80% of retailers collect information on customer behaviour, but only 38% use it for marketing, what is holding them back?

1. Retailers are at the sharp end of the digital
revolution. Once, their competition was limited
to nearby rivals. Now, thanks to the Internet,
their customers can buy from companies all
around the world. In the past, their direct
interaction with buyers gave retailers unique
insights into customer profiles and preferences.
Since then, digital technology has given all kinds
of companies a view into their customers’ buying
behaviour.
As a result, many retailers are keen to adopt and
adapt digital capabilities to ensure that they
remain relevant. This means finding an optimal
balance of digital and in-store experiences that
engage customers and increase profitability.
Digital marketing is a crucial component of this—
and using digital channels to understand and
engage with customers is certain to be part of the
mix.
An emerging trend in digital marketing is the use
of contextual information, such as the current
An executive summary from The Economist Intelligence Unit
BEYOND PERSONALISATION
European retailers’ perspective
on contextualmarketing
location, behaviour or mood of a customer or a
prospect, to deliver more relevant and effective
marketing communications. Bill Brand, president
and chief marketing officer of US broadcast retail
network HSN, describes contextual marketing
as “the next step in a progression from mass
marketing to segmentation, personalisation, and
finally contextual or what I call in-the-moment
marketing.”
To investigate the use of contextual marketing in
Europe, The Economist Intelligence Unit (EIU), in
a project sponsored by SAP, conducted a survey
of west European chief marketing officers, 50%
of whom were from retail companies, as well as
interviews with a series of marketing executives
from across the region.
Our research identified that west European
retailers, like their peers in other sectors, are
eager to build a deeper understanding of, and
engagement with, existing customers and to
make their interactions with prospects more
Sponsored by:

2. 2 © The Economist Intelligence Unit Limited 2015
Beyond personalisation: European retailers’ perspective on contextual marketing
relevant. They are more likely than companies
in other industries to collect contextual
information through channels such as social
media and mobile apps, which have the potential
to provide deeper contextual insights than older
digital channels.
And yet, much of the contextual information that
retailers collect goes unused. The organisational
challenges they face—such as developing
marketing messages that are effective in
particular contexts and hiring the required
technical and creative skills—are apparently
holding them back from exploiting contextual
information to the full.
While they are aware of the dangers of
overstepping the mark by misusing contextual
marketing techniques in such a way as to make
customers and prospects feel uncomfortable,
there is an opportunity to achieve greater insight
and relevance, and retailers would be wise to
learn how to use it effectively.

3. 3© The Economist Intelligence Unit Limited 2015
Beyond personalisation: European retailers’ perspective on contextual marketing
The retail marketing agenda1
The primary goal for west European marketing
executives, in the retail sector as in other
industries, is to improve awareness and
perception of their company’s brand. Nearly
six out of ten (58%) survey respondents from
retail companies list this among their top
strategic marketing priorities. As retail becomes
increasingly digital and the advantage of well-
positioned stores dissipates, having a well-known
and trusted brand becomes vital.
Beyond the brand, European marketing
executives are keen to deepen their
understanding of customers, to improve
engagement and to make their interactions with
prospects more relevant.
This is not to suggest that west European retailers
do not already have a good understanding of
customers. For example, 69% of respondents
from retail companies say they understand how
satisfied customers are with their products and
services, and 65% claim to know how this could
be improved, thanks to information gleaned
through their current marketing channels.
Nevertheless, retailers are especially likely
Which of the following are currently your top strategic marketing priorities?
(% of respondents)
Chart 1
Retail Non-retail
Source: The Economist Intelligence Unit.
Improving awareness and perception of our brand(s)
Understanding our customers better
Increasing customer engagement (e.g. interaction on social media)
Improving customer loyalty
Improving the customer experience
Improving return on investment of marketing activities
Becoming more cost effective
Ensuring our marketing staff have the right skills for our current and future activities
59
58
45
36
43
40
37
37
33
24
29
31
27
34
26
34

4. 4 © The Economist Intelligence Unit Limited 2015
Beyond personalisation: European retailers’ perspective on contextual marketing
to identify improving their understanding of
customers as a strategic priority (45%, versus
36% non-retail).
Similarly, retail marketing executives are
confident that their marketing communications
with customers are well received: 51% believe
that customers are happy with the way their
organisation interacts with them, and 15% even
think customers would like more interaction.
Nevertheless, 43% regard improving customer
engagement as a strategic priority. This suggests
that while customers may be happy with the way
companies interact with them, the companies
themselves are not happy with the response they
receive.
By contrast, retail marketing executives accept
that their interactions with prospects could
be significantly improved. Only 22% believe
that prospects are happy with the way their
organisation interacts with them, while 33%
believe that prospects want those interactions to
be more relevant.
Beyond the objective to strengthen their brand,
therefore, west European marketers feel the need
for a more intimate understanding of customers
and prospects, so that they can deepen their
engagement and improve their relevance.

5. 5© The Economist Intelligence Unit Limited 2015
Beyond personalisation: European retailers’ perspective on contextual marketing
Collecting contextual information2
Given these strategic priorities, it is not
surprising to learn that many retailers are making
use of contextual information for marketing
purposes. One example is the Dutch e-commerce
giant Wehkamp.nl, which uses contextual cues—
such as buying intention—to identify where on
the marketing funnel a prospect resides, and
therefore to target relevant marketing content.
“We use contextual marketing to know where
customers are in the funnel and use different
techniques to orient them to our brand or
to inspire them,” explains Alex Bloemendal,
e-commerce manager at the company. “If a
Which of the following channels do you routinely use to collect contextual information
about customers?
(% of respondents)
Chart 2
Retail Non-retail
Source: The Economist Intelligence Unit.
Website
Social media
In store personnel
Email
Mobile applications
Channel partners
Third party sources – e.g. media partners, data aggregators
85
70
83
31
83
23
70
53
68
34
55
49
34
48
customer arrives on our website via a category
page, it shows interest in that category. If we
target [that category] in the newsletter and he
or she interacts, we know there is interest. If
they visit the product page for the fifth time, we
know he or she wants it and can do a retargeting
campaign for that product.”
Not all retailers are so advanced, but many are
collecting contextual information. Indeed,
retailers surveyed by The EIU collect a more
diverse and sophisticated array of contextual
information than the average company in other
industries.

6. 6 © The Economist Intelligence Unit Limited 2015
Beyond personalisation: European retailers’ perspective on contextual marketing
They are considerably more likely to use social
media (83% versus 31% among non-retailers)
and mobile applications (68% versus 34%) to
collect contextual information. One might have
thought that retailers would have less need to
use these more recent digital channels, given
their bricks-and-mortar outlets, but this is not
so.
When it comes to contextual marketing, social
media and mobile applications are not just extra
channels like any other. By their nature, they
provide greater depth of contextual insight than
has previously been available to marketers.
Mobile applications (as well as mobile websites)
can reveal an individual’s precise location—for
example, whether they are in a store at a given
moment in time—while social media reveal what
they talk about and who their friends are. The
fact that retailers are more advanced in their
use of these sources reflects their eagerness to
adopt digital practices in response to intense
competition from Internet-based rivals.

7. 7© The Economist Intelligence Unit Limited 2015
Beyond personalisation: European retailers’ perspective on contextual marketing
How retailers use contextual
information—or not3
What contextual information do you routinely collect and use about your customers?
(% of respondents)
Chart 3
Don’t collect and would not be useful for marketing
Currently collect and use for marketing Currently collect but don’t use for marketing
Don’t collect but would be useful for marketing
Don't know/not applicable
Source: The Economist Intelligence Unit.
Their current location
What they are currently doing (excluding online behaviour)
Their current online behaviour
Current personal interests
What they are currently planning to do
Who their friends are/who they are with
How they are currently feeling
162963
24144238
4273435
2332935
241
5639
11241
3323
2723
2322
Retailers are using contextual information,
to some degree, in a variety of ways. The
most common application of contextual
information among west European retailers is
communication with prospects, as identified by
65% of respondents. This means they are using
contextual cues to decide when and how to reach
out to potential customers. This could include
anything from search-engine advertising to
location-based promotions.
Meanwhile, 59% use it to communicate with
current customers. The opportunities for using
contextual marketing are greater for current
customers, as a retailer typically has more
information about them.
According to Thomas Bay, international
marketing manager at Danish fashion brand
Vero Moda, which sells through its own outlets
and online as well through channel partners,
contextual marketing is especially relevant for
younger customers. “The younger market expects
to see information when they want it,” he says.
“We try to be relevant at the right point in time,
to give them information they find inspiring.”
Substantially fewer respondents from the
retail sector (51%) use contextual information
to identify prospective customers than those
from other industries (66%). This could be
an indication that retailers have less of a
requirement to identify new prospects as their
physical stores help to attract new custom, but it
also suggests that there may be more for them to
learn.

8. 8 © The Economist Intelligence Unit Limited 2015
Beyond personalisation: European retailers’ perspective on contextual marketing
However, despite their desire for a deeper
understanding of their customers and prospects
and the relatively wide variety of contextual
information sources they use, much of the
contextual information they collect is left unused
for marketing purposes.
For example, 80% of retail respondents say they
collect information about a customer’s current
behaviour, but only 38% use it for marketing
purposes. A surprising proportion—45%—collect
information about a customer’s current mood,
but only 22% use it.
So what is preventing retailers from using the
contextual information they collect?

9. 9© The Economist Intelligence Unit Limited 2015
Beyond personalisation: European retailers’ perspective on contextual marketing
The challenges and risks of contextual
marketing4
Which of the following do you consider to be the greatest risk associated with contextual
information?
(% of respondents)
Chart 4
Retail Non-retail
Source: The Economist Intelligence Unit.
Producing messages that are effective in particular contexts
Encouraging customers and prospects to share contextual information
Hiring the technical skills required by contextual marketing
Hiring the creative skills required by contextual marketing
Respecting customer privacy
Identifying relevant contexts in which to target customers
Measuring the success of contextual marketing campaigns
Adapting our marketing/campaign processes to incorporate contextual marketing
52
48
50
49
50
43
48
43
38
30
37
54
11
19
10
7
When asked to identify the greatest challenges
associated with contextual marketing, 52% of
retail marketing executives identify producing
messages that work in particular contexts.
Communicating effectively in context has
both technical and creative components.
Contextually relevant messages must of course
be generated automatically, as the situations
they address are transient, but they must also
inspire the customer or prospect to take action.
Hence recruiting the creative skills required
by contextual marketing is a key challenge for
almost as many respondents (47%) as hiring the
necessary technical skills (50%).
For Vero Moda’s Mr Bay, the main barrier to
using contextual marketing is finding the time
to analyse and interpret contextual information
that is collected. “The more work you put into
it, the better the result, but the challenge is the
time,” he explains. “There is so much data; being
able to sort through that and understand what is
important makes this complex.”

10. 10 © The Economist Intelligence Unit Limited 2015
Beyond personalisation: European retailers’ perspective on contextual marketing
For other companies, it is a matter of resources.
The Italian co-operative supermarket Coop
Nord Ovest has ambitions to make greater use
of its customer data to provide more targeted
advertising and promotions. “We estimate that
to make it work well, we would need 20 people to
work on it every day,” explains Claudio Marenco,
the organisation’s head of promotion advertising
and loyalty. “Right now, we have only one person
who works on this part-time. That is one reason
why we can’t start yet.”
The proportion of retail marketing executives
who say that respecting customer privacy is
one of the greatest challenges of contextual
marketing is higher in the retail sector (37%)
than in other industries (30%), but it is still
the minority. However, one-half of retail
respondents say that encouraging customers to
share contextual information is a key challenge,
and one-quarter believe that damaging the
brand by making customers feel uncomfortable
is the biggest risk associated with contextual
marketing.
Both these findings highlight the need to operate
within the boundaries of what customers accept
and are comfortable with. “It is possible to get
too personal,” says Mr Bay. “If it feels like we’re
sitting in their living room, it’s creepy.”
Wehkamp.nl’s Mr Bloemendal adds that
customers are increasingly taking control of
the data that marketers collect about them. If
companies abuse their trust or intrude on their
privacy, they will withdraw their data. “The more
people opt out of cookies, the less information we
have.”
Given the strategic importance they place on
maintaining their brand reputation, it is clear
that retail marketers are reluctant to create
negative associations among their customers
by overstepping the mark with contextual
marketing.

11. 11© The Economist Intelligence Unit Limited 2015
Beyond personalisation: European retailers’ perspective on contextual marketing
Conclusion
Marketing executives in the retail sector, like
their peers in other industries, believe that they
have a good understanding of their customers.
But they nevertheless wish to deepen that
understanding further, and they acknowledge
the need for more relevant communications with
prospective customers.
They often have the raw material for a deeper,
more contextual view of their customer base that
looks beyond who they are, how they behave, and
how a company’s products and services might
fit into their lives. In particular, they are using
a more diverse range of contextual information
sources, including social media and mobile
applications.
But while the contextual information they collect
is being applied to a wide range of marketing
activities, much of it is going unused. Retailers
are struggling to find the right messages to use
in particular contexts, due in part at least to the
difficulty of recruiting the required skills. They
are also aware of the danger of making customers
feel uncomfortable through misused contextual
marketing.
This is to be expected—contextual marketing is
still an emerging practice, and marketers do not
want to tarnish their reputation by overstepping
the mark. But if retail marketing executives wish
to achieve that deeper understanding of their
customers, a bit of considered experimentation
to find marketing messages that work in context
could set them on the right path.