The value of personalization in marketing has been largely unquestioned for nearly two decades. Today, most marketers view personalization as essential for success, and many companies have made personalization a top priority. But the marketing environment is changing, and that means it's time for marketers to rethink their personalization strategy.
In a report published last November, the research firm Gartner predicted that by 2021, one-third of marketers will reduce spending on personalization, and by 2025, 80% of marketers who have invested in personalization will abandon their efforts due to lack of ROI, the perils of data management, or both. These predictions were both surprising and controversial because they run counter to most of the current conventional wisdom about personalization.
While I doubt that eight out of ten marketers will completely abandon personalization over the next five years, it is clear that marketers are already facing a personalization conundrum. On one hand, numerous studies conducted over the past several years have reported that consumers and business buyers want - and are willing to provide personal information in order to receive - personalized offers, messages, and experiences.
But a growing number of studies also show that consumers and business buyers don't always welcome personalized marketing and will react strongly when they perceive that personalization goes too far. In one recent study, for example, 38% of survey respondents said they would stop doing business with a company that sent them "creepy" personalized messages.
Most marketing pundits and many marketing leaders argue that the key to increasing the effectiveness of personalized marketing is more personalization. They contend that marketers should collect and use more data about customers and prospects, make personalization more specific, and use it more frequently, in more channels, and for more types of interactions. The popularity of this view explains why hyper-personalization and personalization at scale have recently attained buzzword status.
The "more personalization" argument is based on the idea that increased personalization will produce more relevant messages and experiences, and that the increased relevance will make those messages and experiences more compelling. The fundamental flaw of this approach is that it fails to account for a significant shift in public attitudes toward personalization that's occurred over the past few years.
The Shadow of Cambridge Analytica
Since the Facebook-Cambridge Analytica scandal became public knowledge a few years ago, we have been bombarded with media coverage about how companies collect and use our personal information. Facebook's data privacy policies and practices have been widely, strongly, and repeatedly criticized, but other large tech firms such as Alphabet/Google have also been the subject of multiple media stories and Congressional hearings.
All of this has made the public more acutely aware of how much personal data companies are collecting and how they are using that data to target and personalize advertisements and other marketing communications.
Note: The data practices of large technology companies have also been addressed by several highly-respected scholars. If you'd like to see an example of these discussions, get a copy of The Age of Surveillance Capitalism by Shoshana Zuboff. Dr. Zuboff is the Charles Edward Wilson Professor emerita at the Harvard Business School. Her book is thorough and sobering - if somewhat strident - but at over 700 pages, it is not a quick or easy read.
The heightened public awareness is impacting personalization in two ways. First, as members of the public have become more knowledgeable about how companies are using personalization in marketing, they have become desensitized to its effects. They no longer see personalized messages or content as extraordinary. So, many of the more widely-used personalization tactics and methods make less of an impact today than they did in the past. As the old saying goes, "Familiarity breeds contempt."
More importantly, as the public has learned more about how companies are collecting and using personal information, they have also become more disturbed about those practices. Today, when someone receives a personalized message, he or she is likely to think first about what enabled the personalization. What does this company know about me? How did the company obtain that information?
The conundrum facing marketers is clear. Most consumers and business buyers say they want and value personalized offers, messages, and experiences. At the same time, however, both consumers and business buyers are becoming more concerned about privacy, and they are increasingly distrustful about how companies are obtaining and using their personal information.
Under these circumstances, the "more personalization" strategy may do more harm that good. So, what's the alternative? I'll discuss that in my next post.
Image courtesy of Phil Wolff via Flickr CC.