Why segmentation is NOT personalisation

shoppers

For most shoppers, the Christmas season can mean early mornings hunting for the perfect gift for friends and family. But for retailers, Christmas presents an opportunity to boost revenues and profit. In the UK, the latest research from Mintel predicts that Britain’s retail sales will reach £47.7 billion in December, representing a 4% growth compared to last December.

This follows on from a successful November 2018 when online sales as a percentage of all retail exceeded 20 per cent for the first time ever, according to the Office of National Statistics. For online marketers, that is a great reason for Christmas cheer:

ONS stats

With the continued growth in online, how can retailers meet shoppers’ increased expectations while boosting sales this festive season? Ultimately, it boils down to how well retailers keep up with today’s consumer. This consists of focusing on how they like to shop, what motivates them to buy, and how to improve customer engagement.

As part of these customer engagement efforts, marketers occasionally use the term segmentation and personalisation interchangeably.  And why not?  Both are trying to achieve the same objective – engaging the customer at scale.

But let’s clear up a common misconception: customer segmentation is not the same thing as personalisation. Segmentation is the process of discovering groups of individuals with a broad set of attributes, such as gender, age, purchase history, or other attributes. Personalisation, on the other hand, is being able to recognise the tastes and interests of each individual consumer, and being able to communicate with that person in a way that respects their personal tastes.

Personalisation is a step up from segmentation. It is helping to merchandise products that are relevant for each shopper. Personalisation places the shopper at the centre of the retailing experience, rather than obliging them to scan their emails in the hope of discovering something that matches their specific preferences.  At its best, personalisation combines the knowledge of an experienced personal shopper with the convenience of the online experience.

What is email personalisation?

Let’s start at the beginning: what precisely is email personalisation? The hint is in the name: it’s about delivering personalised experiences that speak to each consumer, recognising their individual tastes, and serving their wants and needs. It’s all about providing the right message to the right person at the right time.

Today’s consumer has an abundance of choice and limited time. If they don’t see the perfect product almost instantly on one website, they’ll bounce to check out another retailer. Personalisation is the ideal mechanism to address these requirements by showing precisely what a shopper likes, without them having to do too much, and perhaps without even realising they needed something.

Personalisation in one format or another has been around on the web for some years now. For example, you may have received an email from a retailer that had your first name in the subject line. That is a simple example of personalisation at work. Many marketers have seen increased open rates from this tactic of adding the recipient’s name in the subject line.

Here are a few other simple email personalisation techniques you may have come across: getting offers for things happening close to where you live; getting a promotional coupon on your birthday;  receiving promotions for products similar to ones you’ve bought recently.

How personalisation improves the retail experience

Personalisation is a relatively straightforward idea, but with some sophisticated concepts behind it. Delivering a genuinely personalised retail experience depends on the analysis of a vast number of interactions and data points across sessions, using a sophistication that is not possible in ESPs or even offline. Imagine a personal shopper frantically trying to rearrange the promotional displays every time a different customer walked in. That’s effectively what’s happening with email personalisation, with each recipient getting their own version of the shop, tailored to their individual tastes – but it’s happening seamlessly and smoothly.

This is crucial because customers are impatient. If you merchandise products that are not relevant for that specific person, you’ll lose them in seconds. With the typical newsletter conversion rate for retail being about 1 per cent, that means 99 per cent of your email database is deleting the newsletter without purchasing anything. If you have a decent list size, a boost to that 1% conversion rate would mean a considerable revenue uplift.

Personalisation is actually, personal. It requires aggregating all the data you have on each shopper and using smart algorithms to create a nuanced and evolving picture of that shopper’s tastes and interests. Also, knowing all the attributes of each product in the catalogue.  Then analysing all that data to make the most accurate prediction we can about what content is likely to engage each shopper as a unique, singular human.

The benefits of personalisation

When done properly, email personalisation is the online equivalent of having your own VIP personal store assistant, who lays out everything to suit your tastes and interests, and who are on hand to make individually-relevant product recommendations. That’s why 75 per cent of shoppers say they like when content is personalised for them, increasing aggregate retailer revenues by approximately 8%.

For the consumer, it delivers a better experience – shopping is more pleasurable and intuitive, and they see what they want more quickly.  And for retailers, this improved engagement leads to higher revenues and increased customer loyalty.

What personalisation means for shoppers

When email content is relevant for each recipient, it delivers a genuine 1:1 retailing experience. This minimises the time required by shoppers to discover the products that are relevant to them. It also reduces the reliance on traditional product discovery methods, e.g. search. This way, consumers can even find what they need without having to use their keyboard, which is important in a world where c. 50% of emails are opened on a mobile device.

Email personalisation also helps deliver a more personal retail experience and can help put a smile on the shopper’s face. Personalising the email experience helps them to feel more valued as a customer so more likely to complete the purchase, with personalisation intelligently eliminating the barriers to purchase at every step of the purchase cycle.

What personalisation means for retailers

‘Know the customer’ has always been a great way to boost consumer engagement. This applies as much for large retailers as it does in a corner shop. Personalisation gives online retailers another advantage over offline retailers, who cannot reshape the store for every shopper who walks through the front door.

Machine Learning enables you to do this for every single shopper at any scale – even if you have millions of customers.  This means you no longer have to depend on generalised personas or segments to shape the shopping experience, personalisation uses machine learning to identify what is interesting for each shopper, intelligently customising the retail experience in real time.

By immediately delivering the right content for each shopper through individualised product recommendation, shoppers are more likely to purchase and add more items to their basket. That means increased lifetime value per customer, which is excellent news for the retailers’ bottom line.

How personalisation is delivering big wins for e-commerce sites

Personalisation provides an unrivalled understanding of what is relevant to each shopper. Email content can be ranked for each consumer with a degree of AI-driven serendipity, using smart product recommendations and a personal touch to keep consumers returning to your website.

Crucially, personalisation also helps to organise product catalogues in a way that is personalised to each consumer. It enables you to rank categories and promos that showcase the most appropriate categories as well as products for each shopper, upranking them at the time they will have the most impact.

Personalisation can help satisfy the modern shopper by knowing their individual tastes and interests, and matching those interests with a deep understanding of product-level data. This powers a great retail experience for your customer and is more likely to generate a sale. It is the best way to delivering an optimised shopping experience for your email database, which will drive higher revenues and increased loyalty – a win-win for retailers and shoppers alike.

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