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How retailers can use data insights to scale personalization

Isaac Krakovsky Photographic Portrait
Isaac Krakovsky

EY Americas Consulting Retail Sector Leader

3 minute read 23 Apr 2024

Turn high volumes of data into actionable insights that can help you personalize customer offerings and scale your business more effectively.

In brief
  • Consumer insights can create better experiences with your brand, as well as build consumer trust – and sales.
  • Employing a virtuous cycle where buyer experiences inform business decisions and future experiences creates value from data.
  • Switching from KPIs to CPIs (consumer performance indicators) can help personalize and scale your business.

Retail used to be a highly personal business. At the corner store the shopkeeper had relationships with everyone who came through the door. He or she knew what each customer preferred, the items they typically bought week after week and could use that knowledge to predict future sales or to offer new goods those customers might also buy. Delivering this kind of personalization and customer experience is what every retailer is trying to do today — only at scale. But with new channels and technologies, constantly shifting consumer expectations and growing pressure from digitally native entrants, retailers are increasingly challenged to navigate these dynamics. This is only compounded by shareholders demanding year-on-year growth from the business. The answer to all of this, to operating at the scale now required, lies in data.

With every passing millisecond, new data about billions of consumers is generated. Retailers must make sense of and derive value from that data. That means approaching it as a virtuous cycle, where insights from the shopping and buying experience are applied to the business, then back into the experience, again and again. Every insight is germane and relevant to the next, lowering cost to acquire while increasing customer lifetime value.

To get there requires two significant changes to how retailers use data. First, embrace new technologies that go beyond dashboards outputs to actually deliver highly actionable insights vs. simple data points. Second, understand it’s time to switch from key performance indicators (KPIs) to a more CPI-centric (customer performance indicators) approach. Let’s take a closer look at the strategies to effect these changes.

Only
of US consumers completely trust online-only retailers and chain retailers.
Only
of US consumers completely trust CPG brands in general.

How EY can help

Going beyond the data dashboard

Retailers understand the need for high quality customer data, but data sources and the volume of data captured continue to increase exponentially — from purchase to consumption behavior, online click data, in-store analytics from RFID tags and camera analytics. With these changes compounded by first-party data guidelines and consumer attitudes to data collection, it’s critical to pull insights out of the data you do collect. New technologies are now capable of going beyond data outputs to deliver insights that can create a more 360-degree view of the consumer. That includes not just ways they engage with brands, but how they live their lives “off-brand.” What other brands do they shop? What else do they purchase? How do they use it? Can you meet a need for these other products and services too — and build business? Am I meeting my customers’ needs? The resulting data-driven insights identify existing or emerging trends and enable more strategic decision-making about customer journeys and how retailers pursue new growth opportunities across core, adjacent and emerging markets.

 

Evolve from KPI to CPI

The pathway to retail success today is understanding what products, services and experiences customers really expect across your channels, and delivering it consistently. As consumer experiences have become primarily digital, mobile and connected, the journey and volume of customer interactions with data collection points expands and creates opportunities for insights-based analysis. Traditional data analytics pinned to KPIs can capture a detailed picture of sales revenue, your gross profit margin and things like inventory turnover and ROI. But while that provides a good barometer of overall business performance, it doesn’t deliver the customer detail needed to personalize marketing to consumers or understand their purchase behaviors to create greater efficiencies and drive growth. That requires the adoption of CPIs — customer performance indicators. CPIs capture the data needed to pinpoint what customers are buying, why and how much it costs you to acquire and retain their business. Common CPIs include sales conversion rate, the average value of each transaction (ATV), basket size and the average time taken to fulfill an order. Retailers can also use datapoints like the customer satisfaction score and net promoter score to assess how satisfied and likely to recommend your brand or products a customer may be. This kind of intelligence, combined with an insights-based analysis approach at scale, can deliver dramatic improvements to targeting, engagement and sales.

 

Use insights to inform all actions and build ongoing trust 

Insights shouldn’t be a one-time use. As retailers move from data to insight, and insight to value, ongoing operations, employee metrics and consumer CPIs become an essential tool that continues to inform decisions that build trust with consumers — not an easy thing to execute or maintain. In fact, the EY Future Consumer Index finds that consumer trust is exceptionally hard to acquire. As part of the survey around consumer sentiment, when asked what level of trust they currently have in various organizations, only 10% of US consumers completely trust online-only retailers and chain retailers. And only 13% completely trust CPG (consumer packaged goods) brands in general. 

...consumer trust is exceptionally hard to acquire.

EY Future Consumer Index

Ultimately, insights drive actionable strategies, and those data-driven efforts deliver consumer loyalty and increased customer lifetime value. The more personalized each transaction is with your brand, the more consumers will continue to trust and re-engage. Over time this reduces cost-to-serve, better allocates resources and improves efficiency, and helps strategically inform how to satisfy the ever-present shareholder expectation for growth. None of that is remotely possible without the right performance metrics and ongoing insights to shepherd strategies, course correct and give you the visibility that will continue to shape the future of your business.

Summary 

Retailers have abundant customer data but lack an understanding of underlying sales drivers, hindering their ability to make informed adjustments that can drive and scale both customer loyalty and sales.

It’s crucial for retailers to embrace a new level of personalized consumer insights, backed by good data practices to grow their customer base and unlock both opportunity and unrealized value for their futures.

About this article

Isaac Krakovsky Photographic Portrait
Isaac Krakovsky
EY Americas Consulting Retail Sector Leader
Advising the retail, consumer and private equity industries for over 30 years. Passionate about leading teams, business transformation, family, skiing and golf.

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