Why It's Time to Rethink Personalization

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.

The State of Trust in Business

The global communication firm Edelman released the 2020 edition of its "Trust Barometer" survey during the World Economic Forum in Davos, Switzerland last month. The new survey found that despite low levels of unemployment in most of the markets covered, many people aren't optimistic about their prospects for the future. About two-thirds of the survey respondents said they do not have confidence that their current leaders can successfully address their country's challenges.

Edelman has been conducting an annual survey on the state of trust around the world for the past 20 years. The Trust Barometer survey focuses on trust in four societal institutions - government, business, non-governmental organizations (NGOs), and the media. The latest survey polled over 34,000 people in 28 countries.

The 2020 Trust Barometer survey found that the overall level of trust has changed little over the past year. Edelman's global Trust Index (the average percent trust in NGOs, business, government, and media) was 54 in the 2020 survey, compared to 53 in the 2019 survey. On average, trust in all four societal institutions increased slightly, but both government and media are still distrusted in most of the countries included in the survey.

Trust has become a major issue for business and marketing leaders over the past few years because of growing concerns about the collection, protection, and use of personal information by business organizations. The Trust Barometer survey doesn't directly address privacy-related trust issues, but it does provide insights about the general level of trust in business. These insights are important for marketers because they describe the "trust environment" in which marketing activities are conducted.

The findings of the 2020 Trust Barometer indicate that public perceptions of business are somewhat ambivalent. Overall, survey respondents trust business organizations as much as they trust NGOs, and significantly more than they trust government and media. Based on the Trust Index scores, business organizations are "trusted" in 12 of the countries included in the survey and "distrusted" in 7 countries. In the 9 remaining countries (including the U.S.), business earned a "neutral" Trust Index score.

In the United States, trust in business has remained relatively stable over the past 5 years, as the following chart shows:

The ambivalent views of business can be seen in several specific findings from the 2020 Trust Barometer. On the positive side, business was the only societal institution that survey respondents rated as competent ("good at what it does"). The net competence score for business was 14, compared to -4 for NGOs, -17 for media, and -40 for government. Respondents gave business fairly high marks for generating value for owners, being an engine of innovation, and driving economic prosperity.

On the negative side, 56% of the global respondents agreed with this statement:  "Capitalism as it exists today does more harm than good in the world." (Note:  "Only" 47% of U.S. respondents agreed with the statement.) In addition, 54% of the global respondents said that business "serves the interests of only the few," while only 29% said that business "serves the interests of everyone equally and fairly."

So how should business and marketing leaders interpret these findings, and what can they do to bolster trust in their company? When interpreting the results of the Trust Barometer survey, it's important to remember that Edelman focuses on business generically - as one of four societal institutions. The survey did not ask respondents about their trust in individual companies. It's not surprising that the respondents had ambivalent feelings about "business" as an institution.

The good news is that business and marketing leaders can identify what they need to do to increase trust in their company. In a December 2019 survey of 2,200 U.S. adults, Morning Consult asked participants what factors are very important when considering whether to trust a company. The following table show the 11 factors that were  identified by more than 50% of the survey respondents:

These results are noteworthy because they show that when U.S. consumers are deciding whether to trust a specific company, they place greatest importance on factors relating to reliability. Protect my personal data - make products that work as advertised - deliver on what you promise - treat your customers well.

Morning Consult also presented survey participants several factors that embodied aspects of social and environmental responsibility, but except for "treat employees well," none of these factors were rated as very important by a majority of survey respondents.

I am not suggesting the business and marketing leaders can safely ignore environmental and social issues. Numerous recent surveys have found that younger consumers and business buyers are placing increased emphasis on environmental and social factors when deciding what companies to buy from.

There is also a growing focus in the investment community on so-called "ESG" (environmental-social-governance) investing. For example, 2019 research by Morningstar found that in 2018, there were 351 "sustainable" funds available to U.S. investors, up from 235 such funds in 2017. This research also found that 2018 was the third consecutive year these funds had received record cash inflows.

So it seems clear that environmental and social issues are becoming more important when it comes to earning trust, but right now, the most important factors still relate to reliability.

Top image courtesy of chuks mbata via Flickr CC.

Unconventional Views on B2B Growth

Last fall, The B2B Institute (a think tank funded by LinkedIn) published a research report that every B2B marketer should read. The 5 Principles Of Growth In B2B Marketing describes the findings of research conducted by Les Binet and Peter Field, two highly-regarded, UK-based experts on advertising effectiveness.

This report is based on an analysis of data contained in the IPA (Institute of Practitioners in Advertising) Databank. The IPA is a trade organization representing the UK advertising industry, and the Databank includes extensive data submitted for the IPA effectiveness awards competition. This database includes information about almost 1,500 advertising and marketing campaigns.

In this report, Binet and Field discuss five principles of B2B growth and effective advertising. Most of these principles embody views that run counter to much of the current conventional wisdom about how B2B marketers can effectively drive growth. While Binet and Field accurately describe their findings as tentative - more about this later - this research is provocative and should be given serious consideration.

Below is a brief summary of the five principles discussed in the report.

Principle 1 - Invest in Share of Voice

Share of voice is typically defined as a brand's share of all category advertising expenditures. A long-standing principle in B2C marketing is that brands tend to grow when their share of voice exceeds their market share, if all other things are equal. Brands whose share of voice is less than their market share tend to shrink. Binet and Field found that this principle is equally true for B2B companies.

Principle 2 - Balance Brand and Activation

Binet and Field argue that B2B companies should balance their spending on brand building activities and sales activation activities.  They define sales activation as any marketing activity that is designed to produce an immediate response from a potential customer.

Sales activation activities usually produce results relatively quickly, and their short-term ROI can be high. But the effects of sales activation activities don't last very long, so they don't foster long-term growth. Brand building activities, on the other hand, excel at driving long-term growth because their  effects last longer.

Binet and Field found that the effectiveness of B2B marketing is maximized when a company allocates about 46% of its marketing budget to brand building and about 54% to short-term sales activation.

Principle 3 - Expand Your Customer Base

The growing importance of customer experience, and the shift to subscription-based business models have led some B2B marketers to place greater emphasis on programs intended to improve customer retention and loyalty. However, the research by Binet and Field found that customer acquisition strategies are much more effective at driving growth than customer retention/loyalty strategies. They also found that reach strategies - strategies that seek to engage both customers and non-customers - tend to be most effective of all.

Principle 4 - Maximize Mental Availability

According to psychologists, human beings use a variety of mental shortcuts called heuristics when they make decisions. One of the most important mental shortcuts is the availability heuristic, which says that when people are facing a choice between several options, they will tend to prefer the option that comes to mind most easily.

Marketers have long known that the availability heuristic plays an important role in B2C marketing. The research by Binet and Field found that mental availability is also critical in B2B marketing, and that marketing activities that increase share of mind are highly effective at driving growth.

Principle 5 - Harness the Power of Emotion

Binet and Field found that emotions are almost as important in B2B buying as they are in B2C buying. Specifically, they found that B2B advertising messaging that appeals mostly to emotions is far better at creating brand preference than more rational content. Conversely, rational arguments perform better than emotional appeals when the main objective is short-term sales activation. The researchers also argued that emotional brand building programs can improve the effectiveness of rational sales activation programs.

Caveats

As I noted earlier, Binet and Field acknowledged in the research report that their conclusions should be viewed as tentative for several reasons:

• The research was based on an analysis of less than 50 cases in the IPA Databank, so the sample size is very small.
• The campaigns analyzed may not be representative of B2B marketing in general.
• The campaigns analyzed tended to have relatively large budgets.
• Most of the campaigns analyzed were run in the UK.

Despite these caveats, the research by Binet and Field raises several important issues, and I hope to see more research on these issues. Much of the conversation in B2B marketing focuses on how many things have changed. The research by Binet and Field reminds us that some things may not have changed as much as we usually think.

Image Source:  The B2B Institute (LinkedIn)

Remembering the "Disruptive" Work of Clayton Christensen

The business world lost one of its leading thinkers last month when Clayton Christensen died on January 23, 2020. He was 67.

Professor Christensen joined the faculty of the Harvard Business School in 1992, after working as a consultant at Boston Consulting Group and co-founding an advanced materials company. He achieved management guru status after the success of his 1997 book, The Innovator's Dilemma. The Economist magazine called The Innovator's Dilemma one of the six most important business books ever written.

In his groundbreaking book, Professor Christensen introduced the concept of "disruptive innovation." He argued that many of the practices that help the best companies succeed can also lead to their ultimate failure. Professor Christensen's ideas have become so popular that "disruption" is now firmly entrenched in the lexicon of business.

In 2003, Professor Christensen and Michael Raynor co-authored The Innovator's Solution, which further developed the concept of disruptive innovation and also discussed what we now call the "jobs-to-be-done" framework of buyer decision making. Professor Christensen acknowledged that he did not originate the jobs-to-be-done framework, but his adoption of the idea has helped make it part of mainstream business and marketing thinking.

Like thousands of others, I have been greatly influenced by the thinking and work of Clayton Christensen. When I learned of his death, I looked back at the posts I've published here and discovered that I first referred to his work almost eight years ago. To commemorate his life and work, I've reproduced that first post below.

Fair winds and following seas, Professor Christensen.

"For Great Marketing Content, Focus on the Jobs Prospects Need to Get Done"
April 14, 2012

The first step to creating compelling marketing content is to understand what your prospects are trying to accomplish when they purchase products or services like those you provide. Most buyers, particularly business buyers, don't purchase a product or service because they want that product or service itself. Instead, when they become aware of a job that they need to get done, they look for a product or service that they can "hire" to perform the job. Theodore Levitt, the legendary marketing professor at the Harvard Business School, captured this concept in a memorable way when he said, "People don't want to buy a quarter-inch drill. They want a quarter-inch hole."

In The Innovator's Solution, Clatyon Christensen and Michael Raynor provide an interesting example of hiring a product to get a job done. A fast-food restaurant chain wanted to increase sales of milkshakes, and it commissioned market research to better understand how to accomplish this goal. The most surprising finding of the research was that almost half of all milkshakes were purchased in the early morning. The milkshakes were usually the only item purchased, and they were rarely consumed on the premises.

The researchers found that most of the morning milkshake customers were people on their way to work. They faced a long commute, and they needed something to make the drive more interesting. In addition, while they weren't necessarily hungry when they bought the shake, they knew if they didn't eat something, they would be hungry by mid-morning. Most of these customers also faced similar constraints. They were in a hurry, they were usually wearing their business clothes, and they only had one free hand.

These customers sometimes "hired" other foods to fill their morning needs, but most of the alternatives had significant disadvantages. Bagels got crumbs on their clothes, bananas were eaten too quickly to last for the whole commute, and breakfast sandwiches made their hands and the steering wheel greasy. It wasn't so much that these customers "liked" milkshakes better than bagels or bananas or breakfast sandwiches, but milkshakes were better than these alternatives at performing the job the customers needed to get done.

It's not hard to find examples of this idea in the business world:

• No business owner really wants accounting software, but many buy such software because they realize they need to generate invoices faster, know how much they owe to vendors, and understand how well their company is performing financially. Accounting software enables them to perform these jobs more efficiently than a manaul bookkeeping system.
• No business owner really wants property insurance, but most will purchase insurance because they know they need to protect themselves financially in case of a fire. Insurance is the best-available tool for performing this job.
• No business owner really wants a company brochure, or a direct mail campaign, or for that matter, a website, but many will invest in those things because they see them as effective tools for performing the job of increasing sales.

As businesspeople and marketers, it's easy for us to forget that most potential buyers aren't really interested in our products or services per se. What they are (or can become) interested in is what our products or services can help them accomplish. Our products or services are simply the means to an end, and this fact should determine the primary focus of our marketing content. To use Levitt's analogy, our marketing content needs to be more about quarter-inch holes than about quarter-inch drills.

To create such content, you have to know what jobs your prospects are trying to get done, why those jobs are important, what happens if those jobs don't get done, and what issues or problems can prevent prospects from performing those jobs. The answers to these questions will provide the basis for your marketing content.

Image courtesy of Betsy Weber via Flickr CC.