Boston Consulting Group recently released the results of a survey it conducted on the personalization practices of more than 50 brands. It is a fascinating read. The case that BCG lays out is stark and one of a rapidly changing world, not just in retail, but 9 other industries as well. If there is one consistent prediction that BCG makes, it is that this rapidly changing world will produce new winners and losers.
The report estimates that companies excelling in personalization today already experience a 6-10% increase in revenue as a result. But what is most shocking is that BCG predicts that over the next 5 years, across retail, financial services, and healthcare, “personalization will push a revenue shift of some $800 billion to the 15% of companies that get it right.” In short, personalization is not about growing the pie. It is about cutting yourself a larger slice.
What is not surprising is that digital native brands have a head start in the personalization race. But that does not mean that brick and mortar brands should pack up and go home. In fact, BCG only identifies 15% of companies as “true personalization leaders,” and they are not all digital native brands.
So what is holding companies back from winning the personalization race? The answer is a combination of four factors that BCG identifies:
Strategic design: Personalization starts with using data and customer centric thinking to uncover unmet customer needs in order to solve those needs at scale. The examples that BCG highlights, Disney’s MagicBands and Carnival Cruise’s medallions, are the epitome of design thinking, but are probably out of reach for most brands to replicate. Luckily the definition that BCG puts forth lends itself to smaller initiatives as well. Sephora’s lipstick app is a good example of that, but one could easily imagine any initiative that delivers in BCG’s words, “personalization with a purpose.”
Data and analytics: Efforts to corral disparate data sources are a prerequisite to effective personalization. According to BCG, more than half of those surveyed reported that they have all the data they need, but “integrating and using it—that’s the hard part.” Additionally the report states that, “developing the necessary machine-learning algorithms to drive the right customer-level interactions are beyond most organizations’ current capabilities.” So in summary, even brands with rich data repositories will still have to dedicate talent and budget, and partner with the right vendors to properly leverage that data for true personalization.
Technology: BCG makes the case that it is time for brands to start shopping for open systems—ones that have the, “flexibility to support existing and emerging technologies.” Today, many brands find themselves the owners of, “Franken-systems that don’t play well together,” precisely because of the integration pains legacy systems have had. Instead, BCG advises brands to focus on systems with a, “robust layer of application-programming interfaces,” that can ensure easier integrations with current and future technologies.
Ways of working: BCG reports that many brands are not yet equipped for the collaborative world personalization requires. In fact, BCG states that, “54% of companies say they have no or low cross-functional coordination for personalization efforts.” Many companies have overcome this issue by creating personalization teams, meant to drive alignment across departments. These teams can dramatically accelerate campaign creation, deployment, and shorten feedback cycles and iterations. It is clear that many companies could benefit from such changes. BCG reports that “57% of companies take three to six weeks to create a campaign (another 22% take several months) and up to four weeks to measure the results.” This fact is in stark contrast to what BCG reports of top performers which have on average 20 campaigns running per month, and drastically shorter feedback cycles.
In all, the BCG study is worth reading and, perhaps, reading twice. If nothing else, it provides great context to the shifting world we see around us, and brings into focus what the winners of this world are doing well. Be warned though that internalizing the report’s core findings will take some time. All of the four factors require sustained focus to advance, but with $800 billion to be divvied up between the “true personalization leaders,” the payoff promises to be worth it.