From Starbucks to Walmart, retailers are investing to figure out how to speak to consumers on a personal basis, with the goal of offering products and services that are truly one-to-one recommendations. There are some hefty rewards for the sellers who get it right.
Brands that use technology and data to offer customers personalized experiences are seeing revenue increase by 6% to 10%, two to three times faster than those that don’t, according to a Boston Consulting Group survey of VPs and C-level executives at more than 50 companies with sales of at least $500 million each.$800 billion is at stake over the next five years
What’s at stake? For retail, healthcare and financial services alone, the study found personalization is a game changer that will push a revenue shift of some $800 billion over the next five years to the 15% of companies that get it right. Three-fifths of the companies surveyed were in the retail, food and consumer product sector. Most of the companies surveyed have some sort of brick-and-mortar presence.
“With the rise of digital natives like Amazon and Alibaba and smaller startups reshaping experience, consumers’ expectations have been completely reset,” said Mark Abraham, who heads BCG’s global personalization business, in an interview. “The ones that are going to win are going to be those that personalize the consumer experience.”
However, while pure-play online retailers have been able to track consumers through their digital footprint and online purchase and browsing behavior, the “next wave of personalization” is coming on the brick and mortar side, Abraham said.
“Having the human connection can trump the online experience,” he said. “A lot of people will research online, but in higher spend categories, they will want to touch and see the product.”Personalization is the biggest driver of improved spend per customer, Starbucks says.
Starbucks President and CEO Kevin Johnson said in a recent earnings call that “one-to-one personalization” will count among the company’s top investment priorities. Starbucks sees “a significant opportunity” in returns on investments it makes around personalization, a company executive said on the call. Starbucks, which has begun sending personalized food and drink recommendations to its mobile app users, said the personalization initiative “is the single biggest driver” of improved spend per customer that it has seen.
How to target consumers one on one is also one of the key target areas behind Walmart’s new technology incubator called Store No. 8, where Walmart will invest in emerging technologies including machine learning and artificial intelligence, key toolsets for personalization.
“We are aligning all of our firepower against the consumer experience,” said Nike CEO Mark Parker on the company’s March earnings call. He said Nike’s is doubling its direct connections with consumers through personalization and digital membership.