building lasting consumer relationships in...

How Retail CMOs can use technology to createemotional and relevant customer experiences

BUILDING LASTINGCONSUMER RELATIONSHIPS

IN RETAIL

METHODOLOGY

00

This report shares the results of a 2017 survey conducted via in depth personal interviews of 100+ CMOs and senior marketing executives at major retail brands headquartered in the US and the UK, including: Best Buy, Marks and Spencer, Williams-Sonoma, Urban Outfitters, and Nordstrom, amongst many others. Respondents hold titles, including: CMO, Head of Marketing, or Senior Vice President of Marketing.

BUILDING LASTING CONSUMER RELATIONSHIPS IN RETAILHow Retail CMOs can use technology to create emotional and relevant customer experiences01

CONTENTS02 | About the Research

03 | Part 1: THE CMO FOCUSES ON DRIVING GROWTH

06 | Interview with Ryan Deutsch, Persado

07 | Part 2: MAKING BETTER USE OF CUSTOMER DATA

11 | Part 3: A WINNING CUSTOMER EXPERIENCE REQUIRES CONTENT PERSONALIZATION

13 | Retailer Spotlight

15 | About Persado

15 | About WBR Digital

Ryan DeutschSenior Vice President of Global Customer SuccessPersado

Attracting loyal customers isn’t just about the product. It’s about crafting an experience that creates an emotionalconnection between the customer and brand.

ABOUT THE RESEARCH

The last ten years of technological advancement have significantlyaltered the retailing landscape. In their effort to provide more relevant content and experiences for customers, retail marketers turn to personalization but still struggle to get it right.

To better understand these trends, Persado and Worldwide Business Research (WBR) surveyed 100 CMOs and marketing leaders to determine how retailers intend to solve the problem of effective personalization today. Our 2017 findings confirm an increasingly important tenet of recent years: the key to gaining market share and brand loyalty is building a relationship with the consumer on a personal, emotional level, and on their terms.

What we discovered through this study is:

1. Refining the customer experience has a direct impact onrevenue. To drive engagement, marketing leaders wantsolutions that rise above the hype and deliver real ROI.

2. Retailers are looking to machine learning and artificialintelligence (AI) to harness their customer data, so they candeliver personalized experiences. The key challenge is doingthis at scale and keeping messaging relevant and human.

3. Today’s online shoppers are empowered and well-informed,and they demand an individualized, emotionally engagingexperience throughout their customer journey.

We hope you find this survey results insightful and actionable for your own enterprise.

02BUILDING LASTING CONSUMER RELATIONSHIPS IN RETAIL

How Retail CMOs can use technology to create emotional and relevant customer experiences

00 BUILDING LASTING CONSUMER RELATIONSHIPS IN RETAILHow Retail CMOs can use technology to create emotional and relevant customer experiences03

76% of CMOs and senior marketing executives told us they will measure the success of marketing technology by its ability to incrementally affect revenue.

https://hbr.org/2014/10/the-value-of-keeping-the-right-customers

Retailers are collectively looking to artificial intelligence and machine learning technologies to solve their biggest problems – of driving revenue and engagement – and are looking to invest in solutions as part of a tech ecosystem that can deliver additional value.

PART 1 : THE CMO FOCUSES ON DRIVING GROWTH

CMOs EMBRACE AI AND CUSTOMER-FIRST THINKING TO DRIVE NEEDED GROWTH

As the CMO becomes a primary driver of growth, solutions that deliver real ROI will rise above the noise and marketing hype. In fact, executives told us they will measure the success of marketing technology by its ability to incrementally affect revenue (Fig. 10).

To achieve this growth, retailers are putting customers at the center of analysis and decision making, becoming increasingly concerned with the performance of key performance indicators (KPIs) such as Customer Lifetime Value (CLV).

For the CMO, the race to improve customer loyalty is on. According to Harvard Business Review, acquiring a new customer is anywhere from five to twenty five times more expensive than retaining an existing one. Given that brand loyalty is on the decline, the marketer’s challenge of maximizing CLV has also never been more imposing.

0400BUILDING LASTING CONSUMER RELATIONSHIPS IN RETAILHow Retail CMOs can use technology to create emotional and relevant customer experiences

The upshot will be the kinds of radical personalization marketers have been shooting for...

2017 SET TO BE A BIG YEAR FOR INVESTMENT IN AI

Retailers are prepared to invest in emerging technologies including machine learning and artificial intelligence, key instruments for successful personalization, among other priorities. A full 86% of our respondents plan to make investments in this transformative technology this year (Fig. 1).

According to Forrester, brands can leverage, “Artificial intelligence technologies to understand and capture the qualities inherent in any content — its emotional appeal, subject matter, style, tone, or sentiment, for example.”

Why is this relevant? Forrester continues: “The upshot will be the kinds of radical personalization marketers have been shooting for; and eye-popping results, like the direct marketer whose team sweats every single-digit uplift in customer clicks, and saw an instant double-digit uplift from content intelligence.”

Respondents who plan to invest in AI or machine learning in 2017? (Fig. 1)

Respondents currently using AI or machine learning in their marketing organization. (Fig. 2)

86%

YES 14%

NO 69%

YES 31%

NO

https://www.forrester.com/report/Breakout+Vendors+Content+Intelligence+For+Marketing/-/E-RES136459

$50-100M

19%

$1-50M

47%

$100k-1M

25%

Less than $100K

9%

$50-100M

19%

$1-50M

47%

$100k-1M

25%

Less than $100K

9%

$50-100M

19%

$1-50M

47%

$100k-1M

25%

Less than $100K

9%

$50-100M

19%

$1-50M

47%

$100k-1M

25%

Less than $100K

9%

Nearly half of respondents who are investing in AI and machine learning are planning to spend $1 - $50 million dollars.

RETAILERS ARE CARVING SIZABLE BUDGETS FOR AI TECHNOLOGIES IN 2017

Forrester predicted that AI investment would triple in 2017. Supporting this prediction, nearly 70% of our respondents indicated that AI and machine learning technologies are already playing a role within their marketing organizations (Fig. 2).

What is certain is that CMOs are allocating significant budgets to AI and machine learning in the next 12 months.

Budgets for AI and machine learning in 2017. (Fig. 3)


CUSTOMER ENGAGEMENT TOPS THE LIST OF BENEFITS OF AI IN MARKETING

The CMO expects artificial intelligence to have a direct impact on top-line growth. 86% of respondents expect higher engagement to be a top benefit (Fig. 5). Research has found that ‘fully engaged’ customers deliver a 23% premium over the average customer in share of wallet, profitability and revenue (Gallup). Interestingly, respondents at the Director level were more likely to be concerned with campaign lifting metrics.

Expected benefits of implementing AI and machine learning in marketing. (Fig. 5)

http://www.gallup.com/businessjournal/172637/why-customer-engagement-matters.aspx


60% of the lift we see in campaign performance relates to the way marketers connect emotionally with customers.

EXECUTIVE SPOTLIGHT

Do you see a shift towards machine learning to connect the dots on customer data and move the needle on marketing performance?

I think data is certainly the key, but the transformation of retail will come from making the data actionable. Most major retailers have more data than they know what to do with or have the capacity to process. Machine learning allows marketers to generate insights for sure, but the key is to leverage the machine towards a particular purpose. Is a marketer trying to optimize for increased transactions? Increased margin? At Persado we focus on engagement. Our platform learns how customers respond to language and images, then uses that insight to create content that increases engagement, purchase frequency and Customer Lifetime Value (CLV). This is a very specific use case but can be applied across the customer experience. It’s highly actionable.

What can give retailers a competitive advantage in this oversaturated market?

60% of the lift we see in campaign performance relates to the way marketers connect emotionally with customers. I believe that emotional connection is particularly acute in moments that matter. Applying the correct message to the correct customer at the wrong time will not result in incremental value. In fact it’s a waste of the insights the marketer has worked so hard to connect. At Persado we work on a number of contextual programs across channels, making certain that these programs connect emotionally with customers at the right time.

Why does marketing depend upon creating intelligent content — content that’s targeted, engages and converts?

The mediums marketing has to leverage are rapidly changing. Brands used to build a relationship with customer on a 60 second tv spot, a full page color ad in the newspaper, or in a physical store. Now brands must connect with customers via an ad on Facebook, a text message, or a pin on Pinterest. The real estate we have to work with has shrunk in a material way, so we need to be smarter when it comes to creating content. This is the unique element of Persado, we are not a content testing platform, we leverage customer insight to create content that resonates across channels, identifying attributes of creative that could not be unpacked and analyzed without AI. It’s really an exceptional time to be working on content intelligence.

Ryan DeutschSenior Vice President of Global Customer SuccessPersado


Retail CMO’s feel most confident in the use of data to inform the more mature channels like email and web. However, they are less confident in their ability do so with channels like social, offline, and display, which points to the difficulty of applying past learnings to future campaigns (Fig. 6).

There is a ton of data out there; the question is which data set is most valuable, impactful and actionable. Despite growing adoption of AI and machine learning technology to uncover insights, marketers remain unable or unsure of how to harness its full power.

PART 2 : MAKING BETTER USE OF CUSTOMER DATA

How well do you use behavioral data to create personalized content? (Fig. 6)% who rated themselves good or excellent


DESPITE GROWING ADOPTION, MANY RETAILERS EITHER DISTRUST OR LACK A GOOD UNDERSTANDING OF AI MARKETING APPLICATIONS

AI adoption is stunted in many organizations by a lack of understanding about what it can be used for. Also, tellingly, nearly 30% of respondents named lack of management buy-in as a stumbling block (Fig. 7).

Artificial intelligence is not a single technology, but rathera spectrum of technologies designed to detect and analyzeinformation, and then act on it in a similar way to a human.

These systems include technology like:n natural language processing – allowing programs

to speak to people in a more recognizably human wayn expert systems, software designed to provide

advice; andn machine learning, which can adapt its own behavior

in real time.

The key to evaluating a successful business case for AI is to look at whether it is applied narrowly to a specific context. The Harvard Business Review notes that while machine learning can help generate unique value insights, it’s also true that “they’ll often fail miserably ifyou try to apply them to something new, or, worse, theymay degrade invisibly as your business and data change.”

It’s imperative to test the efficacy of the AI recommendationsagainst your current systems to ensure your solution is working properly, and not giving you potentially damaging results.

The biggest roadblocks to AI adoption. (Fig. 7)

https://hbr.org/2016/11/the-competitive-landscape-for-machine-intelligence


MARKETERS STRUGGLE TO IMPLEMENT LEARNINGS FROM THEIR PREVIOUS CAMPAIGNS

Retailers are seeking to develop a more holistic view of performance. However, understanding how the intention and behavioral data that comes from online relates to the inventory and sales data that retailers have run their businesses on for the past century is a big hurdle.

According to a recent study by The Boston Consulting Group, almost 60% of companies struggle to effectively measure and attribute the impact of campaigns, limiting their ability to learn from customer feedback and adapt accordingly — which is at the core of individualizing the brand experience.

Percentage of respondents who consider these issues challenging, or very challenging. (Fig. 8)

https://www.bcg.com/publications/2017/retail-marketing-sales-profiting-personalization.aspx


Consumers demand a higher level of human-sounding personalization and relevancy.

AN OPPORTUNITY TO MAKE CONTENTMORE PERSONAL

Personalization is a huge investment area for eCommerce retailers, and according to Forrester, brands believe this will differentiate them more than the products they carry. Despite this, retailers continue to struggle to provide more relevant experiences.

Words have the power to drive consumer affinity and cement the consumer-to- brand relationship. Language is therefore a strong foundation for maximizing the long-term consumer value. The words “Think Different” from Apple, and “Just Do It” from Nike transport consumers to a special place – a destination where they feel a great synergy with those brands and their products.

On a scale of 0 to 4, with 0 as least effective and 4 as most effective, marketers find that they could do a better job with personalization techniques: tailoring product recommendations (2.85); segmentation (2.53); offer personalization (2.49); and personalizing content (2.13).

Most commonly personalized content.(Fig. 9)

n Product recommendations

n Segmentation

n Offer (Discount/pricing) personalization

n Content personalization

0 1 2 3 4

2.85 RATINGAVERAGE

2.53 RATINGAVERAGE

2.49 RATINGAVERAGE

2.13 RATINGAVERAGE

Leasteffective

Mosteffective

Effectiveness of brand personalization strategies. (Fig. 11)


To win the hearts and minds of an increasingly demanding customer in a highly fragmented marketplace, customer insight has to inform personalization across channels, at moments that matter.

PART 3 : A WINNING CUSTOMER EXPERIENCE REQUIRES CONTENT PERSONALIZATION

When asked what engagement means to the CMO, 37% of respondents said impact on revenue, followed by repeat purchases at 27%.

ENGAGEMENT STRIKES STRAIGHT AT THE TOP-LINE – IT MEANS REVENUE!

Retailers are laser focused on how engagement impacts revenue generation and growth. Respondents also indicated that they are looking at engagementas a driver of lifetime value, in terms of repeat purchases, and retention (Fig. 10).

According to research by Rosetta, engaged consumers buy 90% more frequently, spend 60% more per transaction and are five times more likelyto indicate it is the only brand they would purchase in the future. On average,they’re delivering 23% more revenue and profitability over the average customer (Cap Gemini).

What engagement means to the CMO.(Fig. 10)

RepeatpurchasesImpact on

revenue

Brandawareness

Retention

Behavior analytics(e.g. time on site)

13%

27%

13%

37%

10%

http://www.rosetta.com/reports/customer-engagement-rosetta-consulting-study/customer-engagement-from-the-consumers-perspective/https://www.capgemini-consulting.com/reinventing-loyalty-programs

12BUILDING LASTING CONSUMER RELATIONSHIPS IN RETAIL

How Retail CMOs can use technology to create emotional and relevant customer experiences

Demographic and geographic data are the the most commonly relied upon data-sets for personalization However, there is also opportunity here for eCommerce retailers to better leverage additional data streams. In fact, only 34% of retailers indicated a reliance on behavioral data (Fig. 12).

Consumers, tired of being mere marketing targetsand demographics, are demanding that brands communicate with them in more relevant, personaland emotional ways. Retailers may therefore findthat they are able to achieve more effective results with better use of behavioral data so as to servemore relevant communications.

Conversely, getting a customer’s demographical information incorrect, or failing to follow a consumer’s changing life status can result in woefully misdirected marketing campaigns.

Data relied upon for personalization. (Fig. 12)

Respondents asked to identify all types of data they currently rely upon

MARKETERS ARE OVER RELIANT ON DEMOGRAPHIC AND GEOGRAPHIC DATA

Poorly

Very well

Very poorly

Somewhat well

51%

5%

22% 22%

ESTABLISH AN EMOTIONAL CONNECTION

In the age of the customer, emotional connections with brands play a bigger role in decision making than ever before. In fact, Motista, a predictive consumer intelligence firm, analyzed over one billion data points on more than 1.5 million consumers to conclude that “emotionally connected” consumers generate anywhere from 30% to 100% greater annual value (and even higher lifetime value) than other customers.

However, when as part of our research we asked if our respondents had systems for capturing and analyzing the emotional profiles of their audience segments, 36% said no.And when asked how well they currently use emotion to create content, only 22% said very well.

How well do you currently use emotion to create content?

https://hbr.org/2015/11/the-new-science-of-customer-emotions


RETAILER SPOTLIGHT: HOW LUCKY BRAND FOSTERED AN EMOTIONAL CONNECTION WITH CUSTOMERS

OBJECTIVE Lucky Brand wants to cut through inbox clutter with relevant, emotionally resonant content to better engageusers. To do this, Lucky heavily segments their audience and tailors content to each group. The missing piece of their email program was insight into the exact language that would drive each segment to open Lucky’s emails and read the content.

SOLUTION That changed when Lucky Brand implemented an AI-powered solution that gave the ability to explore largest database of marketing language in the world, scored and ranked according to how those words and phrasesperform in-market.

Using Persado, Lucky Brand gained insight into the specific language and emotions their target audience responds to most. For example - In the Lucky Subject Line below, Achievement (an emotional motivator conveying praise or reward for an accomplishment) and Exclusivity (implying or stating one’s unique privilege in receiving the message) were central to generating the greatest lift for both opens and clicks.

WINNING MESSAGE

UPLIFT RESULTS

ACHIEVEMENT EXCLUSIVITY

Pumpkin Spice and Everything Nice

PERSADO WINNING SUBJECT LINE

ORIGINAL SUBJECT LINE

EARNED IT! You've scored an invitation: Uncover your mystery tonight

LUCKY BRAND BACKGROUND Lucky Brand creates the great fitting, good quality, distinctively Lucky jeans and fashion that emanate American lifestyle and spirit. With humble beginnings as a small, Florida jeans shop, Lucky denim is now sold in over 150 company-owned stores and several department store chains across the nation and abroad.

OPEN RATE CL I CK RATE

Persado enables marketers to identify the words that emotionally connect with consumers to increase short term engagement and build lasting, long term relationships. Persado’s platform creates the most engaging digital channel content, transforming daily consumer interactions into maximized customer lifetime value. By crafting the most emotionally connected words, phrases and images for your consumer, Persado maximizes response to your display ads, Facebook, email, web landing pages, SMS, and mobile push notifications while maintaining your brand voice. Persado has been named to CNBC’s 2017 annual Disruptor 50 list and a Cool Vendor in Data-Driven Marketing by Gartner in 2016.

WBR Digital conducts industry research and creates executive-level content in eCommerce, Procurement, Supply-Chain, and Finance. Find out what your audience are saying.

For more information visit: www.digitaleu.wbresearch.com

©Persado & WBR Digital 2017. All rights reserved. This document and its content are proprietary to Persado & WBR Digital and may not be reproduced, republished or resold. The information contained within is provided on an “AS IS” basis for information purposes only and Persado makes no warranties of any kind including in relation to the content or suitabilityThe name Persado, its logo and any associated brand names are all trademarks of Persado.

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