The Unfulfilled Promise of Personalised Offers

Personalised offers could transform the way omnichannel retailers connect with customers, making them a game-changer for retail marketers. Reallocating just a quarter of the budget from mass promotions to personalised offers could also boost retailers' return on investment by an impressive 200%, according to BCG*. In today's tough economic climate, the potential savings could help marketing teams stand out and be the heroes of the company.

Despite these benefits, less than 5% of retailers worldwide have implemented personalised offers at scale. This article explores the reasons behind this slow adoption and offers insights on how to overcome the challenges.

A personalised offer is one that is customised to the individual, with both the qualification criteria and the reward tailored accordingly. This personalised Tropicana challenge from Eagle Eye company Untie Nots illustrates the concept.

Executing this level of personalisation at scale is a challenge. To illustrate, consider a retailer with ten million customers on its database that wants to send ten personalised offers a week to each customer through digital channels such as a loyalty app or email.

To deliver this weekly personalisation program comprising 100 million unique offers, the retailer must follow these steps:

1. Build the total pool of available offers (which may involve tens or even hundreds of millions of offer permutations).
2. Determine the optimal mix of ten personalised offers for each customer and create a coupon for each personalised offer.
3. Allocate the 100 million offer coupons to the ten million customers, making them accessible across all customer touchpoints at any time.
4. Verify the customer's identity after they have finished shopping, typically at the point of payment.
5. Check the products in the customer's basket against their personalised coupons.
6. Apply the appropriate points or discounts to the transaction.
7. Update the transaction total, including any discounts, as well as the customer's receipt (and loyalty program ledger, if necessary).

Most retailers find it extremely challenging to deliver personalised offers in this way with the systems available. The sheer scale of processing required to execute this volume of offers is huge, and to deliver this in a physical store, steps 4-7 must be executed in under half a second to prevent delays at the checkout. Most systems simply can’t operate at this speed.

The “Personalised Offer Maturity Matrix” illustrates the situation facing retailers.

Personalised Offer Maturity Matrix

In the bottom left,?#1?quadrant sit most current offer programs. Analysis of customer behaviour is done at a customer segment level and offers are also allocated and executed to these segments. The downside of this approach is that the available offer pool for each customer is restricted which means that most customers do not perceive the offers to be relevant to them.

Although many of the world's top retailers have invested in advanced analytics capabilities that can produce individualised customer recommendations, they often encounter a bottleneck with legacy systems when it comes to delivering these offers. As a result, these retailers are often stuck in quadrant #2 of the Personalised Offer Maturity Matrix. A helpful analogy to understand this situation is that of someone who has written a letter that a friend would love to receive, but they cannot deliver it to their friend's house. Essentially, these retailers lack a digital "postal service" to facilitate the delivery of personalised offers to their customers.

However, some retailers have overcome these challenges and are now delivering fully personalised offer programs, issuing tens or even hundreds of millions of personalised offers each week. These retailers are experimenting with different approaches to reach quadrant?#4?of the Personalised Offer Maturity Matrix. The most popular is to execute the steps via a cloud-based offers engine that communicates in real-time with customers and the retailer's systems, including in-store POS.

You can see a few examples below.

Personalised Offers from Around the World

Once a retailer has the systems in place to deliver personalisation at scale, our experience is that tremendous benefits come from increasing the share of personalised offers in the pool, while also reducing the money spent on less effective and less measurable above-the-line campaigns. At Eagle Eye, we've witnessed a 7-10% uplift in revenue?from participating customers through personalised offer programs.?

As the retail industry continues to evolve, it's intriguing to consider how retailers can fully harness the power of personalised offers. Given the growing emphasis on the retail media space, it's likely that quadrant #4 retailers will soon be offering real-time personalised ads to both in-store and online customers. This will unleash a massive new opportunity for retail media in physical stores, through personalised ads that blend real-time tailored offers with AI-generated content delivered to shoppers' phones at the crucial point of the sale.

Although implementing personalised offers presents both technical and people-related challenges, retailers cannot afford to overlook their undeniable potential, particularly as AI transforms retail into an increasingly "real-time" industry. Retailers that can successfully navigate these challenges will unlock the full benefits of personalised marketing, gaining a significant edge over competitors who remain focused on generic mass promotions.

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Eagle Eye's cutting-edge SaaS technology is transforming marketing by establishing digital connections that enable personalised marketing in real-time, including through coupons, loyalty programs, apps, subscriptions, and gift services. Our platform, hosted on Google Cloud, is used by some of the world's most innovative omnichannel retailers. We welcome the opportunity to share more about its capabilities and how it can help transform your business. Don't hesitate to get in touch if you're interested in learning more.

* https://www.bcg.com/publications/2021/personalized-offers-have-a-potential-70-billion-dollar-growth-opportunity