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 in November of 2019, 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 ran counter to most of the conventional wisdom about personalization.
While I doubt that eight out of ten marketers will completely abandon personalization over the next five years, it's clear that marketers are 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. Source: "Rethink Personalization for Maximum Impact" (Gartner, Inc., 2019).
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 the 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've been bombarded with media coverage about how companies collect and use our personal information. Facebook's data privacy policies and practices have been widely 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 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's 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 it. 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 people have learned more about how companies are collecting and using personal information, they've 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 than good. So, what's the alternative?
Personalization has been the subject of numerous research studies over the past few years, and these studies provide a good picture of what's required for personalized marketing to produce maximum results. There are three major components of an effective personalization strategy.
Make Personalization Useful
The first requirement for effective personalized marketing is that it must deliver meaningful and pragmatic value to the recipient. A 2018 study by Gartner/CEB documents the business value of personalization that is perceived by customers and prospects to be helpful. I've previously discussed this research, so I won't repeat that material here. For a more detailed description of the Gartner/CEB study see this post.
Make Personalization "Relationship-Appropriate"
The second component of an effective personalization strategy is to use a level of personalization that is appropriate for each customer or prospect. By appropriate, I mean that the level of personalization should match the real-world status of the relationship. A message or offer sent to a long-time customer can and should be more personalized than a first outreach to a new prospect.
To be effective, personalized marketing must be based on genuine insights about your customers and prospects. When you take personalization beyond such insights, it becomes inauthentic and will tend to be perceived as presumptuous. Corporate Visions recently conducted a field trial involving this principle, and you can read more about that research in this post.
Get Meaningful Permission for Personalization
Much of the concern about data privacy and personalization revolves around the issues of transparency and control. Many consumers and business buyers aren't confident they know what personal data companies are collecting about them or how that data is used. And many feel they don't have any meaningful control over those data practices.
Several recent research studies have shown how important transparency and control are for customers and prospects. For example, in a 2019 survey of 3,000 people in the U.S., Canada, and the U.K., The Harris Poll asked participants about the importance of several data privacy practices. The following table shows the percentage of survey respondents who rated four transparency and control practices as very important or absolutely essential:
These research findings point the way to the third important component of an effective personalization strategy. In a world where privacy concerns are heightened, meaningful permission is critical to successful personalized marketing. If the personalization research tells us anything, it tells us that most consumers and business buyers will welcome and value personalized content when it is helpful, authentic, and based on permission that is willingly and consciously given.
So, how can marketers gain this kind of permission? There are three key steps.
Use Personalization "Programs" - In most cases, personalization efforts should be organized into discrete programs, each of which is designed to provide a specific type of value to a specific type of customer or prospect. This approach leads marketers to focus on the purpose of personalized marketing from the recipient's perspective.
Invite Participation - Invite your customers and/or prospects to "subscribe" to personalized content on a program-by-program basis, and reassure them that subscribing to one program won't open the floodgates to other marketing communications.
Be Transparent - It's important to be "radically" transparent in your invitation about the details of the personalization program. The main objective of the invitation is to persuade customers or prospects to participate in the program. So it should include:
- Why the program will be useful and valuable for the recipient
- What personal information will be used, and how the information will be used
- How the personalized content will be delivered (format)
- How frequently the personalized content will be delivered
- The duration of the program
- A clear statement that the recipient has the option to "unsubscribe" at any time
It's About How - Not Whether - to Personalize
The issue for marketers is not whether to personalize marketing content and customer experiences. The evidence is clear that customers and prospects want and appreciate the increased relevance that personalization can provide. The real issue is how to deliver personalization in a way that respects privacy. By making personalization helpful, authentic, and based on meaningful permission, marketers will reap the maximum benefits of personalized marketing.
Top image courtesy of Phil Wolff via Flickr (CC).
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