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What is Personalization in Marketing? | A Brief History

What is Personalization in Marketing?

Why should we study the history of personalization in marketing and sales? 

 

It’s simple — studying the history of anything helps us understand how events in the past made things the way they are today!

 

Personalization in marketing and sales, at some level, has always been there. Just like gravity was always there until Newton discovered it and gave it a name. 

 

From 1963-1977, Joe Girard the “greatest car salesman” sold more than 13000 cars! The Guinness Book even recognized him as the seller of the most cars in a year.

 

But how did he do it?

 

Simple, personalization! He did it by writing personalized letters to each of his customers. This got him to sell more cars than 95% of the car dealerships in America. 🤯

 

Now for a richer perspective, let’s knock on the doors of academic research.

The 4 Stages of Consumer Targeting

Professor Richard Tedlow from the Harvard Business School has divided consumer targeting in the USA into four stages:

 

  1. Fragmentation (pre-1880s): There were few regional manufacturers that sold goods to a particular region.
  2. Unification or Mass Marketing (1880-1920): During the second industrial revolution, improvement in machinery and transportation led to standardization and branded products and goods. Now manufacturers were aiming at economies of scale and were distributing and selling products at the national level.
  3. Segmentation (1920-1980): As the market expanded from the regional to the national level and manufacturers started looking at the entire country as one single market, businesses started producing products targeted to a particular segment.
    This was the era of market differentiation based on demographic, psychographic, socio-economical, and lifestyle factors.
  4. Hyper-Segmentation (1980- present): This is the era of one-to-one communication. Technological advancements especially in digital communication have made it possible for marketers to talk to a single customer or a very narrow group of consumers.

 

This was a quick refresher on the history of personalization. A point to be noted is that all of these four stages still co-exist today. 

Today, we live in the era of hyper-segmentation of personalization. Yet fragmentation, mass marketing, and segmentation still exist and are being used by marketers to communicate with consumers on a more personal level.

Personalization Trends: How Top Brands Are Using Personalization in their Business Strategy

Now let’s zoom in on hypersegmentation and what is going on in the current era. 

We had a humble start which began with email as a marketing channel for personalization. Things weren’t extraordinary as you know today in email personalization.

We moved from an anonymous “Dear sir” greeting to a more endearing “Dear Michael”. And this was a big milestone back then.

 

Fun Trivia: Gary Thuerk, Marketing Manager, Digital Equipment Corporation, sent the first mass email in 1978. His campaign resulted in over $12 million in sales. Adjusting to 2022’s inflation, it was equivalent to today’s $54.8 million. He has also been recognized as the Father of Spam emails. Here’s the copy of the world’s first mass email campaign!

​​The First Mass Email Ever Sent

 

A lot of things have changed since the first barrage of spam mail. And personalization has played a big role in turning spam into clever marketing that consumers can instantly relate to. 

Here are a few examples of brands that have led the charge with their brilliant personalized marketing strategies.

Amazon’s Breakthrough with Personalization in Marketing

 

Later in 2011, Amazon made the first step toward personalization in marketing in the e-commerce world. Amazon set new benchmarks by leveraging data to recommend personalized products to its users.

 

“We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better”

 

– Jeff Bezos, CEO, Amazon

 

Amazon’s item-to-item collaborative filtering algorithm (part of its recommendation engine) considers various factors to suggest the right item to the right user. A whopping 35% of Amazon’s e-commerce revenue is due to its recommendation system – That’s the power of personalization!

 

What is Personalization in Marketing - Amazon's personalized recommendations

 

Following our LinkedIn page for more cool insights!

How Starbucks Changed the Marketing Personalization Game

 

Another well-known early adopter brand in the hyper-personalization space is Starbucks. The coffee maker has been using hyper-personalized recommendations and interactive games to engage customers and run its loyalty program since 2014.

 

Since 2016, Starbucks has been using data from customers’ past visits and interactions to personalize the games for one customer at a time.

 

With this data, the Starbucks application can suggest a carefully curated and tailored selection of beverages, food options, or a blend of both, customized to match a customer’s palate.

 

Starbucks' Personalization in Marketing

 

Additionally, the app stores information about a customer’s typical spending habits during their visits and their preferred types of promotions, ensuring that similar offers are consistently provided to the customer to boost sales.

 

The combo of personalized marketing strategies has helped Starbucks 3x its marketing campaign results, 2x email consumption, and made 3x more customers purchase another cup of Starbucks by redeeming offers.

 

Most importantly, personalization has helped Starbucks channel its marketing spend on more targeted campaigns.

Disney’s Genius Marketing Personalization Strategy 

 

Disney enhancing their theme park visitors’ experience using their wristbands, has been my favorite personalization story since I came across their wristband patents in 2015.

 

The magic band replaces all the hassles of paper, standing in a queue, tickets, renting a car, carrying cash, waiting for your luggage, or checking into your hotel.

 

Disney makes it possible by using thousands of sensors (IoT) and by collecting lots of user data. They collect real-time data on where a guest is, what they are up to, and what they would like to do next. 

 

Simply put, Disney has been able to transform their theme park into a giant computer that anticipates guests’ desires and then serves them exactly what they want.

How Netflix and Spotify Keep You Hooked Using Personalization 

 

Netflix and Spotify are other big names that have used personalization to fuel their business growth. 80% of what users watch on Netflix comes from their recommendation system which generates $1bn in revenue for Netflix.

 

You should definitely check out our detailed breakdown on Netflix’s recommendation algorithm!

 

And do we really even need to talk about Spotify’s yearly wrap? Every December, I see screenshots of Spotify’s app featuring the most popular artists and songs of my friends and connections.

 

Walt Hickey, the winner of the 2022 Pulitzer Prize claimed that Spotify knows him better than he knows himself in his 2014 article on FiveThirtyEight

What is Personalization and Why is it Important?

We had a quick look at the history of personalization in marketing and how some top brands are using personalization to improve their business KPIs.

 

This gives us a good head start and I believe by now you have already started getting the gist of the nuts and bolts of personalization. 

What is Personalization in Marketing?

 

Do you feel you’re bombarded with irrelevant ads and brand messages? If yes, the antidote is personalization. 

 

It’s a method to increase the relevance of your marketing messages by creating personal and individual-specific offers, experiences, and communication.

 

Simply put, it’s a way to enhance the buying experience of each customer by listening, understanding, predicting, and meeting their individual needs and tastes.

 

Amazon’s product recommendations, Netflix’s content to watch, and Spotify’s music recommendations are perfect examples of listening, understanding, and delivering what an individual customer wants.

Why is Personalization in Marketing Important?

 

Buyers don’t just want personalization. They are demanding it. 😅

 

They now view personalization as the default standard for engagement. The trend has been going up since the start of the pandemic. 

 

Many eCommerce companies delivered personalized experiences to their customers and that has raised the bar for everyone else in the business. 

 

McKinsey’s research says that 71 per cent of consumers expect companies to deliver personalized interactions.

 

Why personalization in marketing is important

 

Buyers expect businesses to recognize them as individuals and know their interests. Their loyalty is up for grabs if they don’t like the brand experience delivered to them. 

 

They want brands to show them that they value the relationship, not just how much they need to pay.

 

The same McKinsey study also points out that 76 per cent of buyers get frustrated when this doesn’t happen. Crazy! 🤯

 

The Benefits of Personalization in Marketing

 

Another way to gauge the importance of personalization is the market forecast of personalization and its allied industries. The global personalization software market is expected to hit $1165 million by 2023 and $5162 million by 2030 at a 23.6% CAGR.

 

Here’s 5 crazy stats that point toward the importance of personalization in marketing and sales:

  1. By 2020, over 74% of eCommerce leaders across the US and UK had a website personalization program in place.
  2. In 2022, 62% of buyers responded that a brand would lose its loyalty if it delivers non-personalized experiences. The number was at 45% in 2021.
  3. In 2022, 35% of business managers stated they felt they were successfully achieving omnichannel personalization. The share was 24% in 2021.
  4. 61% of high-growth companies are shifting to a first-party data strategy, while only 40% of negative-growth companies say the same.
  5. 41% of marketers responded that data-driven marketing is most useful in personalization.

How Does Personalization Work?

Personalization in marketing is a form of hyper-segmentation. It works when an organization uses data and insights about users’ interests and preferences to create more engaging and stronger relationships. 

 

Data and insights are the hot words here.

Data Collection and Data Analysis

 

Data collection and data analysis are the geneses of any personalization strategy. A variety of methods are available to businesses to collect various types of data.  

 

Online/offline surveys, online tracking tools, customer interviews, and customer feedback are some methods. And, it goes without saying that the data you collect in your CRM/CDP will determine the success of your brand’s marketing efforts in today’s world.

 

This data is analyzed using different algorithms and machine learning models. This data collection aims to create:

 

  1. Detailed profiles of each user
  2. Various user & customer segments
  3. And engagement, behavior, and transactional trends of specific customer/user segments

 

After the collection and analysis of data, a variety of tactics is available to personalize content, messaging, and the overall experience of customers.

 

This can include using personalized landing pages, personalized email marketing campaigns, and personalized recommendations on websites or apps. 

 

By tailoring content and messaging to each user’s specific needs and interests, businesses can create a more engaging and personalized experience, which can lead to increased engagement, loyalty, and conversions.

How to Build Your Personalization Strategy Using the 4W Framework

The framework we are discussing here is one of the many to develop your personalization strategy. It’s called the 4W framework wherein we assume that you already have some level of data to begin with.

 

Simply put, the framework skips the step where you gauge what data you will need. Next, you collect that data and finally begin with the personalization operations.

 

In this framework, I’ve placed the data collection at the rear end. Unless you’re Netflix/Google/Amazon/FB or some big old consumer company, you’re never going to feel like you have an abundance of data.

 

You will feel a lack of it for sure. 

 

Thus, the best strategy, in our perspective, is to roll with whatever data you have in your systems and build more data-gathering capabilities as you go through the process

 

A mnemonic to remember this framework is 4W which expands to Why, Where, What, and What next.

  • What: What data do you need?
  • Which: Which segment will you choose for personalization?
  • When/Where: How will you implement whatever you decided in the previous step?
  • What next: What will you need in your next personalization campaign?

1. Data: Gathering, Analysing, and Identifying Opportunities 

 

This is your strategy planning/building phase. This phase is covered by the What part of the 4W framework.

 

The first step of your personalization strategy is to analyze the data your company has across the customer lifecycle. Most companies have this data stored in their CRM, CDPs, or in other analytic tools. 

 

You can analyze this customer lifecycle data to find different trends on the basis of the following:

  1. How they engaged with your brand (engagement trend)
  2. The amount of revenue generated, (revenue trend)
  3. What consumers’ behavior drove their purchasing decisions. (behavioral trends)

 

You can also analyze this data to find personalization opportunities, create segments and microsegments, and define and set your KPIs.

 

The sophistication of your personalization strategy will depend on the type and quality of data you have gathered across the consumer lifecycle. 

 

Thus, when you analyze your existing data for different trends you naturally also find what data you are lacking.

 

You can build capabilities around capturing the missing data and improve as you move ahead.

 

It’s an iterative process. 

2. Setting up Personalization Targets and KPIs

 

This phase is the second W of our framework. Here you decide your focus. While setting your personalization goals, a good strategy is to focus on a few customer segments.

 

Pick segments that:

  • You understand well
  • Can drive quick revenue/engagement uplifts
  • Support/improve one of your business/departmental KPIs

 

For the chosen segments, set specific customer outcomes and support each outcome with use cases. 

 

Let’s take a hypothetical case, for example, wherein a VP of sales development wants to build a solid pipeline for the next quarter. 

 

Here the goal of personalization could be to increase the reply rate. The customer segment could be the ones that earlier looked interested in your product but didn’t buy (closed-lost).

 

The use case could be using hyper-personalized videos in email cadences. The KPIs could be a 3x lift in pipeline creation. 

 

How to Set Marketing Personalization Targets and KPIs

3. Planning and Implementation

 

In the third phase, you determine what your segment wants when it interacts with your website, app, or marketing & sales messages. 

 

You utilize the existing knowledge about a segment to come up with a plan to personalize their experience with your brand.

 

This phase is also the culmination of all the other efforts you put into the previous phases. Hence, your plan of action will contain details on:

  • The segment you’re going to target
  • Channels where you are going engage your prospects/customers 
  • Data that you’re going use for offering a personalized experience 
  • The content you’ll be creating
  • Offers (this isn’t compulsory in many cases)
  • Personalization tools you’ll need for orchestration
  • KPIs and success metrics

 

Your offer, channel, content, and tool you use for personalization in marketing and sales will vary depending on your industry, business, and business model.

 

Let’s take an example of a D2C business. Let’s assume the brand decided to reduce its cart drop-offs by sending a personalized video of its celebrity brand ambassador to each user.

 

So for this D2C vendor, the dummy high-level plan may look something like this:

    • Segment: Users abandoning items in the cart. 
    • Channel: Email + App.
    • Data: Name of abandoned cart item(s), Customer Name.
    • Content: A fun hyper-personalized video of the celebrity brand ambassador
    • Offer: 10% discount.
    • Personalization tool: Gan ai.
    • KPI: 2x revenue uplift from the segment, 3x drop in cart abandonment count.

 

Planning and Implementation of Personalization in Marketing

4. Post Campaign Teardown

 

This is the “What’s Next” part of the framework wherein you look at the campaign results. 

 

You perform a post-campaign analysis to find the reason for the success/failure of the campaign, gauge the quality of data you have collected and used, and what data needs to be collected in the next campaign.

 

This step is a feedback loop. It makes your personalization project at large a circular process where data from previous campaigns will be fed back into the system to make it more intelligent.

 

Ignore this step and your personalization project becomes a linear one that has two different ends.

 

And that brings us to the end of the 4W personalization framework! Let us know your views about the framework and how you would go about implementing it in the comments section.

 

Now let’s move ahead and discuss the different benefits and use cases of personalization that you can implement.

Benefits of Personalization in Marketing

1. Boost Engagement and Sales 🚀

 

Use personalized videos to woo and convert each customer at every stage of their journey. transform the customer experience and outperform business KPIs.

2. Build Customer Loyalty at Scale 🤩

 

Use personalized video messages to effectively communicate with customers and build trust and loyalty. Tailor your messages to their specific context and needs to engage and excite them.

3. Increase Brand Recall ⭐

 

Create a stronger emotional connection by speaking directly to your customers. Standout by being more memorable to increase brand recall and garner organic PR

4. Personalized Internal Communication

 

Send videos recorded for each employee and stakeholder. Increase employee loyalty and deepen the bond with stakeholders. 

5. Create ‘wow moments’ for business partners😮

 

Send personalized video messages on special occasions to create a wow moment and leave a lasting impression on your business partners

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