The E of Engagement
Wooing the consumer with personalised propositions
All you need is love…
Words that certainly ring true in the current consumer landscape, where retailers, CPG companies and technology players are trying their best to win over the heart of the consumer. It’s a battlefield out there, but luckily we’ve uncovered the E³ formula for finding true consumer love:
Let's start with the first E: Engagement
It all comes down to a simple truth: If you want consumers to engage with your brand, you must engage with them. Build Engagement by becoming a relevant, emotionally connected partner.
It takes commitment and investments to:
- learn their needs and preferences
- discover how to be relevant for their happiness
- be devoted to making them feel better.
Engagement is about addressing the consumer’s needs and presenting them with relevant and personalised propositions at the right moment.
It’s all about personalisation
Personalisation is the magic ingredient that creates loyalty and helps cement a relationship with the consumer. Personalisation initiatives should appeal to one or more of the consumer’s implicit needs and desires. This will not only stir up feelings of love (and loyalty), but also increase the switching costs for the consumer; switching to another provider would mean losing all the personal benefits they acquired.
However, you have to do it right...
The current personalisation efforts of retailers and CPG companies are mainly driven by efforts to increase transaction value. Think of personalised offers driven by cross-sell ratios. They are based on the interest of the company, not on consumer needs. And what about personalised ads in e-commerce based on past viewing or buying behaviour, they are based on click-through rates, but fail to build Engagement with the consumer.
Retailers and CPG companies that focus only on increasing transaction value are missing the opportunity to increase the customer (lifetime) value. Sure, customer value is driven by (profitable) transactions, but even more by long-term loyalty.
Advantages and opportunities
To create truly personalised propositions, companies need consumer data. And lots of it.
It’s the reason why the technology players have such a big advantage when it comes to creating Engagement. They have an unmatched breadth and depth of personal data coming to them directly from the homes of the consumer – where the technology players’ (social) media channels, cloud solutions and virtual assistance are with the consumer 24/7.
For retailers and CPG companies there is a huge potential in creating Engagement by becoming a relevant, emotionally connected partner for the consumer. Retailers, and especially food retailers, may already have an advantage with the specific depth in transaction data they have available, the omni-channel experience they can offer, and potentially their credibility to be a trusted partner.
For CPG companies it might be a bit more complex due to the lack of direct consumer interaction and thus a lack of access to consumer data. However, CPG companies and their much-beloved brands do have the opportunity to offer deep personal experiences in a specific niche of a consumer’s life.
Both retailers and CPG companies have to keep in mind that consumers are already spoilt by the technology players. Having the highest expectations and being very much used to being personally engaged in the digital space, consumers will expect the same level of personalisation in the physical world.
Inspire and recommend
Personalised propositions could inspire consumers to try new products or services (such as recipes or alternative tastes) that match their potential desires, based on their past behaviour or the behaviour of similar consumers.
AI technology is needed to learn patterns for similar consumers and behaviours in order to suggest ‘most likely’ matches.
Retailers and technology players are best positioned for offering personalised propositions, because they have access to the data-matching transactions or ratings to individual consumers.
Coach and support
Helping consumers reach their personal goals – such as healthier eating habits, losing weight, saving money or decreasing environmental footprint – is a great way to create Engagement.
It takes consumer data and AI technology to map the consumer’s behaviour, recommend actions and potentially benchmark or nudge the consumers (“Others have reached their goal today!”).
Food retailers are well-positioned since they have the breadth and depth of consumption data. Of course, technology players are well-positioned too, having sensor and health data from their consumers’ devices and profiles.
Mass customisation allows consumers to tailor a product to their specific needs and preferences, such as perfectly fitting shoes, personalised design or food adjusted to individual allergies or diets.
It requires a specific process to realise this level of personalisation.
CPG companies are the best-positioned to offer mass customisation since it fits best in their existing marketing capabilities.
Handing out rewards is a great way of building a bi-directional relationship with the consumer, which will also lead to Engagement.
For example by rewarding the consumer’s loyalty by offering discounts, exclusive deals or a unique (priority) status.
Retailers and technology players are best-suited for this strategy with their broad transactions database and ways to tailor the experience.
A consumer community stimulates the customers to have authentic conversations with their peers and share their experiences. It builds trust and a sense of belonging as well as encourages word-of-mouth advertisement.
Community-building requires the recognition of the most active customers and turning them into brand ambassadors. Another opportunity can be to use existing community members to build look-a-like audiences and target potential new customers.
Retailers in particular can benefit from creating content and communities in order to own the habit around a shopping occasion.
As we’ve seen, technology players are best-positioned to drive personalisation given the breadth and the depth of personal data they have at their disposal. But that doesn’t mean there is no way for retailers and CPG companies to catch-up.
Retailers, and especially food retailers, may have an advantage by the specific depth in transaction data they have available. They can offer the omni-channel experience and have the credibility to become a trusted partner for the consumer. Until now, only a few retailers have launched personalisation or loyalty programmes.
The rest are missing out on a huge opportunity.
For CPG companies it is a bit more complex due to the lack of direct consumer interaction and the corresponding access to consumer data. However, they have the opportunity to create Engagement on a deeply personal level in a specific niche of a consumer’s life, particularly in the upper segment – think: sports apparel, coffee, shaving gear and cars. They will need to persuade their customers to participate in such a program, which is -again- highly dependent on the perceived value for the consumer.
Pick and succeed
All in all, it is fundamentally important to approach Engagement as a transformational change.
Every personalisation initiative should start with the ultimate goal of building long-term customer relations, which drives customer lifetime value by being relevant and unique.
Over the past couple of years, CPG companies have begun opening up their own retail stores and building their own e-commerce environments. Both retailers and CPG companies are acquiring data science start-ups or are investing in in-house data science expertise. Those are steps in the right direction, but to really succeed at this E, parties competing for consumer love need to pick a domain and claim it.
If you are a big sports brand: claim the sports domain, be extremely good in that domain and the personalisation you offer using deep data and AI capabilities. Do this, and it will become very difficult for the technology player to beat you on Engagement.
- Think of where and how personalisation can lead to a unique and relevant proposition that appeals to consumer’s needs and desires, and increases switching costs.
- Assess how the relevant data can be collected (via internal transaction data, customer profile data, external data or potential partnerships) and how customers can be motivated to share their data.
- Build or acquire AI capabilities and aim them towards high-impact initiatives that are aligned with the customer engagement strategy.
Facts & figures
Impactful digital engagement increases consumer loyalty for 68% of consumers
Loyal customers spend 67% more than new ones through repeat purchases, larger cart sizes, and frequent upsells
It’s 5 to 25 times more expensive to acquire a new customer than it is to retain an existing one
Chief Marketing Officers spend an average of 14.2% of their budget on personalisation efforts, with double-digit percentage averages across all industries and business models