After spending many years as the VP of Marketing at one of the leading personalization technology providers, I have a pretty good understanding of the benefits and limitations of personalization. And while there are very clear advantages for retailers that adopt a well-designed personalization strategy, I worry about the personalization bubble that has been created. There is irrational exuberance in the marketplace today, an almost mystical belief in the impact that personalization technology will have on a business.
Messages from analysts and thought leaders are fueling this fire. Here are excerpts from an email I just received promoting an upcoming analyst webinar on personalization—sound familiar?
“Personalization is being redefined as individualization—structuring interaction, functionality, and content around the real time individual needs of customers.”
“Discover why individualization, not segmentation, is becoming the new standard for personalization.”
The implication is that with the right technology investments, brands won’t need to do any heavy lifting in marketing. They won’t need to dig deep to understand the differences across customer segments, they won’t need to develop personas, and they won’t need creative breakthroughs to propel their business. Just leave it to the algorithms to crunch the customer data and deliver the perfect message to each consumer at just the right moment. Sounds like magic, right?
As my mother always said, “if it sounds too good to be true, it usually is, unless it’s me.”
The dirty little secret…
Today’s personalization technology is similar to product recommendation engines in that business gains don’t continue to accrue over time. You can count on a jump in revenue almost immediately— 5-10% was the norm for product recommendations —but growth is not automatically sustained year after year. When you remind customers that they left an item in their basket or retarget them with the product they browsed online, a certain percentage will make a purchase. That percentage holds steady and without any further changes in your program the initial jump in performance will flatten out and become business as usual.
But there are things that we've seen marketing teams do to drive sustainable growth from their personalization initiative. And let’s keep in mind that personalization is not the goal. The goal is to make marketing more relevant for the customer and more impactful for the business. We do that with relevant content, delivered at the most relevant time, with relevant context. Relevance drives engagement, and engagement leads to better business performance. With this in mind, I’ll share 5 best practices that we’ve seen work for our clients in the real world.
Five best practices that will drive personalization performance gains year after year:
1. Think beyond the point of conversion
Personalization technology is good at optimizing the point of conversion. Taking customers who are considering a purchase and optimizing the in-the-moment experience to maximize sales. But look at the funnel below. Focusing on conversion optimization ignores the largest group of consumers, those that are aware of your brand and those who have some interest in what you offer but aren’t yet at the point of buying. Incorporating insights from the moment of conversion into earlier prospecting activities can create long term sustainable growth.
Most online advertising channels (Facebook, display, gmail, YouTube, etc) let you utilize customer data for advanced targeting. You can do look-alike targeting, retargeting, and straight up customer matching. Calendars.com is seeing an 8x improvement in ROAS from Facebook advertising since they incorporated insights from the point of conversion into their campaigns. They are mining their customer purchase data to do predictive lifetime value modeling and product affinity projections and are driving better more engaged prospects into the funnel. And they are carrying the advertising message through to the website experience. The result is a dramatic increase in conversions and AOV from their Facebook campaigns.
2. Don’t give up (total) control to the machines
It is tempting to use “black box” personalization solutions and let the machines run your program for you. But be careful. Recently the Head of Retention Marketing at Nordstrom Rack shared the results of an interesting test while speaking at a Custora event in Los Angeles. She set up an experiment to determine the optimal content for their daily flash sale emails. They moved from sending 5 static variations to sending over 270 variates of their daily email. The lesson learned? The emails that included both discovery (manually overriding some of the recommended categories with human curation) and automated personalization delivered the greatest demand, AOV and AUR. So don’t only serve up content that your customers already know and love. And partner with your merchants to influence strategy—black box personalization is not a substitute for business insight.
3. Make your marketers both scientists and artists
As part of your personalization initiative, you need to take the opportunity to make customer data accessible to the marketing team. One of our customers, a leading online cosmetics retailer, shared how she views the changing role of marketing. She believes that marketing has become data driven. It is not enough to know the brand message; you need to really understand the customer. But that can be hard with data in silos. Giving business owners quick access to data-driven insights and letting them answer key questions themselves is critically important. Creativity and data don’t work linearly. The process of digging into the data brings new ideas to marketers. And these new ideas pop up as a result of digging and exploring. When you give the marketers access to the data – and remove IT and analysts from the equation – you get faster decisions and more creativity. Long term sustainable growth comes from empowering your marketers to be both scientists and artists.
4. Use advanced segmentation to power your personalization technology
An old colleague of mine recently left the personalization technology firm where we both workedand joined a large fashion retailer as their head of personalization strategy. One of his first moves was to invest in a personalization engine that could optimize conversions by personalizing website experiences. But he realized that the gain from his personalization technology investment would be fleeting and he would quickly need something else to keep driving performance. So he is investing in a customer data platform to complement the personalization technology. The customer data platform provides advanced segmentation capabilities in addition to data aggregation and access. This customer data platform will enable his team to predict customer lifetime value after only a few purchases, know who will pay full price and who will only buy on discount, understand who is at risk of churn at any given moment, predict who will be VIPs, and know what products and categories his customers will shop next. Integrating these advanced segmentation insights into his personalization tool will power results for years after the initial revenue bump wears off.
5. Have a plan to crawl, walk, then run
You’ve got to have a plan. Think ahead to ensure you drive sustained revenue growth year after year. We call it the “crawl, walk, run” approach. Start small. Invest in the right technology. Go after the low hanging fruit. Then do more. Add sophistication. Don’t just create a generic promotion for customers at high risk for churn—personalize that experience based on their product affinities or price point sensitivity. Start with an email to your future VIP customers, and then expand to an entire website experience unique for them. Regular experimentation and continuous testing are the keys to driving long term sustainable growth in your personalization program.
Personalization technology seems to be on every retailer’s purchase list this year. However when you make your purchase, remember that growth can be fleeting. There is no magic technology that eliminates the need to have a deep understanding of your customers. Follow these five best practices and you can ensure that your return on investment continues beyond the first twelve months.
Do you agree? Disagree? Have other suggestions? Please write your thoughts below, we’d love to hear from you.