With online luxury sales growing four times faster than offline sales, it’s time for luxury brands and retailers to start thinking deeply about how they are going to deliver an exceptional customer experience online. For an industry that has traditionally relied on personalized experiences, data may hold the answer.
Many luxury brands have been weary of digital as it was perceived to potentially tarnish their exclusivity and brand experience. This concern may have legs when considering digital channels such as social media, however, data-driven personalization is strongly in line with luxury ethos. In fact, data represents one of the greatest opportunities for luxury brands to translate their traditional offline experiences to the online world.
A simple example would be an online multi-brand retailer personalizing product suggestions based on brands a customer has previously purchased, just as a sales associate in a store would remember a client’s brand preferences and suggest products based on that knowledge. The online retailer can suggest new products from the client’s preferred brands as well as other brands with a similar aesthetic. The retailer can also personalize offers to that customer in the moments when she is most likely to buy, such as at checkout. None of this is possible in the digital world without a firm grasp on customer data.
Interestingly, while personalization has traditionally been the domain of higher end brands, we are currently seeing it being leveraged by more mass market companies.
For example, StitchFix, a personal styling service valued at $300 million as of 2014, uses customer data to mimic the in-person styling experience by creating personalized selections of clothing and accessories for customers. While a stylist will review the items, StitchFix's secret sauce when it comes to personalizing at mass scale is its engine, powered by customer data, and built by Eric Colson, the former vice president of data science and engineering at Netflix.
Seeing as data-driven personalization appears to be finding success in the mass market, how can luxury brands, who rely even more on personalized customer experiences, leverage the power of data?
Centralizing Customer Data
The key to successful data-driven personalization is centralizing customer data to create a complete foundation with which to power the brand's customer experience. In a bricks and mortar luxury store, a sales associate will remember and keep records of previous interactions with her client and will use that to inform the way she sells to and assists that client in a personal way. Similarly, a complete and centralized data set is the backbone of a seamless, personalized online customer experience.
Unfortunately, centralizing customer data from different touch points can also be a great challenge as it tends to live in different repositories that do not talk to each other.
For example, as Lindsay Nuttall, Chief Digital Officer at advertising agency BBH previously explained to The Business of Fashion, “If I’ve spent £5,000 in a Bond Street store, [the brand] doesn’t know that I’ve also walked into the store in New York before that. And they definitely don’t know I’m shopping and spending online the other 90 percent of the time.”
This is a problem not only when reconciling bricks and mortar channels with online, but also within the digital channel itself. Online, customer data is spread among various siloed tools, such as a brand's website, email marketing, ad campaigns, and so on. Each of these represents an important customer touch point that holds key data about how a customer has interacted with the brand.
Let’s consider the online multi-brand retailer again. The retailer tracks which products a customer clicks through and purchases on the website, but may want to send the customer product recommendations via email, and then in turn track how the customer engages with those emails and if they lead to any further interactions, such as the customer engaging in a live chat with a representative on the website. All of the resulting data, though spread among three different tools, needs to be centralized in a single repository.
Once a luxury company can overcome the hurdle of centralizing customer data, the opportunities to leverage this data to recreate, and even improve upon, the in-store experience are boundless. The customer data can be used to personalize content based on a customer’s past behavior, or to power robust recommendation engines and predictive analytics that can anticipate what customers want or how they will behave -- something only the most skilled in-store sales associates can accomplish.
As Michelle Peluso, CEO of Gilt Groupe, has stated, “We’ve only scratched the surface of what’s possible with personalization.”