Whether your company is just embarking on its personalization journey or refining its current strategy, you’re likely to have many discussions on how to turn the buzzword "personalization" into reality. What you can (and should) you implement in your approach?
Personalization can mean many things and can be executed in a number of different ways. Make sure you answer the five fundamental questions below when developing the personalization strategy for your company.
Personalization vs. segmentation: How targeted do we really need to be to improve conversion and overall loyalty?
The first element to consider is how personal your strategy can and should be. For some companies, 80 percent of topline gains can come from effective customer segmentation while others may need to take a hyper-personalization approach, utilizing complex algorithms to match each customer to specific products.
It’s also critical to understand the development path. Don't try to run before you can walk, and ensure the whole company is brought along on the journey. Plugging in a black box one day and expecting success is a risky, and even if this strategy produces results, it's unlikely to be accepted and adopted by the wider organization.
Personalization versus customisation: How can we provide the end consumer with the products, services, and experiences they truly want?
While the terms are often used interchangeably, it’s valuable to consider the differences in these two approaches. Generally, personalization case studies involve a company selling hundreds, or even thousands, of products with a large source of customer-specific data and identifying the customer every time they interact with the brand. Here the source of improvement is to offer the right products to the right people and refine this process over time.
However, if you only sell a few products or can't identify the customer each time they interact with your brand, this isn’t feasible. Here’s where customization comes into play: Allow customers either to create the product or service they want or to choose from a selection of pre-bundled options. You can also opt to let customers build a-la-carte products rather than bundles. This approach can result in lasting customer loyalty, but it needs to be carefully considered. While this ensures consumers get the product they want (or think they want), it comes with a high risk of downgrading and revenue loss.
Which elements of the offering should be personalized?
Price, product, promotions, services, customer experience, and wider communications. There are numerous ways you can target your customers more effectively. For some companies, it will be more obvious that others. However, don't necessarily use the same approach as your competitors; they may not have thought through all the options.
Within this strategy, it's fundamental to define core customers groups and identify what they need in order to improve conversion. Do they have varying willingness to pay or do they require different products? Perhaps the reason behind each group's need (i.e. the emotional trigger to create the purchase) differs.
There are many paths you can take at this stage, but the key question to ask at the start is whether to vary price, the product, customer experience, or something else.
What common pitfalls should we look out for?
There are two questions here: How can it go wrong and how can it not go right? Moving toward your end goal of personalization will be a process of testing and learning, and this goes hand in hand with not running before you learn to walk. If initial efforts are not revenue positive, then you need to go back and understand why. Maybe the element you thought was limiting conversion was not, or maybe some element of your personalization strategy had unexpected consequences.
Simon-Kucher’s research indicates that customers accept and expect some elements of a company’s offer to vary across customers (e.g. promotions) and others not to (e.g. list prices). If your personalized offering is presented to customers in a seamless way, it is more likely to improve conversion than an offer that's complex and inconsistent. The numbers of touchpoints customers and their friends and family who are traveling with them have with your brand is growing. In the case of personalized price points, this will simply increase the chances of customers noticing the varying prices and losing trust in your brand.
The data, people, and processes needed to successfully implement personalization shouldn't be ignored either. You can't have a data science team sitting in a silo creating personalization; the approach needs to be deep rooted across the company. It may be surprising that an article on personalization hasn't really touched on the technology driving it. While usually crucial for implementing a strategy, the technology needs to be chosen to meet the strategy, rather than choosing a strategy simply because the technology is there.
Is personalization the only strategy to embark on?
While personalization is a great opportunity to become more customer-centric, it's not the only revenue driver available and should be viewed as one of many opportunities to pursue. Remember: It's simply a way to increase conversion; it won't cover up more fundamental issues with the product or service offering if they aren't what your customers need. In the same way each customer is unique, so is each company. So it’s imperative you personalize your personalization.