How personalized does marketing really need to be?
The recent holiday sales performance proved that for most direct marketers personalization is no longer a nice-to-have, it’s a must-have. And winning brands aren’t just getting personal—they’re getting hyperpersonal, allowing marketers to communicate with each customer as an individual.
I’m not talking about simply placing a recipient’s name in an email or identifying the closest store based on geolocation on a mobile phone. Hyperpersonalization moves the customer communication from using core attributes like name, location, or even segment, to ensuring every element of a communication is targeted to the recipient. This includes images, offers, products, and even when and how a message is delivered. Hyperpersonalization allows marketers not only to communicate with customers seeking relevance, but also to avoid contacting potentially disinterested customers—because a strategic decision not to target a customer is still personalization.
Your customer will thank you
Amazon.com makes each of its customers demand more from other brands. Why? The data that Amazon collects about its customers—whether it’s a view of a product using the mobile site, a download onto a Kindle, or interaction with an email—allows the e-tailer to paint a truly 360-degree picture of each customer. By using this data to make the shopping experience easier and quicker, Amazon increases its conversions and loyalty.
The company also uses its data to fine-tune and respond to consumer preferences. Not responding to emails? Then emails are tapered off. Engaging with baby products? Then baby products are highlighted as a category among Amazon deals.
By treating customers as individuals with unique preferences like Amazon does, rather than as a large, homogenous group, marketers can see which customers appreciate the personalization, as well as loyalists who simply want to be left alone.
Get on your CFO’s good side
Personalization isn’t just about delivering an improved customer experience, it’s about growing profitability. If we look at a basic company profit and loss where profit margin (in simplistic terms) is a function of revenue reduced by the cost of goods, returns, shipping, and promotions, anything a marketer does to increase revenues or decrease costs will benefit the bottom line.
Many marketers think of personalization as a revenue-enhancing capability, but best-in-class marketers also view personalization as a cost-reduction capability. The two most direct examples are:
1) Reducing returns— Using customer behavior data can uncover patterns of repeat returners. For example, if Jane seems to order two items in multiple sizes, a hyperpersonalized onsite recommendation might indicate that the ‘Petite X-Small’ was the correct size during her last order as a gentle reminder. The benefit to Jane is an easier shopping experience and the company benefits by an increase in margin for the order.
2) Optimizing promotional spend— Promotional dollars and offers to customers are in most instances a direct hit to a company’s bottom line. So, by analyzing John’s previous behavior, you find that he typically orders every six months and doesn’t seem to order discounted merchandise. Therefore, since you know that John isn’t price sensitive, why give him that 30% coupon? Instead, highlight new arrivals and show him a hyperpersonalized set of recommendations and preserve those valuable margin dollars. We’ve seen brands add from 2 to 5% margin points by personalizing communications.
Wouldn’t your CFO like a profit improvement like this?
3 Steps to Hyperpersonalization
1. Conduct a quick audit — Know where you stand today and where you want to be tomorrow. Look at your competition and review buying experiences from brands outside your niche or industry. You can learn best practices from them.
2. Get buy-in from your CFO— Your business case must have buy-in from the CMO and the CFO. Make this happen by demonstrating the power of personalization as not only a customer experience management capability, but also a strategic investment to grow profitability by increasing revenue and decreasing costs with a strong ROI.
3. Demand more from your partners — Ask your vendor partners to put skin in the game and ensure that the solutions they’re delivering for you exceed the ROI hurdle you prepared in the business case. This is done by ensuring that your personalization capability is easy to use, integrated with the systems you need, and affordable. If vendor partners believe in your business and their solution, they’ll invest right along with you.
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Amrit Kirpalani, Nectar Online
Kirpalani, founder and CEO of NectarOM, is an executive who’s all about marketing analytics. A numbers guy through and through, he holds an accounting degree from the University of Miami. Prior to founding NectarOM, Kirpalani launched Denuo Source LLC, a marketing analytics consultancy. The former McKinsey & Company management consultant and Kellogg School of Management graduate got his start as an intern and associate at international tax consulting group Arthur Anderson. After his tenure at Arthur Andersen, Kirpalani served as a manager at global management consultancy Accenture.
