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Consumer Loyalty is a By-Product of Personalized Experiences: Connect the Data Dots

posted by Professor Marie Driscoll, CFA

e-commerce.jpgPersonalization is the next iteration of a digital strategy to mitigate consumer trends for sharp value pricing and/or convenience. Products move through a lifespan and fast become commodities as consumers seek lower prices.

Products that add to one's personal brand, enhance one's lifestyle, resonate personally and add to one's life experience, is a winning formula for retailers and brands according to Andy Mantis, executive VP of CheckOut Tracking at The NPD Group.

Speaking at a Retail Marketing Society luncheon April 12, on "Gaining Loyalty in the Age of Disruption," Mantis reminded the audience that the growing demand for personalization is in part a result of consumer's positive experience of shopping on Amazon and its use of collaborative filtering. An algorithm that incorporates a user's purchase history, items in their shopping cart, items they have rated and liked, and what other customers have viewed and purchased is the basis of the recommendations that are ubiquitous at Amazon and Netflix and other online retailers. 

The NPD Group is capturing millions of ecommerce receipts and Mantis shared some high level trends that they have observed.

Girl_Shopping_bag.jpgAspirational brands have suffered declining sales in the past three years, accelerating from a 1.4% drop in 2014 to a 3.9% drop in 2016. Handbags declined at a more precipitous 8% pace in 2016, meanwhile, spa experiences saw a 3% sales lift, reflecting the experience over product preference of many consumers. Concurrent with the drop in aspirational products sales is a shift to more discretionary spending on home products and the growing popularity of dollar stores, such as Dollar Tree and Dollar General, among $100K income households, despite the fact that shopping in this venue requires a store visit. 

"Online is part of the new normal and we are only at the tip of the iceburg" Mantis said. Looking at the most recent holiday season, "online is a more civilized shopping experience than the traditional Black Friday." Mantis expects the rollout of 5G will expand bandwidth exponentially, which will usher in more complex mobile apps, faster downloads and a new world of online shopping experience.

What retailers are doing personalization well? Nordstrom, Sephora, and REI according to Mantis. With their high service levels and extensive differentiated merchandise assortments these retailers provide quality and value. "Today's consumer is looking for an item that enhances his/her personal brand, something they care about. Commodity products will go the frictionless route, non-commodities resonate with the customer," Mantis said.

Topics: fashion marketing, LIM Faculty, Fashion News