Customization, Personalization, and the Customer Experience

Companies are steadily catching on to the idea that it makes good business sense to tailor an individual customer experience to the tastes and preferences of that individual, and big companies are now using technology to deliver different customer experiences to different customers across millions of customers, one customer at a time.

So whether we call it personalization or customization, businesses everywhere are getting better at it. But does it matter what we call it? I think so, yes. I think customization and personalization refer to two different forms of individualized delivery, and they offer different kinds of benefits.

The Difference Between Customization and Personalization

Both these words – personalization and customization – describe tailoring something to an individual. But in my own view customization is a narrower form of personalization. When you customize something, you are also personalizing it, but when you personalize something you aren’t necessarily customizing it.

This week I keynoted Sitecore’s “Experience Day” conference in Dubai, and this is one of the distinctions I tried to point out. Sitecore is a digital experience platform (DXP) company, ranked by Gartner as a “Leader” in that category, along with IBM and Adobe. DXPs are designed to personalize each customer’s digital experience, not just across different platforms and interactive media such as web, email and mobile, but also in real time, using contextually relevant, up-to-the-minute learnings about the individual. And that’s what Sitecore does. Using Sitecore’s DXP, marketing clients can treat different customers and prospects differently, employer clients can treat different employees differently, and government clients can treat different citizens differently.

The distinction between personalization and customization can best be understood by considering the kinds of information used to drive the process, and whether that information involves:

1. Third-party data about a customer, or
2. The customer’s observed past behaviors, or
3. The customer’s direct input or expressed preferences.

Personalization relies on any or all of these three sources of information. You can personalize a customer experience by relying on third-party data, observational data, or direct customer input. And the key benefit of personalization of any kind is that it streamlines the customer journey, removing friction from the customer experience by making each different experience more individually relevant to each different customer. For a business, when the customer experience is personalized, the customer or prospect enjoys a more frictionless experience and becomes more likely to purchase.

Customization, by contrast, must involve some type of direct input from the customer. When something is customized we say it has been “made to order,” because a customized product, service, or experience is one that is literally made according to an individual customer’s direction. Customization, as a result, is inherently collaborative. For something to be “customized,” a customer must participate in the customization process in some way, by specifying how she herself wishes to be treated.

And for a business, this act of collaboration means that in addition to the benefit of streamlining the customer experience and making it more frictionless, a customized experience -- one that has been partly specified by the customer herself -- will generate far more actual customer loyalty. To take a simple example, consider the how the online bill-pay function works at your own bank. If you use your bank to pay your bills online, then first you need to input the names and addresses of your payees. After a few cycles you will have built up a directory of payees that is easy to access and makes your customer experience (i.e., using your bank account to pay bills online) more frictionless.

But now you are going to be a bit more reluctant to switch banks, for two reasons. First, because if you switch to a different bank to pay your bills online you will first have to input your list of payees all over again. Since you've already spent time and effort helping your original bank to perfect your own, customized bill-pay experience, it is simply more convenient now -- that is, it's less trouble -- to stay loyal to that bank. In effect, changing to another bank involves more friction.

But second, there is the psychological commitment that resulted from your action to input these payees into the first bank's system to begin with. We are all naturally subject to what is sometimes called the “consistency and commitment” bias. This natural human impulse predisposes us to want to do things that are consistent with whatever we’ve already expressed a commitment to, and when you originally went to the trouble of inputting all your payee data into the first bank's system you created just such a prior psychological commitment, which will also work in the first bank's favor.

But please note: I am not suggesting that any business should require customers to go to any extra trouble just to get more personalized service -- that would be introducing needless friction into the experience, and it would be self-defeating. What I am saying, however, is that whenever a customer can be served even more relevantly by accommodating some type of direct input or specification from the customer herself, this kind of customization will create loyalty that mere personalization won't always create. And sometimes this customer input can be in the form of purchasing or usage patterns. Netflix, for instance, makes better recommendations to you the more videos you buy from them, and Amazon does the same with the products you buy from them.

The loyalty-creating power of true customization is something Joe Pine, Martha Rogers, and I first wrote about in a Harvard Business Review article more than twenty years ago. But if anything, these principles have become even more relevant today, in an age of mobile apps, omnichannel interactions, and technologically sophisticated DXPs.