Individualized marketing, otherwise known as personalization, has become an ideal for brands trying to improve customer loyalty. The dazzling technologies that appear each week—AI engines, neural networks, robots—seem to promise astonishing personalization abilities. To harness these technologies, however, brands need to acquire completely new skills and develop entirely unique processes.
Recently, Loyalty360 sat down with Bernard Chung, Senior Director of Global Solution Marketing at SAP, to discuss the challenges of personalization. He has a valuable take on several key issues of the personalization problem.
As brands know, there is an inherent complexity of developing true personalization strategies. How can brands get to a point with their strategy from being right with personalization sometimes to being right all the time?
True personalization that’s done right all the time can only be achieved if you are personalizing at the individual level. That may be obvious, but if you consider that a segment-based personalization approach has been used and is still being used widely today, it requires a shift in our thinking, process, and technology.
The main issue with segment-based personalization is that personalization is wrong most of the time. Let’s say you purchase a pair of running shoes from a retailer. Based on this purchase and your overall profile, you are segmented into a similar group of customers that purchased the same running shoes. Let’s say that members of your segment group, the minor majority (in this case three out of nine people) purchased a watch as their next product. The remaining six out of the nine purchased various other products.
Based on the minor majority, the personalized product recommendation will be the watch. And if you do a count with this segment-based personalization, the recommendation is incorrect six out of nine times. This is a simple example, but to be more realistic, consider a larger group, say 10,000 customers in a segment group and a minor majority of 1,000 who purchase the watch. This means that the personalization was incorrect 9,000 times. 90% of the time, your personalization was wrong!
Individualization means sending relevant content based on the actual individual information, and not a segment group he or she falls into.
The increasingly complex data environment creates an immense challenge for brands. In fact, a Loyalty360 survey on personalization found that almost 58% of brands say data and data privacy represent a huge challenge when attempting to create more personalized experiences. How do you believe brands should address this issue?
Building and implementing an enterprise-wide strategy for customer preference and consent data management is a big part of the answer. By capturing customer preferences and consent the right way at each touchpoint, storing this data in a central and secure environment, and empowering customers with control over this data in ways required by regional privacy laws, you can take a big step toward becoming a customer-first organization. You’ll be delivering the ad, offer, content, or message at the right time for the customer, not the organization.
With increased demand for customer data protection and privacy, this is the watershed moment for businesses to establish a new competitive advantage through increased transparency and provide customers with more control of their personal data. By tying these elements into delivering personalized experiences, you build more trust throughout the journey and gain more loyal customers.
The average brand is managing several different customer management systems—from email, social, call center, etc.—and each solution may be able to offer varying degrees of personalization. With this in mind, how can brands start to create or enhance personalized experiences across channels?
For many years, marketers had carte blanche authority to purchase whatever customer interaction tools and technology they needed to help meet their business objectives. For many organizations, this acquisition behavior has resulted in a complex technology landscape that ironically has become a key barrier to effectively achieving their goal of engaging customers with personalized experiences.
Marketing departments on average have 15 customer management systems and 11 different customer interaction systems and each of these interaction solutions can be optimized for personalization within its siloed channels. For example, email systems can be setup to respond to the last offer the customer responded to, and at the same time the web storefront can be setup to personalize the web experience based on the customer’s last purchased items, and the social marketing tool can push content based on the customer’s latest social “likes,” and so on for the other interaction channels. And from the customer’s perspective, the result will be inconsistent treatments across these channels.
Individual siloed channels may be optimized in of themselves, but since they’re based on partial customer profile information, they will fail in delivering the best personalized experience. In order to create consistent customer experiences across channels, marketers need a single unified customer profile and a contextual intelligence engine that can determine the right context for each customer engagement. This personalization engine will determine the best scenario for each customer context whether the scenario is an acquisition, retention, cross-sell, or up-sell scenario. It will invoke the best machine learning model to determine the best message for that particular scenario.
Conclusion
From these answers, we see that brands can at least partially meet the challenge of personalization by recognizing that there’s a difference between segmentation and true personalization. In addition, brands need to develop consent-driven data acquisition practices to comply with privacy regulations, and they also need to avoid siloed data channels. These best practices can go a long way toward enabling brands to reach the personalization ideal.
To find out more, register for Loyalty360’s full webinar on the topic of personalization here.