Unlocking customer growth: Driving high value actions through personalization and retail media

US retail media ad spend is forecasted to exceed $100 billion by 2027¹ showcasing how retail media networks are emerging as a lucrative revenue source for retailers. As a result of this rapidly expanding advertising landscape, some retailers are quickly embracing retail media networks often as a siloed strategy for customer targeting.

While retail media may present a huge revenue opportunity for brands, an outsized focus on monetization has potentially had a negative impact on the core customer expectation for personalized experiences.

In a 2024 study on how customers and brands defined success in personalization², Deloitte found that 80% of consumers surveyed prefer brands that offer personalized experiences and reported spending 50% more with such brands. While 92% of retailers surveyed believe they effectively offer personalized experiences, only 48% of consumers agreed.

Retailers may find it quite challenging to strike the right balance between commercial viability and maximizing growth, especially as retailers often develop retail media offerings, advertising targeting strategies, and KPIs for retail media success siloed from the personalization strategy for the customer experience which can result in two key challenges:

1. Retailers should ensure customer experience remains prioritized so that incremental revenue potential doesn’t come at the cost of customer satisfaction and retention.
2. Retailers should prove their ability to accurately and relevantly engage their core customers based on likelihood to purchase, cost to maintain, and total market penetration potential.

To tackle these challenges, retailers should consider adopting an integrated strategy that aligns their technology, people, and processes in a way that establishes customer experience as the threshold for optimal retail media revenue potential. This is especially critical considering retailers expect to allocate 59% of their marketing budget to personalization.

Through a more strategic focus on personalization as top priority, retailers can be better suited to authentically account for and respond to customers’ identities, lifestyles, and real-time needs in a way that can provide mutual value for both the business and the customer.

Four phases approach for delivering valuable, relevant, and integrated customer experiences

To maximize the benefits of personalization in retail media networks, brands should aim to transform the customer experience in a way that focuses on needs and value and defines success through resilient growth and customer loyalty.

1. Establish a data infrastructure that tracks customer behaviors across all channels
2. Identify your top customers to understand their high-value actions & behaviors
3. Design an experience that promotes high-value actions by balancing customer personalization against company profit
4. Scale your solutions through an omnichannel approach

Phase 1: Establish a data infrastructure to track customer behaviors across all channels.

By establishing a solid Customer Data Platform (CDP) infrastructure for the substantial amount of first-party data they collect, retailers’ media networks have an unknown potential to create personalized experiences. One of the largest predictors of a retailer’s ability to tap into this potential is how effectively they manage balance in customer identity resolution between creating a singular view of the customer that still is dynamically responsive in different decision-making processes.

When such a solid identity resolution strategy then meets real-time data, well established CDPs can better implement predictive models that enable retailers to interpret customer feedback, developing addressable market segments, and predict potential needs.

Phase 2: Identify your top customers and understand their high-value behaviors.

With a dynamic understanding of the total market composition, retailers can then benefit from adopting an approach that looks to identify the drivers of customer lifetime value to identify the beneficial actions or behaviors that would grow a customer's value over time. This is usually accomplished by using machine learning to segment customers based on their current and potential value, then profile these segments to create a predictive score for high-value actions taken before an ultimate purchase (or other desired outcome).

High-value actions can vary among segments.

• For new customers, these may include account creation, profile completion, first purchase, or email sign-up.
• For existing customers, it could be increasing order frequency or buying a new product category.
• For loyal customers, high-value actions might include participating in loyalty programs or providing reviews and feedback.

Identifying which actions are most meaningful for deepening your customer relationship can not only serve to improve targetability on the media network, but it can also meet the customer more authentically where they are in their relationship with your brand. This can especially help brands avoid being overly assertive in the early stages of relationship development.

Phase 3: Design an experience that promotes high-value actions by balancing customer personalization against company profit.

With their CDPs more effectively pinpointing high-value actions, retailers can better tailor experiences that resonate with individual customer preferences at scale. Understanding what unique customer profiles make up a brand’s total market potential—including who they are, what they aspire to, and their current lifestyle needs—is crucial. This deep level of insight can form a meaningful foundation for the creation of a shopping experience that not only meets but anticipates the customer's desires, guiding them towards impactful actions that benefit them as much the brand.

To maintain effectiveness and relevance, retailers should adopt a continual learning model of execution that consistently tests and refines personalization strategies against both conversion and satisfaction. This iterative process helps ensure that the strategy remains aligned with both customer needs and business objectives, thereby enhancing the overall retail journey.

Phase 4: Integrate marketing processes, data, and technology through a consistent omnichannel personalization experience

Ultimately, advancing retail media personalization, in a way that also drives financial performance, will likely require a keen lens toward how to deploy a customer-centric design at scale. Success in operating at scale will most likely rely on the effective adoption of an omnichannel strategy, helping ensure a cohesive and seamless customer experience across all touchpoints, both physical and digital.

Often critical to this phase is the full integration of marketing processes. Leading retailers meld traditional marketing methods with advanced retail media channels, creating a streamlined and comprehensive approach. This helps ensure that marketing efforts are harmonized, maintaining consistency across all customer touchpoints.

In this regard, the right technological infrastructure essential. Retailers should work to help ensure that all their channels are consistent and linked, facilitating effortless transitions for customers across various platforms. This integration can not only elevate the customer experience but also provides retailers with a complete perspective of the customer journey, enabling more informed strategic decisions.

Retail brands are at a critical juncture where they can harness the power of personalization and retail media networks to drive growth, but this should be done with a specific goal of delivering a meaningful customer experience. An effective customer experience will most likely require leveraging first, third, and zero-party data to deeply understand and cater to customer preferences, helping to ensure that every interaction is both relevant and drives down-funnel conversion. Retailers should seek to synchronize their technologies, personnel, and processes to deliver a cohesive omnichannel experience that aligns with consumer expectations. Examples from Dollar General, Macy's and The Home Depot demonstrate that such strategic alignments not only help enhance customer satisfaction but also enable retailers to maximize the opportunities presented by the expanding retail media landscape. Achieving this balance is critical for resilient growth and building lasting customer loyalty in a competitive market.

Endnotes

¹ eMarketer, “Retail Media Ad Spend Will Reach Over $100 Billion by 2027,” November 17, 2023
² Deloitte Digital, “Personalizing Growth: It’s a value exchange between brands and customers,” June 11, 2024
³ Deloitte Digital, “Reimagining Retail With Personalization,” June 11, 2024