Retail Gets Personal:

Accelerating the Journey

to Personalization

Based on a survey conducted among 2017

World Retail Congress delegates, this report
reveals findings on retailers state of
implementation and attitudes towards
personalized marketing, as well as common
challenges they face during the journey.
Executive Summary
While some retailers are forging ahead with their personalization
efforts and initiatives, others are grappling to transform their
marketing organizations capabilities so they can engage with
customers in a more targeted way.

Thats the finding of a recent survey conducted with retailers attending World Retail Congress
(WRC) 2017 by Periscope By McKinsey. The research was designed to:

better understand the attitudes of retailers towards personalized marketing

where they are on the personalization journey, and
the challenges and benefits they are encountering along the way.
The survey reveals that while 95% of retailers say personalization is a top strategic priority for
their business only 15% have successfully implemented new automation technologies and
new ways of working to make personalization at scale possible.

The research also highlights how, when done right, personalization has the power to increase
customer engagement and loyalty and unlock revenue growth. But thats not all.

Indeed, those retailers already pursuing a more personal approach to their customers say
their new found ability to dynamically tailor messages and offers to individuals, based on their
actual behaviors, has boosted the efficiency of their marketing spend.

The WRC 2017 survey participants included retailers, brands and shopping mall operators
from Africa, Asia, Australia, New Zealand, Europe, the Middle East, and South and North
America, operating in the Fashion, Grocery, Apparel and Online Speciality sectors.
As the findings reveal, while personalization is a hot buzzword in the retail community right
now participants confirm that capitalizing on the potential involves the precise coordination
of people, processes and technologies.

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Key Findings: PersonalizationDrivers
Customer Centricity is King
The survey shows that personalization is viewed as a strategic priority by 95% of WRC
retailers, with 64% saying its a Top 3 priority for their organization.

How important is Personalization when ranked alongside your other marketing

initiatives this year?

Important
In the Top 3 In the Top 5 Top but not in Not
priorities priorities priority Top 5 important

64.10% 23.08% 7.69% 5.13% 0%

Asked about their reasons for undertaking personalized marketing, 46% of respondents
confirmed that implementing a more customer-centric approach depends upon it. A
further 36% went on to say that changing consumer expectations and demands meant
personalization was a necessity for their organization.

What is your top reason for doing personalized marketing?

Be more Meet evolving Use marketing

customer- customer budget Boost
centric needs efficiently revenues

46.15% 35.90% 10.26% 7.69%

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But delivering more accurate, relevant and personalized customer experiences and
customized journeys that increase engagement and loyalty is just part of the motivation
forretailers.

One-tenth of survey participants believe that moving from a mass marketing approach
will enable them to use their marketing budget in a more efficient way, with a further 7%
anticipating they will be able to leverage personalization to boost revenues.

Key Findings: The PersonalizationRoadmap

Many Retailers are Still Experimenting with
PersonalizedMarketing
Despite being aware that consumers have been calling for greater personalization for some
time, many retailers are still struggling to improve the customer experience with targeted offers
and messages.

Just 15% of respondents had fully implemented personalization initiatives, with 66% of the
fully implemented confirming they were already seeing the benefits.

What is the current status of your personalization efforts orinitiatives?

43.59% 02.56%
On the roadmap for 2017/18 Other

05.13%
Currently not a focus for the next 24 months

05.13%
Requirements definition phase

05.13%
Fully implemented, not seeing benefits yet
28.21%
Proof of concept phase 10.26%
implemented Fully implemented, already seeing the benefits

And while almost one-third (28%) confirmed they had completed a proof-of-concept
implementation, with a further 5% in the requirements definition phase, almost half (43%) of
respondents said that personalization efforts and initiatives are on the roadmap for 2017/18.

While most retailers are still figuring out how to get started, or experimenting with solutions,
those who commit and invest in figuring out how to do personalization at scale may win
theday.

Harnessing Data is Key

Asked which technologies and tools companies use, or plan to use, to implement their
personalized marketing strategies, 82% placed CRM solutions in first place, followed by digital
click tracking software (41%) and a data management platform to join up internal and external
data for a single customer view (38%).

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Which tools do/will you use to collect the data needed to create personalized content?
Select all that apply

Customer
relationship Digital click Data Ad-hoc
management tracking management analytics
(CRM) software platform software Other

82.05% 41.03% 38.46% 17.95% 5.13%

Clearly, respondents acknowledge that bridging the gap between data sources to create
a 360 degree view of the consumer is key to ensuring that promotions have both context
andimpact.

Automated Execution Across Multiple Channels

When it came to the automated delivery of personalized marketing campaigns, two-thirds
(67%) of survey participants confirmed that their content management system was the most
important piece of technology they relied upon to manage creative assets and copy.

Which tools do/will you leverage to execute personalized marketing campaigns?

66.67% Content management system

55.56% Distribution platform

52.78% Automated campaign management system
16.67% Professional personalization software suite

This was followed by automated campaign management systems (56%) to trigger re-targeting,
email campaigns, targeted promotions and next-best-action analysis. Finally, 53% of
respondents put their distribution platform in third place, utilizing this to push out notifications,
emails and other communications.

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In terms of the channels most retailers use or plan to use for the delivery of personalized
promotions, social media and email both topped the list (74% each), followed by App push
messaging (51%) and direct mail (30%).

When it comes to in-store interactions, over one-quarter (25%) plan to enable enhanced
in-person interactions informed by customer data while 20% are utilizing geo-location and
display technologies to deliver personalized promotions to consumers.

Which channels do/will you use for personalized promotions? (select top 3)

74.36% 5.13%
Email Other

28.21%
51.28% In-person interactions
App push messaging

30.77%
20.51% Direct mail
Display

15.38% 74.36%
Video Social Me

Key Findings: Top Challenges

Siloed Processes and Data Hamper Efforts
Only 17% of respondents report having successfully consolidated and simplified their
technology landscape into a single personalization software suite. For those that had not,
delivering personalized promotions was proving an uphill endeavor.

More than two-thirds (67%) reported that gathering, integrating and synthesizing data was
their greatest challenge. Similarly, the ability to align across marketing and merchandising to
share customer data and offer bank decisions was a problem for 43%.

For others (69%), the ability to develop and manage personalized content to stimulate desire in
each consumer was a major roadblock, with a further 35% saying that systematically growing
personalized marketing efforts was proving highly challenging.

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What are your top 5 operational challenges you must address to deliver personalized
offers/marketing?

15.38% 2.56%
Top management support Other

25.64% 7.69%
Getting vendor funding Lack of alignment of top leadership

43.59%
Systematically growing personalized
marketing efforts

66.67% 43.59%
Difficulty in customer Ability to understand the financial
data management impact of personalized offers

41.03% 35.90%
Finding the right Ability to align across marketing
solution partner and merchandising

66.67% 48.72%
Having the right Getting needed analytics and
tool(s) to execute data heroes on board

33.33%
69.23% Managing change process
Develop and manage personalized
content for each consumer

Getting the Right Technology and Partners in Place

A significant 67% of survey participants admitted they did not have the correct tools in place
to execute personalized offers and marketing at scale, with 41% going on to say that difficulty
finding the right solutions partner was hampering their ability to continue on the journey to
delivering personalized marketing that is context and customer specific

But thats not the only issue holding retailers back. One-quarter of respondents (25%) say that
getting vendor funding and buy-in for personalized offers is limiting their ability to move
forward in their personalization marketing objectives.

Gaining Management Buy-In and Empowering the RightPeople

Many respondents report a lack of executive sponsorship from the very top of their
organization was limiting their ability to remove roadblocks and empower people to get
thingsdone.

Indeed, over one-fifth (22%) of respondents said the lack of top management support/lack of
alignment of top leadership was hampering their organization from starting the 18-24 month
journey to personalization.

And while managing change processes to address the higher pace of automated
personalization offers was an issue for 33% of respondents, getting analytics and data heroes
on board in a timely manner was proving a major concern for 48% of all survey participants.

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Key Findings: Measurable Impact
Personalized Promotions Generate Additional Revenue Streams
Asked to evaluate the impact of personalized versus mass promotions, those players that
were well underway with their personalization initiatives were clear about the short, medium
and long term gains they were achieving.

An impressive 80% felt that switching to personalized promotions was having a direct impact
on the volume of customer visits they were receiving compared to the previous year. Over a
half (59%) had observed a 25%-50% increase in customer visits, with 21% seeing customer
visits as high as double.

What type of impact have you observed with regard to visits per customer per year
after switching to personalized promotions?

5.13% Very low impact (up to 10%)

12.82% Low impact (10-25%)

58.97% Medium impact (25-50%)

20.51% High impact (50-100%)

2.56% Very high impact (over 100%)

In terms of generating additional revenue streams, one-third (33%) of respondents reported an

impressive increase in new customer conversions up between 50% and 100%. Almost one-
fifth reported customer conversions had doubled and even tripled.

Evaluating other gains, 43% also reported seeing a high impact in their cross-sell conversion
rates up by 50% or more. Whats more, 41% of respondents also reported bigger shopping
baskets per purchase up by 50% or more.

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In terms of creating additional revenue streams, how would you rate the impact of
personalized versus mass promotions?

Increase in new Increase in cross-sell Bigger shopping baskets

customer conversions conversions per purchase

Very low impact (up to 5%) 0.00% 5.13% 0.00%

Low impact (5-20%) 20.51% 2.56% 15.38%
Medium impact (20-50%) 28.21% 35.90% 28.21%
High impact (50-100%) 33.33% 43.59% 41.03%
Very high impact (100-300%) 17.97% 7.69% 15.38%
Outstanding impact (above 300%) 0.00% 5.13% 0.00%

Minimizing Discounting, Maximizing Value

When it came to optimizing each and every revenue opportunity, respondents were
clear about the other opportunities made possible by utilizing personalized versus
masspromotions.

Almost half (48%) report personalization was enabling them to avoid having to initiate
price discounting of between 10%-20%. And an impressive 28% of respondents used
personalization to target inventory and avoid price markdowns of up to 30%.

Finally, the vast majority (72%) of respondents report that making the move to personalized
promotions had reduced their marketing costs thanks to a more efficient use of resources,
with 30% reporting savings of 20% or more.

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Concerning savings opportunities, how would you classify the effect of personalized
versus mass promotions?

Avoiding Decrease in cost

severe compared to mass
discounting promotions due to more
efficient use of resources

Very low impact (up to 5%) 5.13% 2.56%

Low impact (5-10%) 15.38% 23.08%
Medium impact (10-20%) 48.72% 43.57%
High impact 20-30%) 28.21% 28.21%
Very high impact (above 30%) 2.56% 2.56%

Conclusion
While retailers acknowledge that consumer demand for more personalized interactions
continues to intensify, many are struggling to begin or complete their own efforts at
personalization.

But as the survey findings confirm, the ability to tailor messages or offers to individuals
based on their known needs and behaviors opens the door to new value: value that includes
enhanced revenue streams and greater customer loyalty.

And, as those retailers already on the journey to personalization can attest, the organizational
gains just keep mounting up everything from generating improved margins as a result of
fewer markdowns or optimizing marketing spend to achieve cost savings.

But implementing an agile marketing approach that enables you to automate and move from
making mass offers at one touchpoint to thousands of targeted offers means organizations
will need to rewire how they work in five key areas:

Building a comprehensive customer profile retailers need to achieve a 360 degree

view of every channel, collecting data from multiple sources (web, social, engagement,
transaction, call center, media, geo-location) and getting it to key decision makers in a
timely manner

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 Decisioning move to an automated decision process that identifies decision triggers
for individual customers and applies analytics to identify the most profitable offers so
retailers can influence customer journeys at the right point
Agile, cross-functional teams get ecommerce, marketing, data analytic program
specialists, in-house creatives and agencies working together to reduce campaign launch
timescales from weeks to days
Get vendor funding right involve partners and consumer goods manufacturers in
personalized marketing efforts. Depending on the stage of the journey, retailers can
create offer bank for existing funding, get vendor input while populating offer banks or
allow vendors to bid on the offers they want to fund and select the offers which are most
profitable for them
Distribution automate all personalization, undertaking continuous A/B testing (because
customers are constantly changing what they want) to scale use cases that work
As early adopters have found, personalization can unlock value within months and sustain
this for years to come generating revenue uplift, improved customer retention, higher
levels of customer satisfaction and engagement as well as boosting customer acquisition
capabilities.

About Periscope
Founded in 2007, the Periscope By McKinsey platform combines world-leading intellectual
property, prescriptive analytics, and cloud-based tools with expert support and training.
It is a unique combination that drives revenue growth, both now and into the future. The
platform offers a suite of Marketing & Sales solutions that accelerate and sustain commercial
transformation for businesses. Periscope leverages its world-leading IP (especially from
McKinsey but also other partners) and best-in-class technology to enable transparency
into big data, actionable insights, and new ways of working that drive lasting performance
improvement and a sustainable 2-7% increase in return on sales (ROS). With a truly global
reach, the portfolio of solutions comprises Insight Solutions, Marketing Solutions, Customer
Experience Solutions, Category Solutions, Pricing Solutions, Performance Solutions, and
Sales Solutions. These are complemented by ongoing client service and custom capability-
building programs.

To learn more about how Periscopes solutions and experts are helping businesses continually
drive better performance, visit www.periscope-solutions.com or contact us at
contact@periscope-solutions.com.

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Copyright McKinsey & Company

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