WHITE PAPER: THE TRUTH ABOUT EXECUTING PERSONALIZATION … · WHITE PAPER: THE TRUTH ABOUT EXECUTING PERSONALIZATION ACROSS ALL CHANNELS By: Dan Theirl Rubikloud Technologies Inc

WHITE PAPER:

THE TRUTH ABOUT EXECUTING PERSONALIZATION ACROSS ALL CHANNELS

By: Dan Theirl Rubikloud Technologies Inc. rubikloud.com

Prepared by: Laura Leslie Neil Laing Martin Mark

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INTRODUCTION

Executing personalization across each marketing channel is not trivial. Attempting to predict what product to sell to which customer at the right price is hard enough. Attempting to predict the right channel and device to use with the right offer is nearly impossible with legacy systems. Existing personalization systems focus on the easiest part of the equation by matching the customer with product recommendations via a single channel: email. These systems have made a valiant effort and have improved sales and conversion rates by 2 to 5 percent at best. When you measure the results against the cost, however, the ROI was less than impressive. There is no doubt that predicting what to sell at what price on a 1-to-1 basis will make marketing messages more relevant and effective, but retailers face a challenge in executing these campaigns in a more intelligent manner across offline and digital experiences. This whitepaper discusses these challenges in detail and helps discover new solutions for marketers.

1-to-1

WHAT IS PERSONALIZATION 2.0?

DIRECTMARKETING

FLYERS

TARGETAUDIENCE

LOYALTYPROGRAM

DEMOGRAPHIC

MARKETPLACEADVERTISINGSPECIALS

MEDIAPLACEMENT

BRANDMARKETING

PRICE

CUSTOMER

CHANNEL

PRODUCT

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WHAT ARE THE PROBLEMS IN EXECUTION?

There are several problems retailers face before attempting to send 1-to-1 communications to millions of diverse customers. The first problem starts with the IT challenge of cleaning and preparing data to run models. Many organizations have controls, security layers, and legacy databases that create cringe worthy [BMc1] barriers. The political capital, time, and effort required to push through major IT projects within a large organization typically creates excuses and even stops innovation before it begins. On average, enterprise IT projects run 45 percent over budget and 7 percent overtime. At the same time, these projects delivered 56 percent less value according to research conducted by McKinsey & Company in collaboration with the University of Oxford.1 Once the project budget, timeline, and vendors are chosen, it could be years before completion and the shift into an operational phase to see the benefit. Meanwhile, a much more nimble competitor enters the market, eroding market share and profits.

[1] Bloch, M., S. Blumberg, and J. Laartz, “Delivering Large-scale IT Projects On Time, On Budget, and On Value” (October 2012), http://www.mckinsey.com/business-functions/business-technology/our-insights/delivering-large-scale-it-projects-on-time-on-budget-and-on-value

APPLYDATA

SCIENCE

COLLECTDATA

CREATEPERSONALIZED

CAMPAIGN

COSTOMERRECEIVES

OFFER

ATTEMPTSTO PURCHASE

ITEMS

LEGACY POS SYSTEMSUNABLE TO CONNECT

PERSONALIZEDPROMOTIONS

+45%OVERBUDGET

ENTERPRISE IT PROJECTS

EXPECTED BUDGET BASELINE

+7%OVERTIME

-56%LESS VALUE

THAN EXPECTED

COMPANY BENEFITSBOOST PROFITS

ENABLE GROWTHINCREASED LOYALTY

STAFF BENEFITSJOB SECURITY

PERSONAL SATISFATIONPROFESIONAL GROWTH

A CUSTOMER-CENTRIC APPROACH BENEFITS EVERYONE

CUSTOMER BENEFITSBETTER INFORMED

INCREASED SATISFATIONINCREASED LOYALTY

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Once the data is prepared for modeling, the second major challenge retailers face is hiring the right data science talent to model the data accurately. Imagine making a decision that could cost the organization millions of dollars when the model’s confidence is low and the data doesn’t seem quite right. When making decisions to carry certain levels of inventory or to send out campaigns to millions of customers, the models and data need to give the decision maker confidence. That confidence starts with hiring the right talent who possess not only data science experience but also in-depth retail experience, understanding the problem at a fundamental level. Without that experience, data modeling projects end up taking too long with little to no results. “Big data” and other industry buzzwords end up gaining a bad reputation because of these failed projects. They fail because of a lack of focus, a lack of qualified talent, and technical complexity.1

The next major challenge lies in overcoming legacy POS, CRM, and loyalty program limitations when sending out 1-to-1 campaigns with unique offers for each customer. Most systems were designed to accept only a handful of different coupon codes at once. Marketers are able to generate and send out personalized campaigns and offers, but the legacy systems in stores will not allow customers to check out with their unique offer. The task of upgrading the POS system throughout hundreds or thousands of stores is overwhelming for most cost-sensitive retailers. Depending on the number of terminals and locations, large retailers may spend [CC1] upwards of $70 million upgrading the hardware and software for faster and more reliable checkout systems.2

[1] M. Bloch, S. Blumberg, and J. Laartz, “Delivering Large-scale IT Projects on Time, on Budget, and on Value” (October 2012), http://www.mckinsey.com/business-functions/business-technology/our-insights/delivering-large-scale-it-projects-on-time-on-budget-and-on-value

[2] B. Eckert, “How Much Does a Grocery Store POS Cost?” http://www.costowl.com/b2b/pos-system-grocery-cost.html.

APPLYDATA

SCIENCE

COLLECTDATA

CREATEPERSONALIZED

CAMPAIGN

COSTOMERRECEIVES

OFFER

ATTEMPTSTO PURCHASE

ITEMS



+45%OVERBUDGET



+7%OVERTIME

-56%LESS VALUE

THAN EXPECTED








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WHY TRY TO PUSH THE BOULDER UP THE HILL?

Retailers who attempt to transform themselves into a customer-centric approach are winning their markets.1 One of the reasons for this is that they can strategically hide their promotional discounts offered to customers. If everyone receives an individual offer, it’s very difficult for the direct competitor in the market to identify their promotional strategy and replicate it. Executing properly on personalized offers not only provides higher margins and revenue but offers a great way to gain a competitive advantage.

Margins matter in retail and indicate a certain level of health. When the retailer makes the shift from product-centric retailing to customer-centric strategies utilizing personalization tactics, margins improve. Companies who adopt a customer-centric mentality are 60 percent more profitable than those not focused on the customer.2 Once margins improve, retailers have the opportunity to acquire more market share through more effective marketing. The positive benefits impact the rest of the organization by reducing churn, increasing customer lifetime value, and lowering inventory levels. Executing a customer-centric strategy well leads to overall market success, making it the primary focus for many smart retail executives. Ulta Beauty CEO Mary Dillon highlighted her company’s guest-centric strategy in its 2014 annual report.3

[1] Booz & Company, “The Customer-Centric Organization: From Pushing Products to Winning Customers,” (2004),

http://www.strategyand.pwc.com/media/file/The_Customer_Centric_Organization.pdf[2] CMO/Adobe, “15 Mind-blowing Stats about Customer Centricity” (May 2015), http://www.cmo.com/

articles/2015/5/5/15-mindblowing-stats-about-customer-centric-thinking-and-strategy.html[3] M. Dillon, “Ulta Beauty Annual Report” (2014), http://ir.ulta.com/phoenix.zhtml?c=213869&p=irol-reportsannual

APPLYDATA

SCIENCE

COLLECTDATA

CREATEPERSONALIZED

CAMPAIGN

COSTOMERRECEIVES

OFFER

ATTEMPTSTO PURCHASE

ITEMS



+45%OVERBUDGET



+7%OVERTIME

-56%LESS VALUE

THAN EXPECTED








60% COMPANIES WHO ADOPT A CUSTOMER-CENTRIC MENTALITY ARE 60% MORE PROFITABLE THAN THOSE NOT FOCUSED ON THE CUSTOMER

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BUT HOW?

How does a retailer transform into a customer-centric leader efficiently? Not easily. Between IT costs, lack of data science talent, and legacy systems, the barriers can seem overwhelming. In order to overcome these obstacles, retailers need to transform people, process, and technology. Adopting new strategies is never a smooth process for large organizations but is absolutely necessary at times. Leaders of large retailers need to create a long-term vision, communicate it throughout the organization, and start inspiring the key employees to start changing the organization from within. Retailers must face change management challenges head-on in order to stay relevant with their customers and stay ahead of their competition. Best Buy faced similar challenges making large investments in their people, culture, and even store layouts to shift to a customer-centric approach.1

The easiest way to convince a team to change is to show them the benefits first: the benefits to the company, and the benefits to them personally and professionally. If the company is more profitable, the benefits to the employees professionally become obvious in the form of performance bonuses. Most companies that boost profits grow, and working for a growing company is much more rewarding on a personal level than stagnating at a “mature” company. Once the benefits are communicated internally and the key stakeholders are on board, the executive leadership needs to shift the culture of the organization to the customer. Figuring out what the customer will want

APPLYDATA

SCIENCE

COLLECTDATA

CREATEPERSONALIZED

CAMPAIGN

COSTOMERRECEIVES

OFFER

ATTEMPTSTO PURCHASE

ITEMS



+45%OVERBUDGET



+7%OVERTIME

-56%LESS VALUE

THAN EXPECTED








[1] Ignify.com, “Making Your Retail Store Customer-Centric,”http://www.ignify.com/retail_making_your_store_customer_centric.asp

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to buy next, at what volume, and what price is a question each key member of the team must constantly attempt to answer. Answering that question is both an art and science that must be embraced by everyone from a store manager to brand managers and buyers. Understanding the products customers will want to buy is only half the battle; the other half encompasses the customer’s happiness through the shopping experience. The retailer’s primary job in the market is to own the customer relationship and provide products they want. The only way for a retailer to succeed in this endeavor is to change the culture of the organization in order to home-in on delighting the customer from the first touchpoint to the last.

The lengthy process of change management should take advantage of new technology that empowers retailers to move faster internally and see results sooner. Retailers should consider the best mix of solutions for their organization as they continue their journey transforming into customer-centric leaders. Personalization technology, customer-centric training for employees, upgrading in-store hardware, and implementing change management plans are all considerations along the journey. Smart retailers partner with smart vendors to help execute customer-centric strategies. The following is a short list of strengths and weaknesses for the best vendors available:

TECHNOLOGY SOLUTIONS

ADOBE MARKETING CLOUDStrengths:Adobe Marketing Cloud has several tools that help smart retailers execute customer-centric marketing and learn from customer behavior. It gives the marketer everything needed to gain insight into customers, build personalized campaigns, and manage content and assets. The tools are designed as general utilities for multiple industries. Adobe has integrated analytics with campaign building and testing tools to help digital marketers execute efficiently. Adobe’s strength lies in the early mover advantage; they have been learning the needs of demanding digital marketers for over five years, beginning with their acquisition of Omniture in 2009. After acquiring Neolane in 2013, Adobe took the lead in combining cloud-based analytics software with marketing automation tools.

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Weaknesses:Adobe Marketing Cloud lacks a major big data architecture that can combine multiple sources of data at ease and scale to clean and refine the data in order to power more advanced marketing campaigns. The general tools found in Adobe Marketing Cloud are not vertical specific, lacking models optimized for specific business cases. Adobe campaign tools rely heavily on segmentation for targeting audiences and creating campaigns instead of true 1-to-1 matching algorithms for truly personalized campaign execution. Another weakness, highlighted by The Hub, is that Adobe lacks significant CRM connectors or partnerships to easily connect to existing customer databases.1

SALESFORCE MARKETING CLOUDStrengths:Salesforce Marketing Cloud offers marketing automation, email, mobile, and social marketing tools. Salesforce strength lies in the success of its primary product with their CRM-based sales cloud. Understanding the needs of demanding sales teams, Salesforce looked to expand into marketing by acquiring ExactTarget, which included the marketing automation tool Pardot in 2013. Enabling companies to take advantage of its CRM data to power automated marketing campaigns gives Salesforce a distinct advantage in the market. Weaknesses:The weakness of Salesforce is that it combines a B2B CRM database with B2C marketing tools. Salesforce CRM is a lead- and opportunity-based platform to enable direct follow-up and communication workflows. ExactTarget was historically used as a B2C email solution provider, while Pardot was a marketing automation suite. The weakness is offering one platform for both distinctly different markets. Furthermore, the tools are not specific to a particular vertical market within either the B2B- or B2C-based businesses. Salesforce CRM is not designed for millions of retail consumer records while ExactTarget and Pardot are overkill for one-off B2B communications. There is a lack of synergy between their sales and marketing cloud.

[1] J. Compton, “The Marketing Cloud Wars – Revisited” (December 2015), http://www.thehubcomms.com/marketing-cloud/the-marketing-cloud-warsrevisited/article/457789/

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RUBIKLOUDRubikloud helps retailers transform from mass-market to customer-centric strategies using the power of modern data science. The platform lives in the center of the organization, delivering insights, data visibility, and more importantly, output that retailers implement to drastically impact marketing campaign performance from all measures and channels. Strengths:The Rubikloud platform is vertically deep within specific verticals such as retail and consumer product goods. The in-depth knowledge necessary to solve vertical-specific problems using modern data science provides Rubikloud a unique advantage. When executing personalization, Rubikloud’s models outperform more generic models. Rubikloud’s system also offers speed to market, reducing many of the technical barriers to integration and campaign building. The Rubikloud platform also ingests multiple sources of data and connects out to each popular marketing cloud. Weaknesses:The major weakness is that Rubikloud’s platform is not horizontally thin designed for every single vertical. The platform is designed to handle large volumes of consumer and transactional data from large B2C enterprises. Rubikloud is not designed for small B2B data sets. The Rubikloud platform helps with executing personalization across all channels, but it does not replace the entire marketing stack.

IN CONCLUSION

Executing personalization across channels in order to delight customers is not easy. In fact, many large retailers struggle with the technical hurdles, organizational challenges, and changes in consumer demands. The goal remains the same for retailers and brands: to delight customers with more relevant individualized shopping experiences. Combining the best-of-breed solutions and vendors to overcome the technology and data hurdles empowers organizations to transform and execute true personalization seamlessly.

ABOUT RUBIKLOUD:

Rubikloud Technologies inc. is a machine intelligence platform for retailers that transforms traditional multi-channel retailers into modern data-driven retailers.

Rubikloud directly integrates with important execution pieces such as point of sale systems, customer relationship management platforms and email marketing systems. We are able to easily aggregate and cleanse data across multiple systems in order to properly execute advanced product, promotion and price personalization.

At Rubikloud we recognize that the key to retail success is customer happiness. We provide the means to eliminate irrelevant mass marketing. Rubikloud uses modern machine learning to help execute a customer-centric strategy where consumers receive personal one-to-one communications. Our platform enables retailers to take action on their data through the management of individualized marketing campaigns. This leads to higher sales and an improvement in customer lifetime value.

About the Author: The author has over 10 years of experience helping retailers use analytics and conversion optimization tools to help them make the right data driven marketing decisions. He is now a co-founder of a Toronto based retail intelligence startup called Rubikloud.

web: rubikloud.com

twitter: @rubikloud

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WHITE PAPER: THE TRUTH ABOUT EXECUTING PERSONALIZATION … · WHITE PAPER: THE TRUTH ABOUT EXECUTING PERSONALIZATION ACROSS ALL CHANNELS By: Dan Theirl Rubikloud Technologies Inc