When the Customer Isn’t Right: Retail Personalization and Self-Reported Data

For more than two decades, the customer-centric revolution has been changing the way retailers think about and interact with their customers. There is no doubt this has been a positive shift, and one that has paid huge rewards for those who have gotten it right. The opportunities for retailers to listen to and learn from their customers are greater than ever. Whether it is on the spot feedback through an app or a kiosk at checkout, or the opportunity to shape your personalized promotions by sharing your favorite brands, lifestyle or dietary preferences, customers have a greater voice than ever before.

But is there ever a time in retail personalization when retailers shouldn’t listen to customers? There just might be.

Illusory Superiority
It is a well-established fact that humans in general have poor self-awareness. In many areas of life, we exhibit what psychologists call “illusory superiority” – thinking we are better than those around us in spite of evidence to the contrary. One study found that 93% of Americans believe they are above average drivers. When asked about their charitable contributions, people routinely over-report their donations.  Overall, as Tasha Eurich argues in her book Insight, 95% of people think of themselves as self-aware, but in reality, only 10-15% of us are.

This lack of self-awareness spills over into what customers will tell retailers when asked about their shopping habits. It is common for customers who are asked to say that they prefer products that are healthy, ethically sourced, and good for the environment. It is equally common for their baskets to tell a different story.

No one is suggesting that customers are being dishonest in these situations. We all know it is possible to intend or want to do something and then not follow through. But clearly retailers who are asking customers about their lifestyle preferences or intentions cannot always take the responses at face value.

When Data Goes Stale
Even when customers are not giving responses that don’t quite match their behavior, using self-reported data has its risks. Take a typical lifestyle survey that might come with signing up for a new rewards program. A customer who is currently making an effort to eat healthier may express an interest in organic or gluten-free products. Another shopper may report having a pet and wanting to receive offers on pet food. A third may indicate they do not have any children. All of these things are useful to know. They also could all be inaccurate a year from now. Most customers will never take the time to update their profile. The result for the retailer can be a mix of irrelevant offers and missed opportunities.

When Self-Reporting Still Makes Sense

Obviously, one solution to avoiding self-reported data is not to use it. Many retailers choose to base their personalization only on customers’ actual purchase history.

But once you are aware of the risks of using self-reported data in your marketing efforts, there are still a few places where simply asking the customer what they want still makes sense.

First, it makes sense to use direct customer inputs when a customer is new and doesn’t yet have a transaction history. Asking them some “get to know you” questions when they first shop or first join a rewards program is a great way to build the relationship and accelerate your learning at the same time.

Once a customer has been around for a while, one of the best areas to get direct customer feedback is in response to specific offers. Some of this can be done automatically through self-learning algorithms. If a customer buys something regularly then suddenly stops, a good system will recognize this and adjust. But an opt-out mechanism that lets the customer tell you not to show them that offer again can speed up the process. It also gives the customer a sense of control and being heard that makes them less likely to opt out from a program altogether.

Some retailers have also built a loyalty program perk specifically around customer choice. Letting customers choose their favorite five items for an ongoing discount is a powerful way to drive loyalty and has almost no downside from a customer experience perspective. If a customer chose the items, and has the chance to update them when they want to, there is little to complain about.

Finally, it is wise to let customers give direct feedback on their communication preferences. Letting customers not only opt-in or opt-out of communication, but also set their preferred channel or frequency, ensures you are interacting with them in a way that suits them best.

The old saying that the customer is always right still holds. Organizations that prioritize listening to customers will always win in the long run. But understanding the various ways customers can speak to you – and the best way to interpret each one – can help you shape your loyalty marketing efforts to ensure your customers that will keep them coming back.

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