Brands Gain Substantial Customer Loyalty Through Personalized Experiences

No longer is personalization seen as a “nice thing to have” among loyalty marketers. Personalization is viewed as a crucial piece of the customer loyalty puzzle that will have a longstanding impact on sustained brand advocacy.

Research from a new report by The Boston Consulting Group (BCG) shows brands that create personalized experiences by integrating advanced digital technologies and proprietary data are seeing revenues increase by six to 10 percent, which is two to three times faster than those that do not.

“In many consumer categories, high-value customers drive 70 percent or more of the value for companies,” said Mark Abraham, a BCG partner. “Brand individualization unlocks the ability to enhance loyalty with these and other customers by tailoring the brand experience to each contextual user journey.”

The BCG survey of personalization programs at more than 50 companies in 10 industries underscores the potential value to be achieved but also highlights the execution challenges, the study notes.

Many companies are making significant investments in personalization: Half of the survey respondents have more than 25 employees dedicated to personalization programs and are spending more than $5 million a year on personalization campaigns. What’s more, at half of the top performers, the CEO, and the board oversee personalization programs; which is the case at only about 20 percent of total companies.

“For incumbents to defend—and expand—share, they need to reimagine their business with an individualized value proposition at the core, merging physical and digital experiences to deepen their customer connections,” said Steve Mitchelmore, a BCG partner. “They need to put brand individualization at the forefront of their strategy agenda to influence everything that they do, including marketing, operations, merchandising, and product development.”

But, only about 15 percent of companies can be considered true personalization leaders, and most of them are tech companies and digital natives, the study shows. Another 25 percent are experimenting with 1-to-1 campaigns, but only 13 percent say they deploy truly customer-specific individual messages and only 7 percent manage fully integrated tailored communications across all channels. The remaining 65 percent are still using segmented marketing or even mass-market approaches.

Personalization has always seemed like more of an aspirational goal for loyalty marketers because practical execution can be very challenging.

The report reveals that brands face significant hurdles in realizing the full potential of personalization.
These hurdles include the technical barriers such as poor data centralization (companies collect ample data, but struggle to aggregate it and form one universal view of each customer), legacy technology that doesn’t support 1-to1 communication at scale, and insufficient measurement capabilities. Nearly 60 percent of companies struggle to effectively measure and attribute the impact of campaigns, limiting their ability to learn from customer feedback and adapt accordingly, which is at the core of individualizing the brand experience.

The lack of dedicated personnel is a common barrier cited (74 percent), but the majority of companies also face hurdles that are organizational and cultural in nature. These include insufficient cross-functional coordination (61 percent), inadequate creative processes (57 percent), lack of talent and knowledge (54 percent), and cultures that are not conducive to innovation (52 percent). More than 60 percent feel that they lack a clear roadmap, and half cite the absence of a clear business case and objectives.

At 60 percent of companies, the report shows, no one team is responsible for personalized cross-channel communication to consumers, and 54 percent of companies say they have no or low cross-functional coordination for personalization efforts. 

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