Most retailers are constantly competing with global Goliaths such as Amazon.com, Walmart, Best Buy, Apple Store and other dominant players.
Recently retailers have been consumed with questions about commerce viability, the booming "Internet of Things" and optimal e-commerce strategies. It’s clear that digital retail has entered a critical juncture in its history – both as a conduit and a disrupter of business. Disruptive technologies in social commerce, mobile and customer experience are giving even more rise to the "power of the customer," and once again, retailers must adapt their strategies to retain and attract new business.
Customer Centricity Will Define Ecommerce in 2015
Most retailers are constantly competing with global Goliaths such as Amazon.com, Walmart, Best Buy, Apple Store and other dominant players. To remain competitive, they need a personalization strategy to engage and ultimately convert customers. They should let customers determine what they would like to see and not see, rather than making educated guesses at an organizational level. This personalized approach gives customers a greater sense of ownership and a feeling that the retailer understands their needs, knows what they want and subsequently sends them relevant information.
As customers express explicit desire to get personalized offers, it’s essential to get back to the basics of customer analysis. Ultimately, the power of personalization comes down to one thing: customer centricity and the associated deep dive analytics into the user experience and behavior.
Retailers’ current approaches to personalization are mixed. While some organizations think of personalization as an advertising approach, others consider it a strategy for customizing products and services for "markets of one" – and still – others consider it to be a combination. Further, some retailers apply personalization broadly, while others limit its application.
Diverse personalization approaches have wildly different costs and operational impacts. Personalizing a product offer, for example, is far less complex and costly than personalizing the product itself. Some forms of personalization are being driven by consumers, while others are being presented to consumers by organizations attempting to create new business models or competitive advantages.
Various dynamics play into increased adoption of organization-driven personalization:
- Growing consumer comfort with sharing personal information.
- Increasing use of multi-screen devices, which provide a bridge for online personalization strategies to enter brick-and-mortar settings.
- Time-starved consumers who want to do business with organizations that cater to their requirements.
- Shrinking wallets looking for more and better deals.
- Increasingly sophisticated data collection and analysis technologies.
- Universal commerce advancements that enable organizations to blend data and insight across all consumer interactions, no matter where they occur.
The path to achieve personalization is feasible for many retailers with the advancement of technology and systems. However, before adopting any new technology enabling personalization, retailers need to create a clear blueprint of their strategy that takes into account customers’ previous purchase history, current emerging needs, micro and macro-economic factors, behavior and attitudinal insights.
Discount and Coupon Power in Hands of the Customer
Most ecommerce companies provide discounts based on prices or bundled products that are mostly likely determined by the business. However, during this disruptive juncture, more companies are enabling customers to decide which discounts they take advantage of, and to what extent. This is not a bargain/negotiation, but more of a choice/wish list scenario that could be a win-win for the organization and the customer.
Ecommerce organizations often offer lucrative incentives to tap into customers’ psyches. For instance, offers such as "purchase in the next hour to receive 20% off!" and "buy one, get one 50% off!" are designed to garner quick attention while enhancing a retailer’s reputation and goodwill among customers. However, who isn’t offering discounts or coupons these days? Email inboxes are overloaded with offers that end up in the junk folder or trash. Personalized offers, though, are getting more and more attention. Consider these personalization tactics to drive retention and loyalty:
Customize perks and coupons based on previous transactions and current needs.
Once a retailer has data on a customer’s last 10 transactions, insights can be generated providing key views of last products purchased, which categories were revisited more than once, which payment options were selected more frequently, etc. This data can be used as intelligence to create personalized offers and promotions completely configured per customers’ attitudinal and behavioral history.
Invite customers to participate in a rewards or loyalty program.
Different tiers or segments of customers can be categorized within a loyalty program according to their recent purchase amounts and/or purchase frequency. Retailers can offer special incentives to loyal customers as a way to increase conversions while rewarding them for their repeat business. Loyalty programs do not need to be complex. They can be as simple as rewarding customers on their second purchase at the online store or after a set dollar figure. Or, retailers can offer higher discounts to loyalty club members based on their total spend.
Offer customers credits in lieu of discounts.
Rather than offering a flat discount, retailers may want to consider credits to an online store. For instance, offering a $10 credit vs. 10 percent off the entire purchase. Credits often feel more tangible and make consumers more apt to spend so they don’t "lose" the credit and waste money.
Take a radical approach to discounts and coupons.
Have you considered letting customers offer a price or discount they would like to pay for a particular product or service? This can be experimented for a loyal customer base. Similar to wish list or watch list, customers are allowed to create a discount/promotion list, or make an offer list. By utilizing this option, customers can provide the current and future purchase needs, allowing retailers to better understand customer preferences and also have better bargaining power with whole sellers, distributors or manufacturers.
Customized pricing techniques and virtual technologies enabling customers to design products from a menu of attributes will continue to drive personalization. Increased adoption will ultimately disrupt retailers’ current operating models and have a far-reaching impact on the entire ecommerce industry. Personalization and custom discounting strategies will soon become the norm, and retailers that adapt more quickly have more opportunity to increase their loyal base before their competitors do.
by Anees Merchant, Senior Vice President – Digital, Blueocean Market Intelligence.