Shopping Experience

The IBM 2016 Customer Experience Index Study: The Quest for Relevant Personalization

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This is the third and final part in a three-part series surrounding the IBM 2016 Global Customer Experience Index study. The first blog of the series provided a top-level view of the study, and the second blog of the series discussed the study’s impact on the in-store retail experience.

Context is Key

For most retailers, the topic of personalization elicits strong boardroom emotion, with a tightly held belief that they, as retailers, already naturally treat all customers as individuals, that every interaction matters, and that personalization programs are either in place or are being further emphasized. The imperative to create more personalized interactions is clear, as a strategic means to engender loyalty and advocacy while fending off commoditization and “low price wins” retailing. In fact, retailers estimate they could earn an extra 10 percent in revenue by offering customers and employees a highly individualized experience. However, we often see retailers fail to consider personalization from the customer’s perspective, making the issue more about selling product than building relationships.

A Consistent Lack of Personalization

As part of our IBM 2016 Global Customer Experience Index (CEI) study, we tested 155 North American retail banners on a set of 58 criteria across the 4 Cs of customer-centric retailing, all from the viewpoint of consumers through a “mystery shopper” approach.

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The results were appalling — the industry average for the 15 “Contextual” criteria was a woeful 22 percent, and only 6 retailers achieved a personalization score better than 50 percent. In fact, 34 retailers scored 10 percent or lower, and 2 retailers had 0 percent scores — providing absolutely no ability to let customers express preferences or tailor the experience to their wants and needs.

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In fact, the results were so shocking that we had to ask ourselves if our survey overreached the art of the possible, let alone the art of the practical. We don’t think this is the case, as consumers today demand these capabilities; but even so, there were a handful of questions that needed to be answered — why is the industry performing so poorly? Who is doing this better than others and why? And what actions can individual retailers take to improve?

Digging deeper into the nearly 2,500 unique personalization data points that we gathered provided a number of clues. Not surprisingly, many of the top performing retailers in terms of personalization were data mavens, collecting customer information through expansive loyalty programs and actively leveraging that information. The first tenet of personalization is to covet and gather customer information; however, the CEI revealed that gathering customer information alone is not enough.

Consumers expect a “give to get” relationship in return for providing personal information to retailers. And while, on average, retailers achieved a 27 percent score in providing “you may also like” recommendations via digital channels, only 10 percent of retailers’ call centers could make any semblance of similar suggestions. Pain points also included retail interactions with store associates, who lack the necessary tools and information to combine customer insight to the shopping occasion.

Of all the criteria, the one in which retailers ranked worst was co-creation and co-curation — involving consumers in elements of the merchandising and assortment decisions made by retailers. With an average score below 4 percent, retailers are not engaging customers enough beyond the shopping and customer service functions. Consumers are eager to contribute their opinions and ideas, particularly as it pertains to apparel, entertainment, food and other personal expression items; yet retailers are often unwilling to involve consumers in the merchandising process.

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As a global study, the CEI findings for our North American retailers mirrored the global findings of all 23 markets we studied, spanning more than 550 retail banners. Regardless of the market or retail segment, personalization has yet to become personal in the consumers’ eyes.

The Four Building Blocks of Personalization Strategy

Retailers seeking to improve the experience of consumers and leapfrog the competition need to look no further than four fundamental building blocks of personalization strategy.

  1. Create a customer-centric roadmap of key personalization capabilities which reflect the brand value promise and reflect the authentic experience you wish to provide your target consumers.
  2. Covet and capture customer data in all channels. With the explosive growth of the Internet of Things, devise strategies to gather and rationalize data — both structured and unstructured.
  3. Leverage cognitive technologies which learn to adapt with use to manage voluminous data and overcome “fear the machine” mentalities and, in turn, create more rich digital engagement platforms.
  4. For everything you give to consumers digitally, enable associates to have at least as much available to them to create a concierge service for customers.

The 2016 CEI study can help clients understand their customer experience performance against their peers and the retail sector, highlighting specific shortfalls and opportunities to satisfy customer shopping needs. For retailers executing on personalization strategies, IBM offers unique innovative solutions and services which increase the value returned and accelerate desired outcomes. We are ready to assist our clients, each on a personalized basis, to enable industry leadership and create compelling experiences.

For further information on the 2016 CEI or to set up an appointment with a CEI expert, please consider visiting the IBM 2016 Global Customer Experience Index landing page.

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