Fortune Partners Article

Top Service Leaders:
Profound Personalization

Tear up the shopping list: The next level of customer experience is giving people what they want, before they ask for it.
 
 

Introduction

Imagine the battery on your smoke detector is running low, or the filter in your furnace needs replacing. A new one is automatically delivered to your door. No driving to the store to pick it up, or even ordering it online. It just shows up, even before you knew you needed it.

Driven by rapidly changing technology and a growing awareness among brands that consumers crave a more personalized shopping experience, the future of customer service is all about companies seemingly predicting what you’re looking for, or what you will be looking for.

Call it extreme customization.

"Anticipatory customer experience is the next great disruptor," says Flavio Martins, a customer experience expert and chief operating officer of DigiCert, known for its customer service in the encryption industry.

Technology—in particular the combination of big data, artificial intelligence and machine learning—is changing how brands approach consumers and raising the bar on how they serve them.

Consumers are willing participants in this massive marketing shift, even if it means giving up more of their personal information.

A recent Accenture surve shows three-quarters of consumers are more likely to buy from a retailer that either recognizes them by name, remembers their past purchases or recommends products or services based on their purchase history.

In fact, many consumers now expect companies to use their data to provide better service.

“We are now in the position to gather, parse, and decipher data that has always been there, but we never had the capacity to sort through and understand on an individual level, until now,” says Doug Stephens, a retail futurist and founder of the consulting firm Retail Prophet. “We can finally get back to knowing individuals.”

The challenge for brands is keeping up with the latest technology and ever-increasing consumer expectations, while also balancing the various security, legal and governance issues tied to the use of data—and not overstepping privacy boundaries.

“The increasing importance of data privacy for consumers has forced brands to take a hard look at their data collection and sharing practices in an effort to earn consumer trust,” Accenture says.

Customization beyond consumers

Personalization is already reshaping customer service in a number of industries, in particular consumer-facing sectors such as food and beverage, hospitality and tourism. Examples include Starbucks and its Rewards app, which targets specific messages and offers to individual customers based on their personal information and order history. At the end of 2014 Starbucks also began experimenting with location-based marketing, serving customers targeted offers based on their location and device ID. The company maintains that people who saw the offer were 100% more likely to enter the store.

“Customization is the next level retailers have to ascend to,” says Stephens. “There has to be some higher level of service where a customer walks away feeling like that experience was just for them.”

The Ritz-Carlton Hotel offers a different type of personalization. Its loyalty program provides “Member Experience Concierges,” who choreograph services around a guest’s arrival and departure information.

But customization isn’t just for consumers. As the B2B and B2C competitive landscape intensifies, a virtual ecosystem of companies has emerged to provide increasingly customized solutions tailored to specific industries. Consider the number of financial technology companies that have been created to serve banks and other financial companies, providing customer service platforms and CRM tools crafted around the specific needs of their clients, or data security systems and operational transparency to meet strict legal criteria while protecting consumers from one of their biggest concerns. There are also the countless software companies that are using customer experience strategies to help organizations manage workflow.

A recent McKinsey report points out that a B2B company’s customers and their buying patterns are more complex than a B2C, highlighting another big challenge: there’s no single customer to cater to. “A B2B company requires specific strategies to differentiate itself via customer experience,” according to the report.

But doing so can really pay off: B2B players that pay attention to customer experience have higher margins, on average, than their competitors, McKinsey says. It cites the example of an IT-services provider that transformed its business model back in 2012, including redesigning a set of 20 customer journeys from end-to-end. A year later, its negative net promoter score turned positive, McKinsey says. A year after that it was outperforming the industry average.

Data and the challenges with customization

Industry research has shown that about 80 percent of data collected from consumers is never actually used to improve or change the customer experience. But even those companies who do know how to leverage the data they collect face huge challenges, from data security to privacy issues.

In fact, one big risk faced by businesses using customer information to personalize the customer experience is a big data backlash from consumers who may desire a ‘frictionless’ experience but occasionally feel like brands are getting too personal. This can make companies uncertain about how far they can go in using personal information—a lot of it much more accessible than most consumers think – leading a number of them to offer incentives in exchange, such as improved service.

To alleviate these concerns companies should have the latest data security measures and standards in place and communicate those to customers to help ease concerns about data collection and privacy. They should also explain how the data is being used, either proactively or by making the information easily accessible, such as on the corporate website.

Depending on the business, companies may also wish to educate customers about data privacy, in the form of tips and reminders to regularly change passwords, accept software updates and to avoid accessing sensitive data on public computer systems.

Brands leading in personalization—and what others can learn from them

Amazon’s ‘hyper’ personalized approach has become a model for online customer experience. Like Netflix, Amazon uses data collected from customer browsing history, past purchases, wish lists, etc. to feed a recommendation engine that now generates an estimated 35 percent of all sales on the site.

But Amazon’s journey as a machine learning and AI pioneer hasn't been without challenges. The company spent years convincing consumers it was safe to hand over personal data, such as addresses and credit card information, and to have faith they could deliver products from around the world, sometimes from little-known brands.

“The first big challenge with Amazon was trust,” says Stephens of Retail Prophet. “Through perseverance and good design, it managed to take the chaos out of buying things on the Internet.”

Nowadays, that trust has been translated into convenience. Amazon’s Dash Button allows customers to reorder products they buy regularly, with one click. The company also has a patent for what it calls “anticipatory shipping,” which means sending products to customers before they place an order, based on what they’ve bought in the past.

In the age of big data, building a great consumer experience ultimately comes down to knowing your customers, and giving them what they want. Data helps close that knowledge gap. And as technology gets more sophisticated in its ability to interpret that data, and companies get more sophisticated in their ability to use it, it’s not hard to envision a future when consumers sit back and wait for the brands to come to them.

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