Personalisation: A Leg Up On Your Competitors
Personalisation can mean a lot of things. One-way of defining it in terms of a business is branding: including unique features (that need not be technical) in your sellable products/services, company website and logo, or even reshaping your customer service experience to exude a distinguishable process and vision. Another angle, which will be the focus of this article, is one-to-one marketing, which requires a firm to engage intimately with their individual customers and acquire data about their personal preferences in order to offer them better-suited products and services. Sounds pretty simple, right? Wrong. And there’s a good reason: personalisation by way of one-to-one marketing is increasingly becoming a crucial strategic step towards thriving over your competitors, which is not without its challenges…
Considering that consumers are still licking their wounds following a hard-felt world economic recession, branding may not be enough to gain that slight edge. Commoditization is increasingly becoming a popular strategy amongst survivor businesses to remain competitive in a consumer-led market. And so, a proposed solution is to engage in one-to-one marketing: a characteristically consumer-led marketing strategy, by which product or service providers can strategically target which products/services and at what retail price to market to certain customers based on previously acquired data on their personal preferences. If it is done correctly and in synergy with your existing business model, personalisation can yield fruitful results such as increased customer satisfaction, higher customer retention rates, and a leg up on competitors due to superior knowledge acquired on customer demands which may inform future product design and competitive pricing. An (overused) example is Amazon’s algorithm that uses individual customer data to recommend reading lists and new products based on their customers previous searches, purchases and price ranges. Similarly, YouTube offers personalised home pages when logging in, with previously watched videos and recommended ones (based on the same genre, uploader or producer) appearing on the user’s screen.
But before reaping these results, there are three costly hurdles to get around: customer data collection, data deciphering, and practical implementation. In regards to data collection, the challenges that are faced are obvious: gathering personal information about people requires expensive software and research, and may raise privacy issues. It is also difficult to collect data across all customers, so decisions must be made between gathering individual or segmental data, what types of information are to be collected (e.g previous purchase history categorically or per individual product, price points at which products were bought versus price range, previous search engine history, frequency of purchase, demographical information and annual income, etc). This must be done with a view to obtaining the largest extent of customer data integration, accuracy and projectable data within budgetary constraints. Actually making sense of this data is a make or break move, having already invested in the research process. This is because marketing the wrong product to the wrong person may backfire, so your statistical modelling capabilities must be up to par in order to not only interpret current data but also predict future behaviour, bearing in mind that human preferences lack stability. However with increasing developments in technology, costs are reduced (rather than cheap) and software is more readily available, as evidenced by the increase in numbers of SMEs engaging in one-to-one marketing.
Lastly, practical implementation of this acquired data requires thorough assessment of the information available (taking into account uncertainties and predictability) to determine the extent to which your business should personalise their marketing mix. This means that decisions must be made between whether or not to introduce price discrimination to consumers, to how many consumers personalisation should be carried out, whether it should be based upon a loyalty program/online registration, and also whether to customise products to advance your personalisation marketing strategy. Based on new market trends, personalisation will most likely succeed within one of two types of business models: service providers and online retail. In this day and age, people simply do not notice your efforts in slipping a flyer filled with seemingly meaningless coupons into their mailboxes. Rather, coupons and discounts will be eye-catching if sent to consumers at calculated times (rather than abundantly), directly to their email, with their name written in the contents of the email and subject matter. A more attractive approach is personalising online retail pages to suggest products based on individual preferences. For instance, it is estimated that personalisation as carried out by Liverpool-based Shop Direct, which adopts more than 1.2M personalised variations of their online retail site, will yield an additional £20M in revenue this year alone. A further consideration is the extent to which you will adopt transparency in carrying out personalisation: on the one hand it may be helpful to explain to consumers why your business knows what products they are interested in to ensure no privacy issues arise. On the other hand, you could hide in the shadows to enhance the shopping experience and maintain the element of surprise. Understandably, it is advisable to stick with the former – the more communication and transparency, the stronger relationships with consumers are and the higher the retention rates.
As has been observed, personalisation is a rich man’s game and requires expert research and data analysis to pay off. But it pays off big. Although it is now easier to obtain statistical analysis software for SMEs, data accuracy, consumer preferences, privacy issues, and risk demand that you proceed with caution.
Author: Pakinam El Badrawi
Aug 24, 2015