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Market to Me

The Next Step in Personalisation

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Executive Summary

The retail industry is currently focused on how to gain market share and grow sales in a retail storm that will be weathered only by the dilligent and the bold.

Studies reveal that visitor-to-sale website conversion rate currently averages 2-3 percent for most ecommerce sites (Charles Nicholls), while in the store statistics suggest an average conversion rate of only 20-40 percent (Experian). It would appear retailers are missing a trick. In this article, we will focus on the power of personalisation to increase sales conversion rates both online and in store.

This year will be the turning point for many retail businesses. It is critical for the industry to understand the psychology of today’s consumer and capture sales at every reasonable opportunity. Complacency in this climate goes hand-in-hand with failure. Successful retailers have always known the sweeping demand curves of their customers, but currently the stakes are high and require more precision in decision-making than ever before. Fundamentally, this is a complex moment for retail. What will help retailers win a customer’s business in a sea of uncertainty and desperate competition?

Confident and well-informed purchasing decisions need to be part of every successful retail strategy. Retail profit is driven by offering shoppers a heady personalised concoc-tion of the right product, in a variety of places and at reassuring prices. There are after all endless choices for shoppers to make. Today’s smart retailers offer a wealth of choice in an environment supported by high quality information about products. After all, overloading the wrong kind of information can create confusion or inertia in shoppers. Instead, relevant data and promotions must drive shoppers towards the action of informed purchasing. Oracle is uniquely positioned to help retailers build personalisation strategies, enabling retailers to go to market in a trading environment that demands every single customer interaction be effective.

Market to Me

The Next Step in Personalisation

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A cross-channel approach is becoming ever more important in delivering against this goal. Consumers are increasingly using multiple channels to research, evaluate and purchase goods, not only for convenience but to ensure that they are getting a person-alised offer that best meets their needs. This could be comparing categories of products online before purchasing through ‘Click to Collect’, or checking a competitor’s price on a smart phone while standing in a local store, or engaging with customers through social media channels to keep them informed of key launches or availability of favourite items. Ultimately, consumers opening their wallets need to feel valued and believe that the retailer is “marketing to me”. In this climate, personalisation becomes an ever powerful selling tool.

A Panacea of Personalisation

A recent Oracle survey into the perceptions of digital natives (born after 1985) from the UK, France and Germany of their interactions with retailers today revealed that this group want differentiated offers – whether this be products, ranges, brands, pricing and services – based on their preferences. In their eyes, technology plays a key role in deliver-ing differentiation and personalising the offer to customers. Respondents, particularly in France and Germany, are most likely to use technologies in store to identify promotions, coupons or loyalty programmes. Email is overwhelmingly the channel that consumers prefer to be contacted with offers, yet staggeringly only 20% recalled seeing a compelling personal marketing experience or offer. This figure indicates that retailers are over-whelmingly missing an opportunity to communicate more effectively and personalise of-fers to consumers. The survey also revealed that price and promotions and product range are the key factors that motivate a purchase. (Visit: www.oracle.com/digitalnatives).

Another recent piece of research from the e-tailing group looking at US consumers reveals very similar results. Consumers seek the best perceived value for their purchases. Although pricing is important, only half of respondents are willing to pay full price and it seems that the value-add or the broader offering is now key to making the sale. For instance, Nordstrom has made shipping and returns free on all online purchases, which has implications for customer and brand loyalty. Free shipping and returns were rated as the most critical criteria (over 70%) of any promotional feature on a retailer’s website. Consumers spend more time online researching products than ever before. Providing tailored information and interactive features that support personal product selection and comparison, combined with effective search tools to quickly find the right product is also key, as demonstrated by Best Buy or Argos.

Consumers are increasingly using multiple channels to research, evaluate and purchase

goods, not only for convenience but to ensure that they are getting a personalised offer that

best meets their needs.

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So if we are to consider what perfection in personalisation looks like, it needs to incor-porate the entire offer – from product range, price matching and pertinent recommen-dations, to promotional strategies that include free shipping, convenient delivery times and free returns, and tying purchases into loyalty points and rewards that encourage customer retention. For customers, the shopping experience needs to be consistent and personalised across all touch points including the store, web commerce, mobile, contact centres and social media channels.

How can a personalised offer be achieved? There are multiple solutions to help retailers to flexibly and intelligently target and engage with customers but in reality, it all starts with data. Data is more of a valuable currency in the retail economy than ever before and there is literally more data in retail than ever before. A recent Aberdeen Group study es-timated a 40% year on year increase in retail data volume and complexity. Turning data into meaningful and actionable insight that retailers can use to engage with customers requires sophisticated technology. It needn’t cost an arm and a leg, but it could cost any business that ignores the sophisticated levels of decision-making available in retail today.

From Search to Sales—Collating Data to Make Your Business Grow

Forrester reports that internet retailers spend three times as much (as a percentage of revenue) on technology than their bricks and mortar counterparts. When you consider the growing share of pure-play ecommerce sales is growing rapidly (up 13% in Q3 2011) and is projected to surpass offline sales in dollar value by 2020, it is important that retailers look to invest wisely in technology to help them gain actionable insight.

Most retailers are not organised currently in a manner that facilitates collating data for such an outcome. Retailers have a plethora of available data sets, but this is all currently sitting in siloed trenches within their businesses.

Simplifying a complex systems environment is a significant challenge as retailers generally still have multiple legacy systems that co-exist with new channel technologies. This creates not only more silos of data but also duplication of business information, redundancy in operations and opportunities for errors. Retailers now hold data on search and recommendations, sales, transactions, inventory, promotions, customer preferences and loyalty, and price, alongside the mass of data on financial, HR, planning, supply chain, ecommerce – the list grows each minute of operations.

There are multiple solutions to help retailers to flexibly and intelligently target and

engage with customers but in reality, it all starts with data.

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Data has the power to deliver improved business performance. But it also has the poten-tial to be disruptive. In a data-distributed environment, getting a 360-degree view of a customer is tough. That customer expects a retailer to have all of the necessary informa-tion, but the retailer may not have it in perfect alignment due to multiple data sources. It is a significant problem to be addressed. The goal is to align traditional information and new sources of data such as social media to create a transparent, channel-agnostic, personalised experience for customers. Taking control of the disparate data is a require-ment to meet this goal.

If retailers own their own data and know how to work it, then they have more chance of encouraging shoppers to part with their money. Take Tommy Hilfiger as an example. The iconic fashion brand deployed a web commerce platform with automated recommendations and merchandising to deliver a personalised, relevant shopping experience to each customer, more than tripling sales in its first year. Early results reveal that more than 30 percent of online sales are influ-enced by recommendations.

Another approach to consider is that of Ikea France using online chat capabilities to support customers engaged with its ecommerce operations. By enabling more personalised, interactive assistance to visitors of Ikea.fr, this is helping to generate higher conversion rates, increase average basket sizes and reduce drop out rates on the website.

From Social Networks to Sales—Turning Affiliation into Actionable Business Insights

At this point, it would be wrong to ignore the popularity of social sites and user-gener-ated content and how this is increasingly affecting the way consumers research and shop – and shifting the way companies market to them. In part this is due to our acceptance as consumers online that if we share data, we can benefit from it, but from a retailer perspective, it is enabling them to better market more relevant information, deliver-ing improved suggestions, recommendations and promotions. WalMart’s Shopycat and GiveEmThis.com are two examples where information provided on Facebook is used to provide friends with suggestions for gifts.

The goal is to align traditional

information and new sources of

data such as social media to create

a transparent, channel-agnostic,

personalised experience for

customers. Taking control of the

disparate data is a requirement

to meet this goal.

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Facebook and Google have become data driven businesses. The data they hold about cus-tomers preferences is hugely valuable. Facebook in particular is a green field for launch-ing promotions with new and returning customers, many of whom use Facebook to look for coupons, promotions and special offers from retailers.

Returning to the e-retailing group survey, responses reveal that 81% rate and review purchases, and are embracing newer social tools such as ‘liking’ a retailer and ‘sharing’ products they are considering or have purchased. The influence of such recommendations on potential and existing customers will continue to flourish and retailers need to lever-age this information and utilise a myriad of strategies when developing offers.

However, its not just about peer recommendations. A recent IMRG study revealed that 12% of social media users have been encouraged to buy an item from a Facebook store thanks to site advertising. Placement-based advertising offers yet another channel for retailers looking to target consumers and although the finding above suggests that more work needs to be done in personalisation, these are an easy hit for retailers who can manage this process effectively without the need to purchase additional technologies. Search-based recommendations on the other hand are based on complex scientific algo-rithms provided in the form of predictive recommendation engines that automate and personalise the process. Although an investment needs to be made, implementation has delivered staggering financial benefits around larger order sizes and online conversion rates.

81% rate and review purchases. The influence of such recommendations on potential and

existing customers will continue to flourish and retailers need to leverage this information

and utilise a myriad of strategies when developing offers.

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Delivering Connected Personalised Multi-Channel Sales

As we have alluded to previously in this article, delivering a connected cross-channel experience is a subject that is gaining momentum in retail boardrooms across the world. Empowered by anytime, anywhere access to information, consumers are now blending retail touch points. Earlier in this piece we stated that our digital natives want differenti-ated interactions based on how and when they want to interact. The provision of a cross-channel retail model is no longer enough. If consumers are using a mix of store, online and mobile channels to search, compare and buy products at a time that is convenient to them, then retailers must ensure they focus on personalising each touch point with each shopper to maximise the outcome of that interaction. Not only does this have the poten-tial to convert browsers into buyers and dramatically improve conversion rates but it can also increase order values and drive repeat purchases and customer loyalty. Retailers must transcend retail channels ensuring that every aspect of their business is aligned in sup-port of that customer’s priority, wherever and whenever that consumer chooses to inter-act. If consumers are not yet receiving the personalised experience at every touch point, retailers are clearly missing opportunities around personalisation and recommendations.

Our perspective is that retailers need to align all of their operations and connect multiple silos of data in order to move to an omni-channel approach that leads to a thoroughly connected experience. By that we mean both a consistent customer experience, AND a consistent business experience that aligns the planning process with merchandising execution, the supply chain, store operations, marketing operations and all customer touch points.

The objective is to create what we term as “your experience platform”. By con-necting customer interactions seamlessly across all channels and each lifecycle phase, by enabling smarter decisions from connecting siloed sources of data and embedding these with science and business intelligence to drive actionable in-sight, and by optimising operations to align every aspect of the business to gain efficiencies and economies, retailers can achieve this experience platform tuned to their specific business strategy.

It takes all three goals working in unison to create this new customer experience. Personalisation offers huge opportunities for those retailers who can engineer their businesses not only to identify the most profitable and accurate recommen-dations but also in closing the loop and fulfilling on the customer demand.

The provision of a cross-channel retail model is no longer enough. If consumers

are using a mix of store, online and mobile channels to search, compare and buy

products at a time that is convenient to them, then retailers must ensure they focus

on personalising each touch point with each shopper to maximise the outcome of

that interaction.

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Reimagine Growth: Building Foundations for Expansion December 2010

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Copyright © 2011, Oracle and/or its affiliates. All rights reserved. This document is provided for information purposes only and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission.

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Copyright © 2012, Oracle and/or its affiliates. All rights reserved. This document is provided for information purposes only and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchant-ability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission.

Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners.

Intel and Intel Xeon are trademarks or registered trademarks of Intel Corporation. All SPARC trademarks are used under license and are trademarks or registered trademarks of SPARC International, Inc. AMD, Opteron, the AMD logo, and the AMD Opteron logo are trademarks or registered trademarks of Advanced Micro Devices. UNIX is a registered trademark licensed through X/Open Company, Ltd. 0611

Hardware and Software, Engineered to Work Together

Market to Me: The Next Step in Person-alisation

April 2012Author: Sarah Taylor

Oracle CorporationWorld Headquarters500 Oracle ParkwayRedwood Shores, CA 94065U.S.A.

Worldwide Inquiries:Phone: +1.650.506.7000Fax: +1.650.506.7200

oracle.com