- What is personalization?
Personalization is the art of tailoring products and services to individuals.
For centuries, customers valued the personalization provided in local stores and from skilled craftsmen. In today’s eCommerce age, technology – using Artificial Intelligence (AI) – enables personalization, from simple steps such as using names on email correspondence to the more advanced tailored presentation of words, images, products and offers seen by digital shoppers. Personalization driven by AI is able to boost engagement by relating to individuals one-to-one in real-time.
This post explores what personalization is, including:
1. The history of personalization
The oldest hat shop in the world, London’s Lock and Co, is a great example of ‘old-fashioned’ personalization. Founded in 1676, it has tailored unique hats for legendary figures such as Admiral Nelson, Oscar Wilde, Charlie Chaplin and Winston Churchill. The shop’s workers used recorded details of clients’ sizes and preferences such as material, style and color, and personally delivered hats to homes long before Amazon even existed.
In the 18th and 19th century, there was little choice where people shopped, with family run ‘Mom and Pop’ stores and corner stores often the only choice. Some local stores are still with us, thankfully, but shopping has increasingly shifted online – and for millennials and younger generations, online is today’s default shopping channel. The pandemic gave online channels another push as also older generations were forced to gain (often positive) experiences with online shopping. Interestingly, Research from McKinsey found today’s fast-growth companies drive 40% more of their revenue from personalization than their slower-growing counterparts.
Losing the personal touch
After the long reign of local stores, commerce started to prioritize convenience – often at the cost of customer service and personal experiences. The arrival of department stores – first in Paris then throughout the west from the mid-19th century – brought more choice but less personal touches. The development of shopping malls from the 1950s further emphasized convenience over personalization.
Snap, Crackle and Pop
An element of personalization emerged during the ‘golden age of advertising’ from the 1960s to 1980s, as advertising agencies devised global campaigns aimed at market segments. Adverts appeared on TV with memorable slogans like Beanz Meanz Heinz, Snap Crackle and Pop, and Coca Cola’s The Real Thing. Although advertisers gave products a recognizable personality, it was too often a one-way conversation between brands and the public, providing a key learning for today’s retailers: that conversations need to go each way.
The advent of the internet provided the forum to take personalization to a whole other level. Initial attempts at targeting individuals were primitive; some companies still view personalization as an almost tick-box exercise, harking back to the ‘success’ of the early 2000s where email marketing inserted the user’s name into an email. Now considered a milestone in the history of marketing, this is nevertheless a basic strategy. The content of the email was still the same for everyone. Personalized content based on customer needs, interests and circumstances did not exist. When it did become possible, it was quickly discontinued due to the massive manual effort needed to generate an accurate, engaging level of personalization.
Amazon changes the game
Amazon was the game changer. The online retail powerhouse took a giant leap in 2003 when it began providing personalized product recommendations based on previous shopping habits and other shoppers. Even this strategy, while widely copied in more recent times by the likes of Netflix and YouTube, fell short of the true potential for personalization.
Facebook and Google harvest big data
The next stage of personalization used big data to harvest and analyze huge amounts of information about individual users.
Research suggests Facebook tracks its 2.93 billion users with more than 52,000 unique attributes and provides a list of 29,000 categories to ad buyers. Google gathers even more data. It offers a service to individual users to download their personal data, which on average is around 2GB – more than one million pages!
Google has data from every touchpoint a user engages with: bookmarks, emails, contacts, Google Drive files, YouTube views, call history, browsing history, photos, purchases, calendar, location history, music, steps walked, and more.
Another important moment in the history of personalization was when smartphone advertising came to the original iPhone in 2007. Following the launch of the App Store in 2008, mobile ads began to be more personalized and engaging.
Tapping into the huge repository of smartphone data, a user might receive location-specific dining recommendations, a tailored news feed or an ad for a rival airline flying to their dream holiday destination. The power in the data provided advertisers with the chance to showcase relevant messages to different and specific groups or segments. Mobile advertising now accounts for US$7 out of every US$10 ad dollars – 73% of overall spend.
Today, the opportunities for personalization run deeper, with the ability to engage with users on an individual basis in real-time – thanks to Artificial Intelligence and Machine Learning based profiling and decisioning platforms.
2. Why is personalization important?
Personalization is important in every sector of the economy. Two sectors that benefit more than most are retail and travel because they are customer-centric, relying on meaningful interactions and a high level of engagement.
Travelers, for example, are forever dreaming of their next destination, but the choice can feel overwhelming and there’s intense competition for customers. This is known as the paradox of choice and it applies across retail-led companies. Reducing customer options can increase conversion rates, removing the confusion of too much choice – as long as the remaining content is well-targeted and relevant to each individual buying.
The new norm
This is where businesses need personalization technologies to present the most relevant information to grab attention. Personalization provides a more intimate customer experience. Customers feel like they’re having a conversation and that you’re able to understand their needs.
And partly because of their experience of online retailers like Amazon – but also on the back of today’s highly personalized social media channels – they’ve come to see personalization as the new norm. McKinsey research shows that 76% of consumers expect companies to deliver personalized interactions and 76% get frustrated when this doesn’t happen. Treating someone as an average is increasingly seen as disrespectful.
Providing a more personalized experience for customers is likely to lead to a big increase in revenue. Personalization most often drives a 10% to 15% revenue lift. And Shopify estimates that personalization can provide an extra US$2.95 trillion in sales this decade. The more skillful a company becomes in applying data to grow customer knowledge and intimacy, the greater the returns.
Creating meaningful long-term relationships with customers is the best way to generate valuable results for your marketing activity. Beyond landing an immediate booking, highlighting services and products that appeal to individual needs is the key. This requires a much more holistic approach than in the recent past.
3. How to apply personalization in your business
For most businesses, personalization is a gradual journey, starting with the basics, such as using customer names and remembering birthdays, before developing more sophisticated and even AI-driven approaches. The speed of this journey depends on time and budgets – and maybe your competition.
A next step is to introduce tools to tweak content in emails and on the company website to reflect user profiles. Research has found that more than one in three customers want to see products and offers featured in marketing emails based on items they purchased. By sending triggered emails, such as cart abandonment alerts, companies can reach customers with relevant information at the moment they’re most likely to convert.
Using dynamic content
For all companies – but particularly digital only ones – websites are a shop window. And that window is far more effective when it moves away from generic content, and personalizes its products, offers, and content. Doing this – and specifically doing this in real-time – requires AI-driven tools and an underlying digitalization of your business.
For example, using dynamic content based on context, businesses can use geotargeting to present different products depending on where the customers are based. Meanwhile, website pop-ups are a useful strategy, but need to be based on behavioral data from individual interactions. Think back to the early days of shopping and apply the ‘local store’ customer service lessons to the digital world; treat each customer as an individual to maximize results and build a lasting relationship.
It’s a reasonable policy to connect a CRM to marketing tools and utilize the wealth of data gathered from individual interactions to tailor customer communications.This is specifically useful for known customers. Supermarkets are great at this; using data from apps, credit cards, online orders and loyalty cards, they gather information about individual tastes, then send out appropriate deals and reminders. The limitation of a purely CRM driven approach is that they do not help much with unknown users – which at the same time represent the biggest growth potential to your business.
The ‘golden rule’
The golden rule is to use the data wisely and be guided by the customer. Each person has different expectations of how a brand should communicate and different boundaries around their own data and privacy, so allow the customer to be in control of their profile and the different ways a company may use it.
The most powerful means of achieving results with a personalization strategy is to use artificial intelligence to understand each customer’s real-time intent signals. AI’s ability to analyze big data will help you to build detailed customer profiles that guide real-time, as well as long-term, interactions with customers. AI’s ability to provide more personalized products and information is likely to lead to greater customer engagement and loyalty, and increased sales.
4. How BD4 can get you started with personalization
The most successful personalization strategies are geared for certain industries – because different industries have specific requirements, challenges and customers. A holiday package is a very different beast than a flight or pair of shoes. That is why BD4’s AI tools have been built specifically for airlines, travel companies and retail companies.
BD4’s bespoke algorithms are able to transform these eCommerce companies into customer-centric businesses, enabling them to better understand and reflect each individual’s needs.
Get in touch with BD4 to understand how we can help your brand connect to each individual. Learn how our AI tools will help surface the most relevant offers, products and services to your digital audience.