“You KNOW ME”: The high-tech / high-touch growth formula that makes business soar

Do you remember the hoopla about a million years ago when The Ritz Carlton began saying, “Welcome back” to guests who had stayed at their properties before? At the time, this level of personalization was the pinnacle of customer service, magical even. In the digital age, it’s table stakes.

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Today, we expect the companies we do business with to KNOW us, and to remember our preferences and previous interactions so we don’t have to repeat ourselves. And yet, after all these years, many companies are still not fully harnessing the power of recognizing customers, welcoming them back, and using the stored memory of the customer to advance a relationship versus the execution of a one-off transaction.

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KNOW ME, PLEASE.

Some companies are still asking the customer to retell their story with every interaction. Customers get frustrated because they need to repeat their issues to multiple service representatives or repeat their stories to retail merchants who simply don’t know them or don’t have tools to know them. As digitally savvy brands put more effort into providing a consistent experience, the demand for a one-company omni-channel customer experience will grow – as will the expectation of near-perfect execution.

Shopping service Stitch Fix has made “you know me” their growth engine from the very beginning by filling a hole in the marketplace that Founder and Chief Executive Katrina Lake discovered while at school at Harvard: shopping was a chore to many people. The number of options could be overwhelming, and personal shopping was usually only offered in upscale traditional retail stores. Lake saw an opportunity: build a profitable business serving every woman who desired a personalized wardrobe curating service. The business has continued to grow since going public and has expanded to include men’s and children’s clothing.

Stitch Fix has done a masterful job of blending data science with an understanding of their customers’ needs, preferences and shopping behavior – essentially scaling the “you know me” experience. What makes their approach hard to copy is the humanity they have wrapped around delivering relevance that matters to the customer. It’s an approach to business growth worth understanding.

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A summary of the Stitch Fix formula for “you know me”

To scale personal shopping to the masses and deliver the customized experience founder Katrina Lake envisioned, Stitch Fix needed to go well beyond utilizing the artful skills of stylists and their individual databases. They built a personalization engine that blends artificial intelligence with the expertise of data scientists and stylists to deliver reliable and relevant personal shopping experiences.

Stitch Fix employs a three-part process to get “you know me” right. First, they ask users for measurements, style likes and dislikes, customer lifestyle and clothing needs, along with photos. They also ask for any Pinterest pins the client may have marked, and cleverly use those pins in programmed algorithms to help clarify style beyond what someone can fill out on a form. This rare blend of humanity, expertise and data is Stitch Fix’s first step to delivering personally curated clothing consistently to masses.

Next, they use data science to deliver a scalable personalized experience. The algorithms that come out of the data provided, overseen by Eric Colson, Chief Algorithms Officer at Stitch Fix, spit out suggestions for stylists to utilize – everything from sizing to location, geography, body type, fabric preferences, colors and pattern preferences. These tools are so potent that they can narrow down many options of, for example, pants, to the few pairs that the customer is statistically likely to keep.

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Third, Stitch Fix’s thousands of stylists work through the rich content to humanize and personalize the experience. They create customized boxes of five items for each of their clients. As a client’s orders increase, the data science improves to deliver more results that are spot on for customers. Stylists also increase their personalization as they get closer to clients. My friend Mindy, for example, recently requested loose and comfortable clothing in preparation for a surgery. Her stylist sent the customized order, and also a floral bouquet with her best wishes for a speedy recovery.

Eric Colson, Chief Algorithms Officer, has said, “Our business is getting relevant things into the hands of our customers… We couldn’t do this with machines alone. We couldn’t do this with humans alone. We’re just trying to get them to combine their powers.”[i]

Stitch Fix delivers relevant, human experiences… and grows from it

Since its public debut in late 2017, Stitch Fix has seen its “you know me” growth engine flourish. Their subscription service is up nearly 75 percent since its IPO, with the stock up as much as 200 percent.[ii]  Their power of “you know me” derives from their ability to build a business based on customers accepting the clothing recommendations in their Stitch Fix shipments. To provide perspective on the power of this exacting information, at Amazon 35 percent of purchases are driven by recommendations. At LinkedIn, it is 50 percent. For Stitch Fix, 100 percent of purchases are recommended. Stitch Fix has become profitable when other retailers are struggling; 2018 net revenue reported was $1.2 billion, an increase of 26 percent year over year, with net income of $44.9 million.[iii] Stitch Fix has nearly tripled its head count over the past two years and now has 2,800 mostly part-time stylists, many working from home, and more than 1,000 warehouse workers across five locations.

Jeanne Bliss is not an IBM employee and her views are her own. This blog is adapted from Jeanne’s recent book Would You Do That to Your Mother?

[i] Source: Gaudin, Sharon. “At Stitch Fix, data scientists and A.I. become personal stylists.” Computerworld, May 6, 2016. https://www.computerworld.com/article/3067264/at-stitch-fix-data-scientists-and-ai-become-personal-stylists.html

[ii] Source: Vena, Danny. “Is Walmart Gunning for Stitch Fix?” Motley Fool, April 17, 2019. https://www.fool.com/investing/2019/04/17/is-walmart-is-gunning-for-stitch-fix.aspx

[iii] Source: “Stitch Fix Announces Fourth Quarter and Full Fiscal Year 2018 Financial Results.” October 1, 2018. https://investors.stitchfix.com/news-releases/news-release-details/stitch-fix-announces-fourth-quarter-and-full-fiscal-year-2018