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Hyper-personalization explained: What you need to know

Personalized marketing on the internet isn’t new – but AI is taking it to a whole new bespoke level that promises to revolutionize e-commerce. Welcome to the world of hyper-personalization.

Imagine knowing the shirt you’ve ordered will definitely fit, because you’ve already seen it on your body in virtual reality. Or that a delivery man could find you at your local cafe with a package because a mobile app tells him at the last minute you’re out of the office. Or that your customer’s return will be routed by a smart label algorithm to the region or store where that specific item is most likely to resell, rather than back to the main warehouse or shop it was originally sent from.

These are all examples of what is possibly the hottest thing in e-commerce and marketing right now: -hyper-personalization. So, what is this “next big thing” about? Well, there isn’t actually a single accepted definition. The concept is a broad-reaching umbrella term, much like its sister idea, omnichannel. And as such, it’s still being developed, defined, and tested in the market – particularly in the consumer retail sector.

Generally speaking, it’s a way of communicating and targeting individual online customers with tailor-made marketing and products and delivering on these promises, without fail.
Of course, personalized messaging and marketing has been around for some time, allowing retailers to lightly profile their customers, and sell and suggest items that more or less fit their needs.
This next generation version, hyper-personalization, uses data, artificial intelligence (AI) and advanced algorithms from multichannel sources and social media to expertly tailor marketing content, products and service offerings that suit each user like a custom-cut jacket, be it the design, manufacturing or delivery sectors. Today, approximately 63% of global consumers don’t realize that they’re now using AI on a daily basis.

The 2018 Epsilon study “Power of Me” found that 80% of consumers were more likely to do business with a company if it offered well targeted, meaningful and personalized experiences. Done right, -hyper-personalization is profitable, forward thinking and even expected by young consumers.
Done wrong, personalization is annoying and in-vasive. Who hasn’t received a strangely personal bot-written email, or a birthday greeting that ends in a clumsy sales pitch, or ads that hunt you down from device to device?

Customer is key

Rule number one of hyper-personalization might be “know thy customer.” And it’s all about the data, gathering insights, and increasingly, machine learning.
Collecting and collating detailed information across multichannels and social media relating to previous orders, preference surveys and loyalty programs help predict trends, identify new market opportunities, increase inventory optimization and assist in the creation of really great customer experiences.

Data mining and prescriptive analysis are just part of the story. Algorithms that access photos on a mobile phone or tablet can be gleaned for hints, including anonymous location intelligence data.

For example, London and Tel Aviv-based Pixoneye builds profiles of consumers by accessing their mobile devices’ photo galleries, location information and activities. They might predict a wedding, a birth or a home move and pass an anonymized brief to client companies, allowing them to expertly target their marketing efforts. Pinterest individual searches suggest other items the consumer might be interested in, based on photos taken by them or images liked.

The trailblazing techniques serve to confirm the old-fashioned notion of securing long-term customer relationships as the most reliable way to drive growth. Still, data gathering and analysis remain among the biggest challenges for companies, even as they hold great promise for innovation.
Trading personal data for personalization is worth it for 68% of consumers, according to Epsilon research – as long as they get relevant offers, exclusive content, recommendations and the feeling of truly personalized communication in return.

At the same time, as more data is collected, privacy concerns may rightly be triggered. In a 2018 study of global chief marketing officers conducted by digital marketing and media group Dentsu Aegis Network, a data breach or misuse of consumer data was cited as their No. 1 strategic risk, and they expressed concern that European data protection regulations will make it harder to build direct relationships with consumers.

Blockchain technology and encryption can help assuage worries. Yet as hacking and data breaches turn into almost daily news items, established companies that are investing large amounts of money in ensuring they have very high security levels can reap significant advantages, says Alex Hislop, Vice President Consumer Retail Sectors MLEMEA, DHL Supply Chain.

“Some of our customers are moving around highly sensitive, expensive or delicate consumer retail products that are extremely time critical. So, they need companies that they can be sure will protect their data, protect their products safely and securely, and protect the integrity of their product. And that is to the detriment of some of the startup businesses disrupting the industry, because they don’t have the long trading history of being able to service customers and properly secure data,” Hislop says.

Tailored offerings

Where hyper-personalization has so far excelled is in the luxury consumer retail market. Upscale brands and retailers realized they had to offer the VIP service experience buyers of high-end goods were accustomed to from elite boutiques. And they use information tools to do it, says Luis Teixeira, Chief Supply Chain Officer of luxury digital fashion retailer Farfetch.

“It’s all about using the data we have from our customers to be able to provide them not only with the most seamless experience, but also with a luxury experience. This is what we aim to do,” he says.

At the luxury end, hyper-personalization can mean personal shopping services, exclusive packaging with hand-written notes and valet-style white-glove deliveries. It also requires an extremely agile supply chain (aka “fast logistics”), and a company culture of service without compromise.  
In the mid and mass markets, there’s plenty of room for growth, though some subscription services have managed to bridge the gap. For instance, vendors of men’s grooming products, exclusive sportswear and equipment, pet grooming and vitamins have mastered the art of anticipating seasonal needs and new trends, and of testing innovative new concepts with this loyal consumer group.

In the mass mainstream, this might translate into something like customized packaging or engraved items, like a personalized perfume bottle or pair of running shoes, machine-worked in a local or regional packaging and delivery hub. Or VR dressing rooms that store a customer’s measurements and image, meaning better fits and fewer returns, notes Hislop.

“If the technology works well and matches the person’s body or face shape, that person is less likely to order four or five shirts in different colors and sizes if, thanks to VR, they’ve already been able to see that the size fits and the cut and color suit them. This could have a significant impact on the current retail fast fashion industry, which averages a returns rate of over 40% for online sales.”

Want it Delivered?

Why go looking for the latest logistics trends and business insights when you can have them delivered right to you?

Give the people what they want

Recent trends in customer service innovation have tended to focus on making purchasing simple, safe and foolproof.

The next wave of the customer relationship, however, is not just about offering convenience, but connecting with customer values. The Dentsu Aegis Network survey found that close to 70% of chief marketing officers globally say connecting their brand to social impact is an important way to engage consumers. And young people in particular value green strategies.

For logistics, making a personal connection doesn’t have to mean free delivery and returns. Instead, says Hislop, some customers will put their money where their heart is.

“According to the research, the younger the person is, the stronger their propensity to look for an environmentally friendly delivery and returns solution,” he explains. “It emerged that 20- to 35-year-olds are much more willing to pay for that service, because they know it’s the right thing for the environment. And we’re also seeing a number of companies now who try and ‘close the loop’ and make their delivery and returns delivery with zero negative impact on their long-term supply chains.”

Think consolidated deliveries in the future, where a customer prefers to wait a few extra hours or days for their order over the instant gratification of an inefficient single truck delivery, says Hislop. Competitors could even van-pool – sharing unbranded vans to maximize efficiency and loads, and lower emissions. Crowdsourcing-style projects could also let individuals take local delivery jobs that suit their commute every day, and supplement their incomes by delivering goods or collecting returns as well.

Delivering the future

It might be fun to envision the zenith of delivery as a sky full of drones bearing groceries and fast fashion goods, but that’s unlikely to happen in the short term. While drone technology seems ideal, the miniature flyers are so far only allowed in very limited areas due to air traffic clearance concerns. There is certainly some potential, as DHL’s Parcelcopter tests involving drone delivery of medicines to inaccessible regions have shown.

But the real heroes of the last mile’s next frontier are likely to be much closer to the ground.
Starship Technologies, from the creators of Skype, is a remotely monitored robot service that delivers to corporate and academic campuses and has already trialed in some cities. Amazon is testing its own version, a friendly blue slow-rolling box on wheels called Scout.

Alex Hislop says DHL is thinking beyond the bot. One method in the works deploys robots regionally for deliveries in tandem with a self-driving, autonomous or electric delivery van, enhancing efficiency of both human and machine.

Hislop also envisions “robots with characters and emotional intelligence,” offering innovative customizable delivery with personalized options based on target preferences. This might mean a robot that can switch to Spanish from English when delivering to a Spanish-speaking customer in Miami. Or a bot that plays soothing music when delivering to hospitals, and uses the patients’ names and their favorite song the next time they visit. They learn with each visit and the experience only gets better.

“Your robot absolutely must be able to deliver, and must be able to deliver to expectations. So it’s actually quite complex, but the emotions around the delivery robot are an important aspect of the customer service level, which can exceed expectations if we get it right,” he says.  Now that sounds like the future. — Susanne Stein

Published: June 2019

Images: iStock

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