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Personalization is an exciting and developing area for Customer Experiences. On the podcast, we hosted Graham Hill, Ph.D., to talk about it, and I wanted to share Hill’s insight here, too.
Hill is an old friend I met in the early days of using customer relationship management (CRM).. Hill has also been in the Customer Experience area for many years and has a wealth of knowledge and experience and its well worth a conversation with him.
Personalization is a significant area for our field, particularly with the assistance of artificial intelligence (AI) tools. Hill has views on personalization and has some case studies of work he has done with other clients that he can share.
What is Personalization?
Before we get too far into the trends and future of Personalization, it’s a good idea to communicate what we mean by the term. Hill says that it is best thought of on a continuum. On the one extreme are the general branded communication standards we use for customers, and on the other are customized communications meant for an audience of one.
It’s important to remember that mass communication still has a place. Branded communications build markets rather than respond to individual customers, Hill says. However, mass communication isn’t the only type that has a place in a marketing strategy; personalization also has a place.
It is important to note that mass-customized communications still have a lot of similarities. There are not 20,000 individually created communications. Instead, these individualized communications have mostly the same thing, but they are individualized with data collected about the customer that will make the offer seem customized. It looks unique because the content is personalized to information relevant to you.
Hills says there is true personalization, which is individualized content only about the customer and what they are trying to do now. Personalized around the interaction, this type correlates with the journey stage where the customer is. The communication is there to help move the customer along their journey with the job they are trying to get done at that stage.
Hill notes research that looks at the usual rate of response using direct communications targeted at customers versus personalized content (mass-customized communications) and individualized communications. The personalized content was nine times more likely to get a reaction than the general content, and the individualized content was forty-four times more likely to get one. In other words, individualized content was 4,400% more effective at driving sales than general communications. Hill says this study used five or six categories in the digital marketplace over a year.
Does that mean everything should be individualized content, then? It does not. Not everybody needs to have things personalized. Sometimes, mass communications work fine. Not everything’s perfectly individualized, either. However, this study shows that distinct levels of communication have various purposes and different effects on customer behavior.
Segmentation for Personalization Is Different
Hill says he has seen lots of segmentation over the years, most of which is worthless. Many segmented customers based on abstract psychographics, demographics, and socio-graphics. What can you do with that? Hill says it’s not useful for marketing or designing what the Customer Experience looks like because it’s not relevant to what customers are trying to get done.
Hill proposes using outcome-based segmentation, meaning what a customer is trying to do and what journeys they go on to get those jobs done. How do they measure success? What outcomes are they using to measure the success of completing their jobs on their journeys? He says the answers to these queries should be the foundation for segmentation, and these are the segments that see the best results for driving sales using personalization.
Hill was the interim head of CRM at Toyota Financial Services in Germany. He restructured the customer contact program, which had a series of interactions with customers over the vehicle ownership life cycle. They were trying to develop communications to help owners get more value from their vehicles.
One area they overhauled was the repurchase management program. Each eligible customer gets an individualized offer for a vehicle that compares their current payment to the new payment for the new car. They based this communication on a dealer mentality and the workings of a dealer in the UK. They also got out, talked to dealers, and used Toyota’s Kaizen approach to improve the exercise continuously.
Before the overhaul, this interaction regarding the job (i.e., replacing an aging vehicle) was a glossy, tri-fold brochure with no personalization. The response rate was ten percent. After the individualized offer was mailed instead of the brochure, the response rate jumped to 35 percent.
I approve of Hill’s approach, which is not to get over-excited about a new buzzword. So often, when we talk about things that technology newly enables, it’s like, “Well, that’s the goal.” Then, the goal is to implement this new thing. They aren’t sure why, but they will do it anyway.
I hear Graham arguing about determining the goal of communication before designing it. Then, consider whether investing in the new way of doing things serves that goal.
It’s possible to overinvest in new technologies or approaches or guide your team in a new direction, losing sight of why you’re even doing that in the first place.
Is personalization generally a good thing? Yeah.
Does that mean that every implementation of it is a good idea? No, not anywhere close.
So, keep asking yourself, as you consider personalization plans, why are we doing this? What is the goal? What is the means that we are attempting to achieve at the end of this?
So, What Should You Do with This?
If you were to take away something from this conversation and do something, Hill recommends you do three or four things, all of which are relatively easy and fundamental to your success.
- Understand a bit more about your customers. Talk to them about what they’re trying to achieve, not what they do. When you talk to them, discover their journeys and determine how they measure success. Understanding what customers want, how they get it, and how they measure success is a fantastic foundation.
- Consider how to improve what matters to your customers. By identifying those interactions, you can make a difference through personalization. Find the system elements where customers must decide something and personalize those interactions. When you understand what customers want to try to get done and how they go about it, you know where to apply your efforts most effectively.
- Determine the minimum amount of personalization that gets their job done. Keeping people happy and serving them helps us get our jobs done, too.
Finally, add a simple measurement approach. Understand how many people go to these key touch points and what they do when they arrive. Then, compare that to what they do after personalized communications. See what you can learn from them and improve your approach like Hill did at Toyota.
If you do that, Hill guarantees you go from that low response rate that we discussed for standard communications to the 44 times better response rate. That is how personalization can change your outcomes through having relevant and timely personalized communications about the customer’s jobs.
Remember, with personalization, it is essential to stay goal-oriented. Why are you doing this? Can you solve customer-specific problems? Can you solve the particular issues in your business? If not, maybe don’t do it yet. Wait until you know the answer to that question.
Also, remember that none of this is rocket science, and it doesn’t require rocket science to make it work. You use better tools, like AI, but these aren’t absolute necessities. It’s all about solving simple problems with the simplest tools you can. Then, build upon that to get more value.
Colin has conducted numerous educational workshops, on how to improve your Customer Experience, to inspire and motivate your team. He prides himself on making this fun, humorous, and practical. Speak to Colin and find out more. Click here!