Why all the hype about Personalized Marketing?
For a recent project, I had the opportunity to dig deeper into marketing personalization and thought I’d share an overview of what it is, key takeaways from the deep dive, and some reports that were helpful to reference. Let’s dig in.
What is Personalization?
I think personalization can be viewed from two sides—the business and the consumer perspective. For businesses, personalization can either be a business strategy or a marketing strategy depending on a company’s go-to-market model and its sophistication. The holy grail is to dynamically deliver a targeted customer experience seamlessly across all channels to an individual consumer that considers the context and speaks directly to his/her needs and desires. In this case, the marketing focus is always on the consumer and her experience rather than taking a channel view. For example, here’s a quote from Mark Sciortino, VP of brand marketing strategy and planning at Walgreens, to give this more color:
Our approach entails leveraging real-time data to personalize the customer experience for individual shoppers based on their unique preferences, whether they’re in the beauty aisle, seeking a cold remedy or browsing our website or mobile app. It’s about understanding what our customers value and delivering meaningful content that reflects that across all channels, including in store, mobile and social…. “We’re using a combination of data and technology to ensure content reaches the right customers with accuracy, optimizing in real time as their activity changes. With customer behavior constantly changing, personalization is key to making lasting connections with Walgreens shoppers and ultimately delivering on our mission to champion the health and well-being of our communities. (Source: AdAge)
For consumers, personalization can vary and include personalized products, solutions, services, offers, and experiences. Given that not all companies and brands are delivering personalization in the same way and scale, it’s not surprising that consumers might have different perspectives on what personalization looks like.
Why are companies focusing on Personalization?
Well, the results are pretty compelling across revenue and marketing metrics:
Total sales can increase 15-20%, digital sales even more, and marketing ROI can improve across channels (McKinsey)
Personalized web experiences lead to an average +20% increase in sales (Accenture)
74% of retailers using personalized offers and promotions realized an increase in sales; 61% saw an increase in profit, and 55% realized an increase in customer loyalty (Infosys, Bain)
Personalization can reduce acquisition costs by as much as 50%, lift revenues by 5-15%, and increase the efficiency of marketing spend by 10-30% (McKinsey)
Personalizing emails resulted in 6x higher transaction rates than non-personalized emails (Experian Information Solutions study, Forrester)
Improved targeting of display ads both on and off Facebook can increase ROI 50-100% vs. simply targeting the average Facebook audience (McKinsey)
What does Personalization look like exactly?
Here are a few good examples:
Nordstrom offers a quiz on-site to personalize one’s shopping experience based on preferred brands. The company also shows what’s trending around you.
Spotify started with “you might like” recommendations and has moved to daily playlists curated to each individual.
Tiffany & Co.’s online experience guides consumers to the closest physical store with “Make an Appointment” functionality, creating an omni-channel experience and considers the high-touch nature of many of their purchases.
Home Depot uses its app to direct customers to items in the store with exact aisle and shelf location.
L’Oreal created an app, Makeup Genius, that lets consumers virtually try on makeup, showing how different looks can be created based on scanning a customer’s face, and seamlessly purchase the required products.
Pampers segments its consumers based on a baby’s age, which the brand collects at registration, and other behavioral triggers. Newsletters offer relevant content, rewards, and offers. The result: over 50% open rates. (Source: Gartner L2, 2015)
Maybelline’s Master Contour makeup line was launched with multiple how-to YouTube videos targeted to specific segments. Consumers saw different ads based on intent and demographics to provide solutions and answers relevant to questions each might have for their skin color and type.
Starbucks utilizes its app and loyalty program to customize offers to customers such as sending a time-limited, customized offer to try a new product when a customer is close to a store or sending “challenges” to earn points for free goods.
What does Personalization success look like?
A big watchout with personalization, however, is that it runs a fine line between what consumers find helpful and what they find creepy or annoying. Marketers are still learning what works and doesn’t. McKinsey released a great report last year that gives some good guidance and examples.
Here are a few pullouts from it and other research on what consumers appreciate:
Being proactive
Example: Delta shares flight cancellation and rebooking options proactively so its customers can take action and rebook a flight
Example: Proflowers sends a reminder of an anniversary and if a customer wants to repeat purchase an item
Providing guidance
Example: Nest thermostats optimizes its heating and cooling settings based on a household’s activities and user behaviors and preferences
Example: Send relevant content post-purchase, for example on how to care for a piece of jewelry
Recommending relevant products they wouldn’t have thought of themselves, such as to adjacent or complementary categories, rather than what a consumer has already browsed (McKinsey, 2017)
Example: Shoedazzle based on a consumer’s product likes sent an email with a personalized showroom of shoes, resulting in multiple purchases
Data Point: Amazon attributes 35% of its product sales to personalized product recommendations (Accenture, 2016)
Delivering relevant content
Example: Mint.com recommends cost savings ideas and opportunities based on how much an individual customer might save
Example: Google Now delivers relevant information such as directions, traffic, and weather based on personal information, behaviors, and interests
Reminding consumers of things they would like to know, but aren’t tracking
Example: Harry & David reminds customers of gifts they purchased the prior holiday season
Examples: Letting a consumer know when a product that is back in stock or introducing a new item from a favorite designer
Offering customized promotions
Example: Starbucks utilizes promotions to both offer value on a product that a customer already purchases, but also provides incentives for them to try a new category
Recognizing consumers regardless of channel or touchpoint
Example: A consumer ran a running race and received a targeted offer from Nike for new running shoes
Respond when in shopping mode
Data Analysis: A retailer determined that shoppers responded better to email offers when sent within a specified time of them being in-store
Personalization requires data.
For businesses to pull this off, data is key and ideally should include all data about a consumer regardless of where that data originates. In fact, 68 percent of consumers expect the information they provide an organization in one place to be available in another (Forrester, 2014). Businesses should also be savvy about how they gather additional consumer data. For example, they should consider building data acquisition into relevant consumer touchpoints (e.g., data request when sign-up for email list, diagnostic tools, wish lists, preferred locations, loyalty programs). To use this data, however, consumers seek transparency on how it will be used and are more open to sharing data with brands they value and trust. Companies should be explicit when capturing data and get consumers’ consent. It’s also helpful when companies explain why certain content is being presented to them, for example when Netflix notes that it’s recommending certain programs (e.g., ”Because you liked…”).
When personalizing based on this data, there are areas where consumers start to believe it crosses the line. For example, consumers aren’t quite ready to have companies or personal digital assistants make purchase decisions on their behalf. While retargeting ads are shown to deliver strong ROI, retargeting too often can become obvious and annoying to consumers, especially if you don’t have a full closed data loop and don’t realize the customer has already purchased the product. Brands have to avoid being irrelevant and self-serving; data has to be used for the customers’ benefit.
Personalization takes time and requires a plan.
All the hype and promised results can make companies eager to implement and achieve these outcomes for their businesses. Yet, personalization isn’t something companies can do overnight. Personalization is often a multi-year journey and can be executed on a spectrum from more basic to more complex programs that get to individualization and intent-based actions. It is often recommended to start small, get some wins, demonstrate value, and prove the business case. Also, framing an overarching strategy and operating model is helpful before investing in specific technologies and data capture.
To be sure, personalization is an important marketing strategy today, and implementing a strategy takes thoughtful goal setting and planning. Companies need to consider the backend technical and data sides of implementing personalization, because it can’t be done without it. Other organizational factors should be considered, as well (e.g., new processes and organizational structures). If you’re interested in starting that journey, I’d suggest doing more benchmarking in your industry and seeking recommended solution partners that can help you develop a strategy and implementation plan.
Personalize with the customer in mind.
But most importantly, don’t forget that companies need to understand their customers and their customer journey to determine what type of personalization would be relevant and valuable to them. Don’t get overly focused on the solution side of things without also putting attention to the full customer experience across channels and touchpoints and learning how to make it frictionless, helpful, and enjoyable for your customers. If you start with the customer, you are more likely to be successful.
Resources:
Here are a few resources you might find helpful if you want to go deeper (not comprehensive, but provides a start):
“What shoppers really want from personalized marketing,” McKinsey, October 2017.
“The heartbeat of modern marketing: Data activation and personalization,” McKinsey, March 2017.
“Marketing’s Holy Grail: Digital personalization at scale,” McKinsey, November 2016.
“Avoiding the Pitfalls of Personalized Marketing and Sales,” Bain & Company, 2016.
https://www.bain.com/insights/avoiding-pitfalls-of-personalized-marketing-and-sales/
“Orchestrate, Organize, and Operationalize—Delivering the Promise of Personalization @ Scale,” Accenture, 2016.
“Deloitte – Made-to-order: The Rise of Mass Personalization,” Deloitte, 2015.