Business applications of personalisation: beyond product recommendations
As we outlined in our blog “Hyper’s building blocks of personalisation”, affinity analytics, attributes and need states exist in a virtuous spiral where increasing your understanding of either one leads to better understanding of all. In the final blog of our 3-part series we dive into how these layer up to create transformational insights across the entire business.
Product Assortment & Ranging
Having too many products in your offering can be costly as it’s difficult to maintain a supply chain with such a broad and complex offering. Many businesses would benefit from range rationalisation, reducing their global product range to improve supply chain efficiency without impacting customer choice. But which products should you strip out?
Customer needs states can identify how many products serve the same customer need. Remove unprofitable lines which don’t serve a unique customer need and have viable substitutes. Make profitable lines stand out from the need states, digitally and physically. Affinity Analytics also forms the backbone of demand transference algorithms, which help predict where customer demand shifts to as listing and delisting decisions are made.
Benchmarking your product range to know where you stand against your competitors highlights the strengths and weaknesses in your assortment. Customer needs states and product attributes play an important role here, making it easier to compare across retailers and spot the areas where you might want to reduce range and save supply chain costs, or the areas where you need to up your game in new product development. This helps you establish if you are missing key sources of delight and inspiration from your product ranges where your competition excels.
Website Optimisation & Curated Range
E-commerce brings us the joy of the endless aisle, and whilst everyone loves choice, it can get in the way of an easy and friction-less experience if the range is not well curated, leaving us scrolling through tons of irrelevant content or products. Personalisation can improve the navigation around a website, focusing the product taxonomy on customer need states and utilising attributes to drive flexible search terms.
Customer centric needs states are essentially a re-imagining of your merchandising hierarchy, but as if it were designed by your customers’ decision-making process and not the historic buying process. This re-imagined hierarchy can be used to improve navigation of the website taxonomy alongside attributes to drive novel product filters relevant to that customer.
Another way to tame the endless aisle is to use all the data you have, combined with personalisation, to stop treating all customers the same and curate products that are relevant to them. When known customers come back for a repeat visit, the expectation that they should receive more relevant offers and recommendations is growing.
Prior analysis of a customer’s historic transactions enables better decision making here. Many websites personalise on the fly based on your current browsing session with features such as ‘customers who searched for x also viewed y’.
Do your customers get the same web experience regardless of what you know about them? A personalised ‘show window’ or landing page is a great way to show customers that you know about them and can cater to their specific needs. This might be in the form of inspirational product recommendations, page filters applied as a default for their clothing size or product preference, bespoke affinity-based sort order of relevant products sets.
Localised Store Ranges
In a similar way to ecommerce, in physical stores, we want to create product ranges that are reflective of what we know about the local demographic and the nuances of customer preferences that the store serves. You may have an extensive global product range but how to you go about filling limited space in each store?
Creating clusters or micro-segmented stores based on how those stores are shopped, in terms of the full set of customer need states, can be a great way to understand stores that need to be ranged in a similar way.
It lets you know which stores need to have an up-weighting or down-weighting of certain customer need states and products. Store and customer attributes help you describe why the store represents a different type of customer in relatable “human” language.
This means you can maximise the level of customer choice in the minimum number of SKUs, whilst catering for the local demographic and buying habits in a data driven way.
Pricing & Promotions
It’s easy to get stuck in the promotional cycles laid down in previous years through fear of losing sales but this leaves you at a loss as to the effects of promotional cannibalisation. The answer is to utilise customer need states, which are the sets of products that will cannibalise each other’s sales where promoted. Until you understand this you may stay trapped in the promotional “death spiral” with deeper and deeper promotions year after year.
Breaking free from that using affinity analytics and need states sets your business up for more advanced machine learning to start to optimise the need state as a set of products and maintain the balance of different price points within the need state.
Or more simply you might want to create some effective product bundles and set the optimal pricing for the bundle. Affinity analytics comes to the rescue, informing us which products are complimentary, and combined with price elasticity, we can find the optimal price point to drive customer engagement.
Marketing & Communications
Marketing and communications are your chance to speak to the customer and empathetically tell them that you understand them, their motivations, and needs. Running marketing campaigns and CRM messaging from broad brush segmentations leaves a great deal of value on the table, for both consumer and your business.
Most marketers are acutely aware of this and know more personal communications could drive revenue and reduce customer churn, but still don’t have the data and analytics tools to enable 1-2-1 targeting.
Affinity, attributes and need states work together to surface the right product or message to your customer based on every interaction they are having with your business. They enable you to move from bombarding your customers with generic content to triggered relevant communications that drive genuine engagement.
Next best action processes and algorithms can manage the cadence of communication and provide the A/B testing framework to allow robust views of your marketing effectiveness.
Do you struggle getting the right product in the right place at the right time? Do pricing, website, marketing, and range decisions cause incredible change to your supply chain forecasts? Has reacting to Covid-19 buying patterns caused major disruption in your business? If so, you’re far from alone.
Supply chain can be impacted by all the business functions above. It’s essential that they act harmoniously as personalisation may well inspire and delight the customer, but if the order can’t be fulfilled or the shelves are bare, then ultimately this delight turns to disappointment.
A solid and shared view of need states can help solve this and be a great tool to build into demand forecasts, in the same way Airbnb were shown to use them in our part 1 of this blog.
At Hyper we think accurate supply chain forecasts should move beyond predicting individual product demand in isolation, it should be done at a customer need state level as ultimately these are the products that act as substitutes for each other and share an overall demand profile.
Pricing, promotion, and marketing then influences the share of demand that each item receives from the need state level demand profile, giving your supply chain team more accurate and predicted patterns to work with.
Hyper Personalisation: To affinity and beyond!
There you have it, we strongly recommend you kick off your journey towards enhanced customer personalisation, build the recommendation engine and the insights will come! Just be sure to keep an open mind, think creatively about the applications of the analytical gold dust you’ll produce in affinity analytics, attributes, and customer need states.
Hyper Group’s approach to reaching effective personalisation:
- Strategic planning and guidance – to land personalisation correctly in your business, you must align a swathe of business functions and get the right processes in place. We help businesses take that high-level strategic overview, work with you to get stakeholder buy in and spot pitfalls ahead of time.
- Layering data science techniques – effective business personalisation isn’t created overnight; we’ll help you create a roadmap of analytical and business projects which layer on top of each other in a virtuous spiral of insight and enhanced customer experience.
- Using the right technology – the modern world of cloud based data warehouses, data analytics platforms, cutting edge data science and machine learning techniques makes it easier than ever to work towards personalisation, but it’s a confusing landscape with a catalogue of vendors promising similar outcomes. Let us help you navigate that minefield and invest in the right technologies.
- Domain expertise – we understand consumer facing businesses and the common organisational challenges. We’re passionate about improving consumer experiences and have the domain expertise and background to support your personalisation efforts.
- Decision making tools – our approach to creating effective personalisation isn’t based on landing big expensive consultancy projects where the benefits of which fizzle out over time. We work with you to create analytical decision-making tools, aligned to the tasks which need to get done, and embed them in your teams, tech, and processes.
From all of us at Hyper, we hope this blog series inspires you to see the true benefits of what personalisation can do for your business and your customer. It can be a scary journey, so our focus is on helping with that roadmap to using affinity analytics, attributes and need states to understand your customers and deliver rich, relevant, and rewarding experiences to them. Please reach out to learn more about how we can support your personalisation initiatives.
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