Have you ever gone online to buy something simple – say, a kettle – and ended up with an entire set of kitchen gadgets you didn’t even realize you wanted? That has most probably been hyper-personalization at work. By analyzing your behavior, preferences, and context in real time, retailers can anticipate your needs and create shopping journeys so relevant and seamless that you discover products before you even go looking for them.
According to McKinsey, 71% of contemporary consumers expect companies to deliver personalized interactions, and 76% become frustrated when they do not receive them. Simultaneously, Salesforce finds that 73% of survey respondents expect better personalization as technology advances. Moving from the phase of “people searching for goods” through “goods searching for people” to “connecting goods with people” (Forbes), e-commerce has been changing at a speed like never before. However, how does this work in practice?
In this article, we will briefly cover the rise of hyper-personalization in retail, the benefits it brings to businesses and the key considerations one should keep in mind when implementing the approach. While industries such as banking, entertainment, and healthcare are also embracing the strategy, its effects in retail can be seen with the naked eye.
Hyper-personalization: the New Standard
Although personalization is not new, it has traditionally relied on relatively simple techniques, such as addressing customers by name or suggesting products based on purchase history. Another common tactic has been segmenting customers to target campaigns by demographics, industry, or role. While these strategies yield some positive results, their impact remains relatively limited, as they still rely on static data that may not be entirely relevant. This is what has radically changed with the advent of hyper-personalization.
Hyper-personalization: What is it?
Hyper-personalization is often described as personalization at the next level, where technology helps businesses provide exclusive experiences, tailored to the preferences and context of individual customers. A distinctive feature of hyper-personalization is the use of detailed, granular data in real time, which allows brands to anticipate customer needs even before they arise. This approach has been utilized to make meaningful personal connections, demonstrating huge potential to foster profitable growth.
Key technologies
Some of the key technologies that hyper-personalization leverages include: AI and machine-learning for analyzing large amounts of data in real time to create personalized recommendations; data analytics to build the complete picture of customer needs and preferences; location-based technology to make contextual offers; chatbots and natural language processing (NLP) to assist customers in real time; predictive analytics to anticipate customer needs, etc.
A good example of technology enabling hyper-personalization is Sirma’s AI-powered digital marketing solution, Salexor. It uses a proprietary AI algorithm to assign dynamic scores to anonymous website visitors by analyzing their intent, qualifying them as individual leads for personalized offers. Simultaneously, an AI-enabled chatbot provides real-time, 24/7 personalized service to customers, ensuring a seamless and highly tailored experience.
Advantages and Disadvantages of Hyper-Personalization
According to McKinsey, personalization can reduce customer acquisition costs by 50%, increase revenues by 5 to 15 %, and enhance marketing ROI by 10 to 30%. Yet, the actual benefits of hyper-personalization go far beyond the numbers. So do its challenges.
Advantages
Often, hyper-personalization is seen not only as a marketing tactic but as a strategic enabler of long-term business value. IBM, for example, identifies the following ten benefits, which illustrate the latter:
- Enhanced customer experience – by focusing on the individual needs and preferences, hyper-personalization makes customers feel understood and valued;
- Increased customer engagement – by sending relevant content, offers and recommendations, hyper-personalization keeps customer attention and increases engagement;
- Improved customer retention and loyalty – by knowing their individual preferences are prioritized, customers are more likely to return and build long-term relationships;
- Omnichannel consistency – by ensuring consistent interactions along all touchpoints, hyper-personalization enhances the overall brand experience;
- Increased revenue – targeted recommendations and dynamic pricing may lead to higher sales and average order value;
- Higher operational efficiency – by using AI insights and automation, hyper-personalization optimizes the resources needed to deliver personalized customer experiences;
- Proactive customer service – by anticipating customer needs, hyper-personalization addresses customer pain points before they even occur;
- Improved marketing ROI – hyper-personalization reduces wasted resources on irrelevant campaigns and maximizes ROI;
- Deeper customer insights – based on collected and analyzed data, hyper-personalization can inform future business strategies;
- Competitive edge – by offering unique and memorable experiences, hyper-personalization can help businesses differentiate themselves from competitors.
We can safely add higher conversation rates and increased customer satisfaction to the list, as by personalizing offers, hyper-personalization fosters customers to do the action we need (i.e., take advantage of a special discount, subscribe to a newsletter, take part in a loyalty program, etc.), which ultimately strengthens their engagement with the brand and increases their satisfaction.
Disadvantages
Although a powerful concept, hyper-personalization is not without its challenges. In a recent survey on personalization, Boston Consulting Group found that “two-thirds of consumers have had at least one negative personalized experience with a brand that led them to break off the interaction”.
To avoid this, Salesforce recommends that businesses should ensure compliance with all relevant data privacy regulations such as the GDPR or CCPA. Second, they should make sure that their personalization efforts do not feel creepy, irrelevant or intrusive. Ultimately, they should strike a balance between automation and a human touch to maintain meaningful customer interactions.
Real-world examples
IKEA features an interesting example. Through its app and online platform, IKEA offers personalized product recommendations, style inspiration, and even AR-based room visualizations that reflect individual preferences. This strategy not only increases purchase relevance and customer satisfaction but also showcases how hyper-personalization can bridge physical and digital retail, driving both sales and long-term loyalty.
Ada Mall offers a strong case of the power of hyper-personalization. By customizing the Salexor platform, Sirma enabled the mall to qualify digital prospects in real time, engage the most active users with personalized offers, and ensure 24/7 customer service via an AI-enabled chatbot, including instant access to loyalty program details. This tailored approach not only enhances customer experience but also drives measurable business outcomes: within three years, loyalty purchases per active cardholder are projected to grow by more than 12%, clearly demonstrating the economic value of the new approach.
Conclusion
Hyper-personalization is transforming the way businesses connect with customers, shifting from broad segmentation to real-time, data-driven experiences. As the next stage in the evolution of personalization, it is already helping retailers boost satisfaction, increase conversions, and drive profitability. Yet, to unlock its full potential, businesses must implement it wisely and address potential challenges. Partnering with proven technology providers in retail like Sirma ensures a successful deployment that maximizes both customer impact and business value.
