E-COMMERCE CUSTOMER PERSONALIZATION: WHAT TO DO ABOUT IT. PART 1

Customer personalization example by Starbucks

Starbucks is not always great at spelling your name but you must agree, the idea of writing names on a cup of coffee is brilliant. Whether it is a personalization technique or a marketing move, this simple act establishes an immediate personal connection between the company and the customer. It is easy to do when you can physically pass over the cup to your customer but it becomes much more difficult when you operate an e-commerce business. So how do you even go about personalizing your product/service?

A couple of days ago I had a conversation with a large international company in the online retail industry. It’s a very well-known, established and respected e-commerce marketplace with excellent proprietary technology, very sophisticated software and business processes. The company operates in (and ships products to) multiple countries, so the level of technological and operational sophistication is tremendous. Like any other company in the e-commerce space, they are focused on customer excellence and the best possible customer experience. Currently, they are taking efforts to establish new processes around mapping customer journeys, segmenting their user base and providing personalized user experience. 

​Last year I read a short article in Forbes which stated that personalization leads to customer loyalty and delivers many more benefits to the companies working on providing a customized experience. According to another article, customer personalization is the number 1 trend in online shopping in 2018 and 70% of US consumers expect some sort of personalization from e-commerce businesses. Many more articles and my conversations with people made me think about the user personalization problem in the e-commerce industry and triggered this post.

When I was a banker, 15 years ago, the KYC (Know Your Customer) policy was the first document you had to read when you join the team. Banks are very conservative as they are strictly regulated, so you absolutely must know your customer to avoid potential trouble. However, that level of personalization was easy to achieve as banks establish a very personal relationship with the customers, whereas the e-commerce companies are offering services to anyone who has access to internet and often don’t even know who is looking at their website or mobile app on the other end. I have been working in the e-commerce space for over 10 years now and I haven’t seen many companies which would allocate significant resources to create user-specific experience. In fact, before writing this post, I called 12 of my friends who own or work for companies with the revenues of anywhere from $500K to $2B/year. Only 1 company (the smallest one) is working on customer personalization and 2 companies are thinking of doing this. Of course, the sample is too small to draw any conclusions, so this post only reflects my own perception of the current situation in the e-commerce market. There are various companies working on providing customer-personalized services on a smaller scale (it’s relatively easy to do this when you don’t have millions or tens of millions of users) but the large companies can hardly do this due to their huge (and, often global) scale and very complex operations. Let’s take a look at the usual company growth process.

When a company is a newly formed venture, it operates on a shoe-string budget and the founders would put resources behind developing the product which at least a small number of customers (read: at least anyone) would use. We are not talking about well-funded startups that raise millions of dollars at the seed stage or in round A and can afford to hire all the experts they would possibly need. We are discussing the situation, in which any self-funded entrepreneur would find him/herself when they want to start a business. The priority at this stage is to acquire first customers and start generating revenue.

When they see that there is increase in customer demand, they iterate and improve their e-commerce offering to better address customer needs and provide for more features or product variety, which, in turn, are supposed to attract more users/customers. As the company grows, the number of customers increases, the customer base grows and starts to exhibit new patterns and characteristics. The company resources are dedicated to sustaining the growth momentum and offering more features, more product variety or further developing the technological platform. Usually this is when they open a call center and the founders can finally delegate the customer service responsibility to other employees. Sometimes they even pay for Zendesk or another customer support tool (which also takes time and resources to implement). At this stage the company is bombarded with a growing number of customer requests, technical issues, marketing spending adjustments, necessity to hire and train new people and retain old employees and so many other things, inherent in active growth stages.

If the company gets through this process successfully, things will stabilize a little but a growing pressure from founders and/or investors will urge the company to move faster and faster to successfully compete with others in their niche as well as keep everything in due order internally, and at the same time manage all the usual operational, financial, strategic and tactical issues. At some point somebody would mention that the company needs to start paying closer attention to individual customer needs.  
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Now, imagine, you have a business that is getting a million or more unique customers a month, with sophisticated technology (sometimes not very perfect because the company’s number one priority has been to grow and increase revenue vs invest in technology), all kinds of issues on the marketing side (you can always improve the efficiency of SEO, SEM, affiliate, email marketing and other marketing campaigns), unsatisfied customers because the customer service is not ideal yet, and, on top of that, employees who need to be motivated and energized to support the growth – and you now need to figure out the way and adjust your business/technical processes to provide personalized and unique customer approach that everyone is talking about in the literature. How, on earth, do you ever do this in these conditions? Even a minor change on your website or in your mobile application interface in many cases would require several meetings, a CEO approval, multiple follow-up emails and meetings and reevaluation of company priorities. This is not a 5-person nimble and scrappy startup anymore. All too often, it is exactly at this stage that companies come to realization that customer personalization is key to sustain further business growth.

Continue reading about this topic here.