Large numbers of companies recognize the virtues of personalization and in fact, according to new research conducted by The Relevancy Group for email personalization vendor Liveclicker, almost nine in 10 retailers now use personalization in their marketing efforts.
Of the 147 retailers The Relevancy Group surveyed, 86%, 66% and 62% use first name, email subject line and email body personalization, respectively, making them the three most commonly-used personalization techniques. But retailers that don’t go beyond these basic tactics are likely missing out on personalization’s potential.
Retailers using purchase-based personalization techniques, which incorporate CRM data and RFM (recency, frequency and monetary) modeling, tended to have greater revenue than those relying on basic personalization.
But the more significant differences were seen with retailers using advanced personalization techniques, which generated 17% more revenue and were able to realize ROI of upwards of $20 for every dollar invested in this level of personalization.
What is advanced personalization? The study considered the use of stream-based click data and events, rules-based logic, the dynamic rendering of offers at email open, and real-time data, including live inventory, to be advanced. In general, around 50% or fewer retailers polled are using these techniques, although large percentages say that they plan to use them in the future.
Who’s doing it best?
Interestingly but perhaps not surprisingly, many of the retailers recognized as personalization leaders in Sailthru’s recently-released 2019 Retail Personalization Index are using these advanced personalization techniques.
Sephora, the top retailer in the Sailthru index, uses real-time inventory data in its personalization efforts. If it has identified a product that a customer is interested in but that was out of stock, it will send a “back in stock” email when the product becomes available again.
Nordstrom, which ranked second in Sailthru’s index, uses a number of advanced techniques as well. For example, it will alert customers to new discounts on products and brands that it knows they like, and will even inform them if some are available for in-store pickup near their location.
It’s not hard to see why advanced personalization techniques like this can deliver 20x ROIs. So why aren’t more retailers taking advantage of them?
According to The Relevancy Group, two of the top three obstacles retailers identified as standing in the way of their personalization efforts are related to IT resources. Specifically, approximately a quarter of retailers indicated that IT support for data extraction and the development of personalization applications were holding them back. A similar percentage expressed concern about security. Lack of budget was also an issue for a fifth of retailers.
The Relevancy Group suggests that the security concerns are misplaced. “Most enterprise level SaaS solutions today are robust and have proper security and encryption protocols in place,” it stated. As for the other challenges, the question for retailers is whether they can afford not to invest in growing their personalization capabilities.
Forty percent of retailers revealed that they see Amazon as a competitor, and 18% see Amazon as a threat to their vertical and/or business. But Amazon isn’t invincible and is ironically perhaps growing more vulnerable as its dominance peaks.
Over half of retailers believe that their best opportunity to compete with Amazon is to deliver more relevant and enriching customer experiences. Personalization obviously has a potentially significant role to play in doing that so in the coming years, advanced personalization capabilities could very well emerge as a key differentiator between retailers that gain against Amazon and those that lose out.