Monday Jul 02, 2012

How far is too far?

Previously I've talked about Safeway's personalized pricing as well as Target's use of analytics to learn about customers.  Then last week I read about Orbitz tailoring their hotel offers based on the browser used.  (Orbitz claims that Mac users are 40% more likely than PC users to book four- or five-star hotels.)  So just how far is too far when tailoring the retail experience?

When most consumers read about these types of tactics, they tend to feel violated, as if someone was reading their personal diary.  Nobody wants to be tricked into buying things.  Walking into a grocery store and seeing crates of apples stacked high looks enticing, but the crates are just for display and the apples may be over a year old.  Even though its much cheaper to print markdown tags, many retailers manually write the price tags because consumers think they deal is better if the price is hand-written.

The technology already exists to personalize prices and experiences for consumers.  People get upset thinking they paid more for something than a neighbor, but it already happens all the time with cars, flights, and the use of loyalty programs and coupons. There are many variables at play for any purchase.  They only difference is that the customer segments are getting smaller, sometimes reaching a size of one.

There's two ways to look at this.  Retailers have always manipulated the environment to get consumers to buy more -- or -- Retailers are getting better at tuning the shopping experience for consumers.  I choose the latter, and so do most consumers by spending their money in the stores they like.  Consumers like to see fresh flowers at the entrance to the grocery store, and they like to see specials scrawled on chalkboards.

The key is making sure that consumers benefit from the experience as well.  I'm willing to give up some personal information in exchange for discounts and more relevant marketing, and the next-generation of shoppers are even less concerned about privacy.  Retailers need to use all the tools available to differentiate their offers and connect with their customers.

So if Orbitz wants to put three-star hotels at the top of the list for me because I'm using a PC, that's fine by me.

Wednesday Mar 21, 2012

Personalized Pricing

In past postings I've spent a fair amount of time talking about targeted promotions.  Using a complete view of the customer that includes purchase history, location history, and psychographics gleaned from social media, we can select the offer with the greatest chance of redemption.  This is done to influence shopping behavior, which might be introducing the consumer to a new product line, increasing their basket size, increasing frequency of purchases, etc.

Safeway seems to be taking a slightly different approach with their personalized pricing.  In additional to offering electronic coupons and club card offers, they are also providing a personalized price for certain items based on purchase history.  So when Sally want to shop at Safeway, she first checks the "Just for U" website for three types of deals.  She starts by selecting manufacturer coupons to load into her loyalty card, then she checks the Club Card for offers like "buy one get one free."

The third step is the interesting one.  Safeway will set a particular lower price for Sally good for 90 days on items she buys often.  Clearly this isn't enforcing a new behavior but rather instilling loyalty.  I would love to know exactly how they are determining the personalized price.  Of course bargain hunters can still stack the three offers so they can, for example, get their $4.99 Oatmeal for $0.72.

I like this particular question and answer from their website's FAQ:

My offers are not that great. Can I tell you what offers I need?

That's a good idea. That functionality is not currently available, but we appreciate your input and are constantly improving our just for U program. Stay tuned for exciting enhancements!

I suppose if Safeway is tracking all the purchases, they can easily determine whether the customer if profitable.  As long as the customer stays profitable, why not let them determine a few offers themselves?  Food for thought.

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David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.


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