Andrea Marchiotto is Unilever’s Senior Global eCommerce Manager – Head of Foods Retail. Prior to his time at Unilever, Andrea was one of the Amazonians who built and launched amazon.it. While at Amazon, he managed the personalization of Gateway, the most important and visited e-commerce homepage on the Italian web , coordinated and led Amazon Italy and Spain’s three most important sales events – Prime Day, Black Friday and Cyber Monday – achieving the biggest sales days of the year repeatedly (in 2013, 2014, 2015 and 2016). As an e-commerce practitioner with such an impressive track record, we wanted to ask him for his thoughts on one of the most powerful concepts in e-commerce.
WHAT IS PERSONALISATION?
Personalisation means engaging with shoppers in an intimate and intuitive way. Deloitte conducted a study which outlined three degrees of personalisation: mass personalisation, where products are altered to meet consumer preferences, using existing data without any input from the consumer (aside from giving their permission to use the data provided). One example of this would be Amazon’s personalised recommendations on their website. Then you have mass customisation where products are mass produced but the consumer is offered some limited options to customise the product – like different colours. This would be the case of NikeID. Then there’s the third level of personalisation: bespoke products. With a bespoke product, the customer is involved from the beginning until the very end of the process to create a unique product or service.
We can see this with MyMuesli, a German company with a Build-to-Order model, selling organic muesli with a) ready recipes and b) a customizable solution, whose products are available in the DACH region, in the Netherlands, in Sweden and the UK. The key things about MyMuesli are first, their close contact with producers, suppliers and traders and secondly, their operational excellence and technology. Their mix machine, the world’s first fully automated organic muesli mixing machine, can mix more than 566 quadrillion muesli combinations. Quite impressive!
How does it work? You go online, you customise your muesli, you can even have your muesli package labelled with your name and then you can also have it customised in any flagship store. And that’s effectively the end of the customisation element. You can also find MyMuesli products elsewhere in select supermarkets but you’re not able to customise your choices there. Instead, you’ll find ready mixes — presumably the bestsellers derived from the top combinations that the customers choose. This is how you could use personalisation cleverly and then expand into other channels. Of course, there are also downsides to this model: for example, consumers need to wait for their product as shipping times for custom orders can be more than four days.
THE RIGHT WAY TO DO PERSONALISATION
Personalisation can be used in handling customer dissatisfaction to change how a customer perceives a company. So for example, a true story: one time a customer wrote to Amazon about a problem (their book was not delivered) and was answered by a customer service agent named Thor. The customer, who asked if he could be Odin in the chat, had his issue resolved through a conversation that used Viking-like tonality and role-playing as both the customer and agent embraced their respective King of Asgard and God of Thunder roles. The issue was quickly resolved, the customer’s order was bumped up to next-day delivery, and the customer thanked Thor for his great service. Even a small thing like this tells you a lot about a company: even though there are guidelines and rules, at the end of the day, Amazon keeps the customer at the centre of everything. (you can read Thor and Odin’s full conversation here).
Another example of personalisation is from US startup NatureBox (which has some similarities with another famous snacking company, Graze), who built a Direct-to-Consumer model, with a personalized food shopping experience online that caters to the consumer’s taste and dietary preferences, combining unique flavours with trusted ingredients to provide great tasting, gluten-free snacks “you cannot find anywhere else”. Another strong point of this company is the fact that it’s following one of the biggest trends of today’s world: a clever focus on healthy food and sustainable nutrition, using no artificial flavours colours, sweeteners, corn syrup, hydrogenated oils or MSG. It therefore seems like the company is doing a good job at getting personalisation right while simultaneously meeting customer expectations and fulfilling desires connected to sustainability and healthy-living.
THE CHALLENGES POSED BY PERSONALISATION
I think the most common mistake companies make is to underestimate the amount of effort personalisation demands from a logistics, supply chain and technology perspective, and how complex it really is. The top challenges for companies include things like the machinery you need to make this happen, and the increased complexity of the algorithms to determine what the right options or choices for the product would be, as well as determining how many options would be needed for the product or service to feel unique while still making a profit. That’s also a challenge in terms of the consumer because when you give too many options you create confusion and frustration. This results in higher bounce rates on the website.
However, despite how costly this may sound, it’s certainly possible to implement personalisation on a budget. You can always leverage the lean start-up methodologies: instead of creating one big cake, you create a cupcake and you test it. You set your budget, you give yourself three months, you try to identify a partner who can help you create a personalized product, or even just packaging (there are plenty of start-ups out there providing such services for a reasonable price). If you really want to do things in a lean way because you don’t have the budget, you can Ship-from-Desk. This happens! Sometimes, when you need to test things quickly, you have to take an unorthodox approach. As an example, create just 50-100 units, literally pack them in-house and sell them to early adopters to see if things are working out well enough. If things look good – you have good KPIs in terms of conversion, good customer feedback, people like it and talk about it, you interview them, and they love it – then you can think about refining your MVP and making it exceptional (it’s the concept of moving from Minimum Viable Product to Exceptional Viable Product), then scaling and investing more.
So, there are a lot of advantages to trying out personalisation. But what about the downsides? A lot of people are talking about digital privacy concerns — but I don’t think these will stop companies from offering personalisation. This is not a simple trend but is something which will evolve even further.
In the past, we were so scared of being recorded by cameras and now we live in a world with private cameras everywhere — we respect this for security reasons because we feel more protected. Another example is when Amazon started to ask customers for their data but after you saw how Amazon uses your data for providing better recommendations and products, you may have thought, well ok, maybe sharing data with this company is good. I think it’s important for companies to be transparent and committed to transparency towards the consumer and the shopper, and make it one of the key leadership principles. It’s true that in this age, people demand more and more transparency. People are looking at companies with a true purpose.
Right now, it’s early days, but it also seems likely that blockchain could address some of these concerns. There are some blockchain projects that allow you to carry your digital identity with you which can’t be counterfeited. So, in the future, we might see companies leveraging blockchain to protect your data. Then you decide exactly how you want your data to be used or not. There is an interesting German company, Wysker, which is pioneering in the field of using blockchain technology in the online retail industry to give customers complete control of their data and even allow the users to control the level of personalisation they get when using the Wysker app. Users can choose how much data they want to share with retailers selling via the Wysker app and the level of personalised recommendations is adjusted according to the user’s preferences and data-access settings. Examples like this show how the decentralization of the blockchain could help solve the issue of big companies who have great power and who make mistakes — like Facebook did with Cambridge Analytica for example.
FINALLY, THINK ABOUT PROFIT
At the end of the day, you need to make money, so you need profit. It’s always good to keep the ratio of Cost per Acquisition (CPA) and the lifetime value of the consumer (CLV) in mind. If it cost me €100 to bring you in, but during your lifetime with my company, you spend €300, that’s a good ratio. If I need to pay a lot of money to reach you and then you only visit my site or shop once, and I have zero chances of getting to know you, doing cross selling or upselling, proposing something new to you, I’m doomed. Personalisation should never be an end goal, but rather a piece of the puzzle, a pillar of your strategy, to create a more balanced and diversified business model that can keep you competitive and profitable in the medium and long run.
So, start with understanding your customer’s real need and use personalisation as a tool to reach your customers and identify precisely what their needs and desires are. Start small. Test things in small batches, do it yourself if possible, if things go well, you’ll have a nice problem to solve because everyone will be talking about your new personalised product. Maybe you’ll sell out and won’t be able to keep up with demand. That’s a great problem to solve! But first thing’s first, let’s make sure that there is a solution for a real customer problem and that there is a market for your product.
As told to Savant Events.
Andrea Marchiotto will be chairing our first day at Savant eCommerce Stockholm on 18th September, which covers personalisation – as well as marketplaces, marketing in a crowded digital environment and the next phase of omnichannel maturity. Secure your pass today.