CHAPTER 1

What is Personalization?

Good manners advise against getting too personal in our everyday lives, but it can never be personal enough for unique user experiences. When we talk about Personalization or Individualization, we refer to actions beyond newsletters or postal mailings with a name salutation. Even though A/B tests, product recommendations on websites or apps, or segmentation are extensively employed, they do not accomplish the core of personalization. We must understand personalization as consistent marketing messages according to consumers’ affinities, habits, and wishes; in other words, as User-centered Personalization. They are consistently centering on the user: The right message to the right person at the right time in the right channel.

The right message to the right person at the right time
in the right channel.

In general terms, personalization means the coherent display of contents, offers (product, price, et al.), and services across all media, channels, and touchpoints, which are tailored to each person (prospective customer, new customer, existing customer, et al.). Other experts such as Gartner interpret personalization as a “process that creates a relevant, individualized interaction between two parties designed to enhance the recipient’s experience”.

At Smart Digital, we defined data-based user-centered personalization as digital communication that is individualized for each user in real-time, scalable, consistent, and relevant across all channels. The user is, therefore, placed at the center of marketing efforts. Data, technology, and marketing organizations and their processes work alongside to enable an optimal user experience and increase engagement with the brand or product. This consistent user approach’s kernel is the user’s data, specifically historical and situational preferences, which users generate through their past (purchases) and current behavior (website visits, product research, searches, etc.). The goal is to use this information to optimize conversions at various points along the user journey, strengthen loyalty, and achieve competitive advantages regarding brand perception.

Personalization: enabling One to One experiences in real-time across all channels

The figure shows companies’ “personalization maturity level” and clarifies how personalization is interpreted and implemented differently. The most advanced personalization stage is “hyper-personalization”: enabling 1:1 experiences in real-time across all channels. “Personalization at scale!”

At Smart Digital, we defined data-based user-centered personalization as digital communication that is individualized for each user in
real-time, scalable, consistent, and relevant across all channels

CHAPTER 2

Types of personalization

With the customer experience being the new “battleground,” personalizing the user journey is becoming a decisive competitive factor. In the past personalized one-to-one customer experiences mainly took place in physical shops, here developed the core approach of personalization, which has successfully shifted to the digital world.

But which digital touchpoints between brands and consumers can be personalized? And with which types of personalization can companies apply to create an extraordinary user experience?

As early as 1993, Don Peppers and Martha Rogers, Ph.D., predicted on “The One to One Future” that the future of marketing would focus on the individual customer and not on mass communication. The publication of this thesis took place before commercial communication via the Internet was possible. Much has happened since then, as a brief look at the historical development and the technological possibilities of personalization will show.

The blueprint: the local shopkeeper

In the past, a successful local shopkeeper would recognize his customers and tailor the offer according to what he knew about them. The purpose was to retain customers and ultimately generate more sales.

The first step: print mailings

Before our lives turned digital, retailers communicated with their customers through mailings. The most efficient way to facilitate interaction between the retailer and customers and prospects was through catalogs and personalized consultations. Today, mailings still have particular relevance, but it is decreasing due to accelerated digitalization.

The digital start: name tags in e-mails

The e-mail was one of the first channels and touchpoints in which personalized addressing of customers became established. In the beginning, it was simple naming or tagging. Nowadays, companies also began to feed their CRM systems with users’ information to offer personalized shopping advice.

Next stage: Recommendation marketing

Web personalization was first introduced and applied on a large scale by Amazon in online retail. The Amazon approach consisted of personalized product recommendations based on users’ previous shopping habits: “Customers who bought this also bought that.”, this rule-based approach encouraged the creation of user experiences based on manual rules. And is still very common today.

The era of Artificial Intelligence

The next level of personalization we are currently in is more comparable to a ‘real experience’ as it delivers tailored, consistent, and relevant digital communication in real-time based on individual user behavior. The AI era is characterized by using machine learning algorithms and predictive analytics to deliver an experience relevant to the customer at every touchpoint in their user journey.

Types of personalization differ both in the level of user-centricity and in individualization’s logic, as shown below:

Segment-based personalization

This relatively simple form of the user experience’s individualization, in which users are clustered and addressed according to identifiable characteristics, is not considered personalization in this strict sense. Often the individualization parameters are demographic characteristics such as age, gender, or location. Marketing campaigns are displayed according to the defined segments.

Rule-based personalization

The easiest way to describe rule-based personalization is with IF/THEN statements: IF a person falls into segment A, THEN show experience X. For example, IF a visitor is from San Francisco, THEN show them information about an event in that area. IF a visitor is a member of your loyalty program, THEN show a message welcoming them to your website.

Behavior-based personalization

This form of personalization is about addressing individual users at every stage and touchpoint of their user journey with highly relevant, 1:1 content and offers tailored to them. This genuine personalization, highly automated, allows marketers to deliver what matters most to users. Instead of focusing on generic associations between groups, Marketers can create customized individual user experiences and respond directly to the ever-changing and evolving needs of their users in the sales funnel in real-time.

In practical terms, behavior-based personalization looks like this: Picture a user and potential customer looking for a specific product. He has searched the website endlessly to find the right product for him. Through his behavior on the website, brands can identify his affinities in real-time and deliver the right actions, messages, and content at the right time in the right channel. So, if the user has shown a preference for certain products, he will receive personalized information tailored to them. The goal is to move him forward in the buying process and complete the purchase in a targeted manner that is positive for the user.

In Summary

Creating personalized experiences was already one of the goals in pre-marketing technology times. The “analog” personalization practices in retail until now and the users’ expectations have significantly influenced the emerging and now widespread digital services availability. However, it is not that long ago that we have advanced, with the help and use of AI, from the simple personalization of emails using name tags to scalable, behavior-based and individual digital user experiences.

Behavior-based personalization addresses individual users
at every stage and touchpoint of their user journey with
highly relevant, 1:1 content and offers tailored to them.

The future belongs to the digital age.

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