BOSTON: Brands that integrate advanced technologies and proprietary data to create personalized experiences are enjoying revenue increases of 6-10%, or two to three times faster than brands who do not, new research reveals.
The Boston Consulting Group's Profiting from Personalization study, which surveyed personalization programs at more than 50 companies in ten different industries, described the potential value of the technique, while providing an overview of the challenges brands face.
Crucially, in the next five years, across retail, healthcare and financial services, the 15% of companies that successfully deploy and leverage personalization can expect to see an $800bn revenue shift, as consumer interactions begin to yield more value.
"In many consumer categories, high-value customers drive 70% or more of the value for companies," noted Mark Abraham, a BCG partner.
"Brand individualization unlocks the ability to enhance loyalty with these and other customers by tailoring the brand experience to each contextual user journey," he said.
The survey showed that two-thirds of respondents expect a minimum 6% incremental annual revenue lift by individualizing service. For several sectors including apparel, financial services, grocery, and tech, companies anticipated upticks of 10% or more.
About a quarter of companies in those sectors have already achieved revenue increases of 6% or more.
The effectiveness of the technique has also provided evidence for greater investment for up to half of respondents who currently spend over $5m on personalization annually.
"For incumbents to defend—and expand—share, they need to reimagine their business with an individualized value proposition at the core, merging physical and digital experiences, to deepen their customer connections," said Steve Mitchelmore, a BCG partner.
However, the report acknowledged barriers to implementation; namely technological limitations and inadequate measurement capabilities. According to BCG, nearly 60% of companies struggle to measure the impact of campaigns.
For brands that succeed, the rewards are abundant, the authors reported. Starbucks, the US coffee company, was highlighted for its game-based personalization strategy that rewards loyal users, helping to triple the incremental spend of customers who redeemed offers.
Data sourced form BCG; additional content by WARC staff