Personalization 101

Introduction

Between the ages of about 7-10 years, I used to walk to and from school with a bunch of my friends. Every day, it was the same 5 or 6 kids; we knew each other only too well. Our parents knew each other, and they knew each one of us. Just next to our school, we would stop at a provision store. "Apu Shop" as we would fondly call it, was always manned by Uncle Apu and his wife. They knew us. We knew them. Which basically meant we could run a tab. He knew that on exceptionally hot afternoons we would each get an ice popsicle (a 5-cent stick of ice flavoured with syrup that would probably be banned today - haha). And more importantly, he knew which flavours each one of us would have. It never occurred to us then, but I remember today how we was never out of stock for any one of us. He also knew who was allowed to have chips or the "Rabbit" sweets, and who wasn't. He was like a Dad to all of us; if one or more of us was exceptionally late, he'd be out in front looking for us, or our parents would call him on his landline in his shop to ask. He even had a paper with our home numbers on it, in case he needed to call our parents. When any one of us got hurt, he and Aunty were the ones to clean our wounds and put plasters on us. Did we (or our parents) ever pay him for these "extra services"? No. In fact, we often got discounts. "Just for you" - he would laugh!

I'm narrating this memory because it relates to the topic of Personalization.

Personalization: A Strategic Imperative for Customer-Centricity

This is the first in a series of posts about "Personalization". It's a broad AND deep topic that warrants a much deeper dive than we might imagine. As a word, it is often used across PR & Marketing materials. As a soundbyte, it shines a spotlight on a brand's supposed customer centricity. But it is also so much more.

Uncle Apu's story showed that "personalization" when done right, was natural, effortless and an expected part of our life - even if that's not how we thought of it as kids. It was all about "what's in it for me"; so in essence, personalization is a rather selfish concept from the perspective of the Customer.

This is important to understand and remember.

From a business perspective therefore, personalization must be more than just a strategy. It has to be part of an organisation's DNA and culture (for it to be effortless). Just as our parents and ourselves as kids took Uncle Apu for granted (running up tabs and roaming the aisles of his shop, trying new things) your Customers today expect things to just work. They expect your services to be there, ready and available on-demand. Personalization is also a journey. Uncle Apu didn't magically get to know our names and our parents (and vice-versa) overnight; like everything, it started on day 1 with a "Hello" and became a gradually-deepening process of relationship- and trust-building. And when our preferences changed, Uncle Apu took note. Imagine if this happened in business too - that your service provider took the care, time and interest to cultivate not just their relationship but also TRUST, with you, their customer.

Could Apu Shop have been successful without doing what they did? Perhaps. But my friends and I wouldn't be reminiscing about it 40 years later. And I wouldn't be thankful for the tremendous love and value they added to my life personally, as a kid going to school.

Ultimately, this is what Customer Centricity is about. We define Customer Centricity as putting the Customer at the core of your business strategy and decision making. You cannot do this if you don't know who your Customers are, what they need, what they struggle with or what they consider as "Value". Remember, what customers consider as value is also deeply personal; engaging in a chat with a business-person in a hurry to get to the lounge would be irritating to them, while engaging with a first-time traveller would likely be appreciated by them in a completely different way. Same situation, different context and needs. Businesses might group similar customers into segments for the sake of efficiency and operations, but ultimately, you will certainly not be considered Customer Centric if you're unable to deliver the value that is expected by every single Customer, personally.

And therein lies the first challenge with Personalization.

Personalization vs. Customization

It’s important to distinguish personalization from customization, as the two are often conflated in the way they are used and marketed.

• Customization refers to experiences tailored to a group or segment of customers with shared characteristics. For example, a car company offering different packages for urban vs. rural customers or a hotel advertisement about its new room features is engaging in customization. It’s eminently scalable but limited in individual relevance. Many brands rely almost solely on demographic segmentation in their attempts at personalization; this is far from sufficient. One of my favourite examples is captured in the image below. Beware if you think you're personalizing your offer to a white male, born in 1948 in England, who has been married twice, has 2 children, is wealthy and famous, holidays in the Alps and lives in a Castle.

• Personalization, by contrast, targets the individual. It uses data and often technology to tailor experiences and offers to that individual person’s unique preferences, expectations and needs at that particular point in time. Of course, it is entirely possible that 2 or more people might have identical preferences and needs although this becomes increasingly unlikely the more granular and detailed you get with their user journeys and needs. One example is Spotify’s "Discover Weekly" playlist, which is generated specifically for each user based on their listening habits. Another might be your favourite food delivery or grocery app that offers a "one-click" option to reorder whatever you might have done the very last time. A rather unique example is in the image below, from a SaaS provider called Attentive; they are one of the (very) few companies I know that are actually able to (truly) personalize SMS and email messaging at scale.

The key difference is that customization segments customers as a group with common characteristics, while personalization understands and serves them as individuals with specific needs and expectations.

One interesting perspective I've come across was from the Nielsen Norman Group who defined the difference in the context of user experience: “Customization gives control to the user and personalization gives control to the site. Both can enhance users’ experience, but only when carefully implemented.” It's akin to what Dan Ariely says in his video (see Bonus section below) where the "product or service is changing as a function of who YOU are" as a consumer. (emphasis is all mine)

But wait- you're probably now wondering: is there value in Personalizing (vs Customizing)? Do we really have to?

The Value of Personalization and/or Customization

Intuitively, you would agree with me that Customization OR Personalization is probably better than not having either. While the terms may be used interchangeably by many brands, there seems to be little argument as to the benefits of having one or both, over not having anything at all:

Do an AI- or Google search on "Personalization" and you'll be bombarded with statistics about why it's important, why companies struggle and what do customers expect from it.

Here's a TL;DR summary for you to digest:

The Business Value of Personalization

1. Increased Revenue and Margins Personalization has a direct impact on the bottom line. Research by McKinsey shows that companies excelling in personalization generate 40% more revenue from those activities than their average peers (2). Whether it’s personalized recommendations driving repeat purchases or targeted messaging increasing conversion rates, personalization boosts profitability.
2. Improved Customer Retention and Loyalty Retaining customers is more cost-effective than acquiring new ones, and personalization plays a pivotal role in fostering loyalty. Salesforce data reveals that 84% of customers are more likely to remain loyal to brands that treat them as individuals rather than as segments (3).
3. Operational Efficiency and Effectiveness Personalization reduces wasted efforts in marketing and customer service. Email open rates are around 17-23% across industries and Click-through rates are between 2-5% (4). These numbers are shocking. Essentially it means 1 in 4 people don't even open your emails and less than 5 out of 100 people even click through. Clearly, efficiency and effectiveness of marketing operations needs improvement. By using data to predict what customers need, businesses can allocate resources more effectively, improving ROI across campaigns and touchpoints.
4. Competitive Differentiation In competitive markets, personalization sets businesses apart. This is actually really, really intuitive. As yourself when was the last time you willingly patronised 1 business over another simply because you felt like they "got you". There's a reason why brands like Amazon, Spotify, Apple, Patagonia (you know the list) have raging fans, willing to pay more than logic might dictate in the face of cheaper alternatives, and dominate their respective industries.

And what about Customers? What's in it for them with respect to Personalization?

The Customer Value of Personalization

1. Simplified Decision-Making Personalization reduces decision fatigue by reducing distraction and irrelevance (5). For example, Netflix’s personalized recommendations save users from endless scrolling, while grocery apps suggest items based on past purchases, making shopping and re-ordering easier. Banks and all sorts of financial services businesses understand this much better than you might imagine - which is why the best ones "funnel" you as quickly as possible to consider only the relevant products, usually by speaking with a human advisor.
2. Time Savings Customers value convenience. Personalized experiences eliminate irrelevant options, ensuring customers find what they’re looking for faster. For example, SaaS providers track a Customer Success metric called TTV (Time-To-Value) where a shorter TTV implies that personalized content has communicated the product's value proposition. Those with shorter TTV will more likely become regular, engaged customers.?Forget Saas - do you remember how you felt when you went to your favourite pub or restaurant (you know, where the owner or servers know you) and all it took was for them to welcome you back by name and ask "Will it be the usual?". Which brings me to the point about Emotional Connection...
3. Emotional Connection Personalization builds trust and emotional resonance. When customers feel understood, they develop a stronger affinity with the brand. This is particularly true for brands that align with customer values, such as value-for-money, or even sustainability or inclusivity. A little hack: brands that enable customers to project a more positive image of themselves (e.g. Instagram, Apple, LV etc.) create emotional connectivity that is faster, deeper and more long-lasting.
4. Improved Outcomes The Holy Grail of Personalization is (or ought to be!) Customer Satisfaction. A Customer's Job-to-be-done with your product or service has multiple facets to it. The faster and better that you can enable them to get that job done, the stronger the bond of loyalty that a customer is likely to have with you. Whether it is content, tools or solutions, relevance is key for your customers, who will otherwise find it frustrating.

Where are we today?

Clearly, there is value to be derived both by businesses and by customers, from Personalization (or at best, Customization). And yet, our satisfaction as consumers and customers by many metrics, is less than adequate. Think about your own experiences:

How often have you been let down by a lack of even basic customization, let alone personalization? How often have you been bombarded with irrelevant adverts for a product you may just have searched for on a whim? How much spam email do you get daily in your inbox from brands you can't even remember signing up to? When was the last time you were greeted by name when checking in? The last time you went to your clinic (that you've always been to), were you asked to fill in the same form with your name and details? Remember the last time you were charged for excess baggage; after having done more than 10x trips on the same airline with only cabin baggage! What about those pre-historic IVR (Interactive Voice Response) flows when you call your telco or bank (even though they clearly have your mobile number on record)...

Clearly, we are FAR from real Personalization. And sadly, I fear that the AI-machine (you know, the one that promises to generate even more content at scale, for a fraction of the cost, at a fraction of the time) is only going to make things worse. While this is somewhat understandable, what I find personally quite disturbing is when I hear and read senior executives use words like "Personalized" when their products and services are not even customised. (I make a mental note to avoid those brands as much as I can!).

Conclusion

We are in an era where customers demand experiences tailored to their specific needs and preferences. Far from being a single tactic, activity, or soundbyte, personalization must be a comprehensive approach to customer-centricity that creates measurable value for both organizations and their customers.

If you've read this far - thank you. You'd have realised this blog has dealt with the "what" and "why" of personalization. In the next blog of this series, I will talk about Personalization as a strategy for business. I will share share a framework that I've developed which is a useful guide to thinking about whether or not your solutions and services are truly Personalized. Subsequent blogs will dive deeper into each element of the framework to explore relevance and application. Technology solutions and data are key enabling drivers for personalization so it becomes inevitable that we will also dive into that discussion.

But beware: technology and data alone are insufficient; they are only tools which will be ineffective as long as you don't begin by understanding your Customers and what drives "Personalization" and provides them value.

Key Takeaways

1. Personalization is a selfish concept, defined by the Customer and what they decide is "Value" to them
2. Personalization is a strategy and a journey; to be done well, it has to be part of an organisation's DNA and culture.
3. Personalization is a necessary part of being Customer Centric. If you don't know and understand your customers and their needs, you're likely to be neither customer-centric nor personalised in your interactions with them.
4. It's important to know the difference between Customization (experiences tailored to a group or segment of customers with shared characteristics) and Personalization (experiences and offers tailored to an individual person’s unique preferences, expectations and needs at that particular point in time).
5. There are some very obvious business benefits to Personalization; there are also a number of Consumer benefits. The more you enable, engage and empower Customers via Personalization, the better it will be for your business.

References

1. https://www.nngroup.com/articles/customization-personalization/
2. https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/the-value-of-getting-personalization-right-or-wrong-is-multiplying
3. https://dma.org.uk/article/2024-personalisation-trends-report
4. https://www.campaignmonitor.com/resources/knowledge-base/what-are-good-email-metrics/
5. https://www.flexrule.com/articles/how-personalized-engagement-reduces-decision-fatigue-in-financial-services/#:~:text=Personalized%20engagement%20reduces%20distraction%20for,Decision%20fatigue%20is%20real.

Bonus Content

Here's an Instagram reel from Dan Ariely talking about Personalization.