Few will dispute the awesome power of the next generation of personalization in the beauty space. For most, however, there is a lack of understanding as to why this disruption is long overdue and, once it is fully embraced, just how seismic the change will be throughout the health and beauty industry.
According to a recent study conducted by Oracle NetSuite in partnership with Wakefield Research and The Retail Doctor, “More than four in 10 consumers (42%) – and almost two-thirds of Millennials (63%) – said they would pay more for improved personalization. Yet 80% of consumers do not feel they are provided with a personalized shopping experience both in-store and online, and 53% say they felt negative emotions the last time they visited a store. Only 39% feel confident in retail stores today.”
The Biggest Problem Retailers Face
Retailers are constantly looking for some technological trick to fix their ailing finances. However, the big problem is that our global distribution channels have gotten so massive and efficient that, unless you’re selling something hyper-personalized, handcrafted, or so audaciously expensive it’s out of the reach of most shoppers, you’re in the commodity business. The reason many retailers and chains such as Sears, Bon-Ton, and Claire’s are failing is that they ultimately sell undifferentiated goods that you can buy anywhere.
Personalization is the antidote to Amazon’s growing dominance. Beyond the broad category of personalization, we have Unicustomization℠ – the concept that in the future, each product will be designed, formulated, and packaged to fit your unique and individual needs. Having an affordable, in-store, and personal experience will draw shoppers back into retail where they can have their product needs exactly matched in ways never before available.
The Psychology of Personalization in Beauty
While the technology behind personalization is both stunning and powerful, discussions around topics, like Artificial Intelligence and harnessing the power of your own biometric data, misses the real story of personalization in the beauty space. It is the consumer psychology of personalization that is often misunderstood when discussing these disruptive forces.
As Sailthru points out, “In 2004, psychologist Barry Schwartz wrote The Paradox of Choiceabout the sense of paralysis consumers feel when faced with too many options. If someone has too many choices, they’re less likely to choose anything — or be happy with their selection.” This is a fascinating insight when looking at the overwhelming number of choices that today’s consumers face in the health and beauty categories online and in the aisles of most retailers.
The result has been a bifurcation whereby companies, like Dollar Shave Club, have eliminated choice altogether by outright claiming they have the best razor on the market and by offering a subscription service so that you never have to think about your razor needs ever again. This “oversimplification” approach turned out to be a billion-dollar idea as evidence by Unilever’s purchase price.
The other extreme (and where hundreds of billions of dollars are up for grabs) is personalization. Rather than taking the “one size fits all” approach, the paradox of choice is eliminated by ensuring that the perfect product is made completely to your specifications – not by having you manually sift through millions of possible combinations, but rather by sharing your personal and biometric data.
Consumers are also given an opportunity to add their own unique input directly, so that there’s a feeling of control and collaboration in the process of personalization. This feeling of control, collaboration, and co-creation empowers consumers to access the perfect product that has been completely customized to their specification and available data. This process will lead to much higher rates of attachment and connection to a product that is co-created by each consumer.
The Profit Potential of Personalization
According to SkinStore, “The average American woman will spend $300,000 on makeup throughout her life.” You have a lethal competitive advantage when you combine the insights around how personalization eradicates the “paradox of choice” problem alongside extreme brand loyalty that occurs when a consumer believes that they have permanently solved a problem with the best possible solution. What the subscription options of Dollar Shave Club, SalesForce.com and Netflix have show us is that once a decision is made to subscribe to a quality service, it’s extremely difficult to get a committed subscription customer to look elsewhere.
As Matthew Halpern points out, “If, as designers of experience, we can make someone love the process even before they trust the product, we remove the cognitive work of decision making.” He goes on to say, “No one wants to believe they are addicted to things…but they are. We are all habitually conditioned in every aspect of our lives.”
The company that ends up fully unlocking the seismic potential of personalization in the health and beauty space stands to gain billions of dollars in satisfied customers who, at their core, would prefer notto decide which health and beauty products are best for them. Instead, they’d love to feel confident that all the available information and technology is being utilized to create a custom formulation that perfectly fits their needs.
For more information on this topic, please see our keynote session at the Personalized Beauty Summit.