interactions at the individual level and enrich the individual customer journey maps by gathering accurate behavioural data from shoppers.
Combining action and insights through a dynamic iterative process enables retailers to deliver the most relevant product and service. For example, a large international home improvement company went from over half a billion dollars in abandoned cart revenue annually to a 15 per cent lift in conversion and a 10 per cent increase in top-line revenue by implementing a cloud-based platform. The platform collected and analysed customer clickstream data, delivering real-time, 1:1 personalised offers.
Customer experience personalisation is the focal point for changing the way retailers do business, merging physical and digital experiences with an individualised value proposition.
Q: Why are retailers still immature when it comes to this topic? What are the biggest challenges to delivering contextual discovery experiences?
A: Maturity will inevitably grow as adoption of advanced analytics technologies accelerates. Many organisations face challenges regarding digital transformation, which delays deploying personalisation at scale. Some of the key challenges are:
- Data management and integration: Selecting useful data, managing different data types consistently and integrating data silos — these elements are the core of smart data management that enables real-time contextual experiences. Retailers need to create an open and decentralized data lake, removing silos and making data accessible to a wide audience across the organisation and the partner ecosystem. Furthermore, personalisation means being in touch with sensitive customer information. Complying with General Data Protection Regulation (GDPR)-type rules and IT security standards is imperative.
- Defining new KPIs: Most retailers are still using old, disengaged KPIs to measure how new business models are evolving. These make it difficult for retailers to assess the customer experience transformation accurately and to make the continuing progress that will justify further investments in this key area.
- AI foundation implementation: Customer experience personalisation fundamentally relies on AI capabilities that combine and analyse structured, unstructured, historical and real-time data. Retailers can leverage standalone or purpose-built AI solutions for personalisation in the short term. In the medium to longer term, the challenge will be leveraging foundational AI solutions to potentially extend algorithms, data and technologies for specific use cases.
Retailers need to start a virtuous circle that can help them track and analyse customer-product-associate interactions at the individual level and enrich the individual customer journey maps by gathering accurate behavioural data from shoppers.
Q: How can retail organizations overcome these challenges quickly and efficiently enough to not miss out on this opportunity?
A: Retailers should consider several actions that can help them personalise at scale:
- Create a roadmap for the CX platform to drive customer journey personalisation, relevance and automation around the four C’s of consent (compliance, confidentiality, contextuality and cyber security).
- Define new KPIs that are customer-centric, information-centric and process-centric (especially around availability, risk and security). The more the KPIs are defined and integrated, the more retailers can measure CX and improve their individual approach to customers.
- Accelerate AI adoption to start delivering hyper-personalisation, dynamic process composition and contextual customer engagements. AI is essential for the retailers of the future to personalise a highly fragmented and complex customer journey.
Looking for more insights about digital transformation in the retail industry? Check out these articles on THRIVE.
As associate research director at IDC, Andrea Sangalli is responsible for IDC Retail Insights research on Worldwide Retail Customer Experience Strategies, providing advisory support to technology vendors and retail end-user clients. His research is focused on analytics, commerce, IoT and innovative technologies in the omni-channel ecosystem.