Having worked on personalization projects over the course of 10 years, I have seen a general change in retail in towards personalization. Everyone wants more data and feels that they need data and machines to do personalization. This has lead a lot of customers to feel they are not being catered to and that personalization is more annoying than helpful. That’s because retailers are doing it all wrong.
When most retailers think personalization, they confuse recommendations and personalization. The reasons for that are a few. One, they look at Amazon and see these recommendations and read reports about how Amazon is making anywhere from 25-35% of sales from personalization (again, they confuse the two). Then the retailer wants to have the same thing, I mean, who wouldn’t. But that range has never been verified so it could be totally false. Now I do think Amazon makes a lot of money off of recommendations and I have built those systems myself and they do make a lot of money. But if you have stores, let us be real about your sales growth. Verified sales impact for a brick and click retailer is about 5-10% lift in revenue because recommendations are often only used online which is still a minority of sales for most bricks and clicks retailers.. That’s what you can expect too.
Most retailers, as I said before, confuse recommendations and personalization. Recommendations are just a tool set used to express your personalization strategy. They are not the same. Recommendations are great and varied. They can do all kinds of things but there are a dozen variations on recommendation theories and if you don’t know those theories, some vendor is going to have fun selling you a ton of stuff that will probably sit around and do nothing for you but will help pay for that vendors vacation home. Which leads me to my next issue.
Another problem is the most people don’t understand the basic theories of personalization. I see this a lot, you went and talked to a vendor who tells you that personalization is X and Y, that’s because that’s what they sell. X and Y tend to be some kind of technology stack that you can buy for a few million. But the issue is that personalization is not a technology issue, it’s a behavioral and customer experience issue rolled into one. Without a clear understanding of those issues, the technology is meaningless. It reminds me of my school days. When I was in school learning accounting, my prof made us do it all by hand. Even though computers would do all that work. She said if you don’t know the formulas, you won’t know when the computer is wrong. Same thing holds true for personalization, if you don’t know the basic theories behind the technology, you won’t know when it is wrong. Of course the vendors don’t really want you to know this because if you did, you could do a lot of this yourself and then they lose money.
Finally, when a company takes a technology only approach to personalization, they end up with personalization bubble. What happens is, you end up with this hammer called technology and all problems are nails. With this hammer you try to hammer in all the nails. And you demand more data! More data is always the answer. You start to see the work as a data problem that are suppose to fit certain models and business rules. People are rather interesting creatures that tend not to follow models. So you get frustrated and demand more data! Then your experience becomes a filter bubble. You’ve captured all the data on a customer that you legally can (no need to go NSA on your customers) and you find you don’t actually know them at all. That’s because most data still lacks intent. And people don’t always want a totally personalized experience because when you do that, you remove surprise and delight. People still like to be surprised and delighted with new experiences.
Personalization is a concept that is very simple yet much nuanced. Taking the time to understand what drives personalization, will save an organization a lot of time and effort.
Byline: Edward Chenard is an expert in big data and personalization. If you would like to contact him, reach out to Edward@crosschannelprairie.com.