Retail Personalization Is About More Than Just Sending Offers

As merchants look to set their offerings apart to win shoppers’ loyalty, personalization is key. That means more than just using artificial intelligence (AI) to calculate the right targeted promotion — consumers are looking for emotional connection.

Personalization is becoming table stakes for retailers. The PYMNTS Intelligence report “Personalized Offers Are Powerful — But Too Often Off-Base,” created in collaboration with AWS, which drew on responses from more than 2,500 U.S. consumers, found that 71% of shoppers received personalized offers and are interested in them. Plus, another 12% did not receive personalized offers, but are interested in them.

Additionally, 41% of millennials said they are highly likely to switch to merchants providing personalized offers, as did 34% of Generation Z consumers.

Yet many of merchants’ efforts in the space are missing the mark. Only 44% of consumers who received tailored offers said the offers were very relevant to their needs. As such, it seems that many brands and retailers are failing to really get to know their customers.

Indeed, leveraging data to understand consumers’ behavior is not only about identifying the dollar amount or percentage that a merchant can offer to bring the shopper back to the store. It is about tailoring the experience to shoppers’ preferences overall. Merchants can use personalization to tell stories that resonate with individual customers’ interests, values and aspirations. By crafting narratives that are relevant and meaningful to each customer, brands can evoke emotions and strengthen the connection.

In fact, that emotional connection can be the key factor setting a brand’s offerings apart from those of industry giants that can offer better prices. In an interview with PYMNTS, Jeff Yurcisin, CEO of household and personal care products brand Grove Collaborative, shared that consumers’ affinity for the brand is a key reason that its most loyal customers “start their shopping” journeys with the company.

“They’re doing that not because we have more selection than Amazon, not because an individual item might be priced in a certain way,” Yurcisin said, “but rather, they’re trusting us as this brand that is curating these high-performing, planet-first products.”

Overall, emotional connections are top of mind for many merchants. In the latest wave of earnings report, a wide range of brands and retailers spoke to the importance of these efforts. On Macy’s latest call, CEO and chair-elect Tony Spring touted the chain’s “strong emotional connection with its customer” as a key advantage.

In the beauty space, Ulta Beauty CEO Dave Kimbell noted alongside the company’s last financial report, “There’s an emotional connection that’s driving the category and has been for a very long time.”

LG Electronics, for its part, specifically highlighted how it is using personalization to drive users’ connections with its products.

“This year, we would like to advance the completeness of AI agent technology, which allows personalization through user recognition and natural interaction that not only recognizes the situation and context to multimodal sensing, but also commands to the device and have emotional connection with users,” a company representative stated on the firm’s last earnings call.

Meanwhile, furniture retailer IKEA conducted a study of tens of thousands of consumers last year identifying eight key “emotional needs connected to a fulfilling life at home” impacting their purchasing in the category — control, nurturing, enjoyment, aspirations, comfort, security, belonging and accomplishment.

When done right, personalization allows merchants to move beyond generic marketing strategies and connect with consumers on an emotional level, leading to stronger loyalty.