December 14, 2015

Businesses Failing to Give Consumers the Personalization They Crave

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This is a guest post from Stewart Rogers, Director of Marketing Technology at VentureBeat. He writes marketing technology news for VentureBeat, and analyzes the martech industry for VB Insight, VentureBeat’s research arm. He has over 25 years of experience in sales, marketing, and running software companies.

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Hyper-personalization is coming. But the data tells us it might not get here quick enough, so we run the risk of alienating the latest generation of customers.

Among many other revelations, that is a decent summary of the most recent research into personalization we have undertaken at VB Insight. We’ve analyzed personalized marketing from two perspectives:

  • How you achieve it
  • What customers think of it

The research itself has been interesting to conduct. We’ve found significant cross-overs into other studies that discovered how people complain online in the 21st Century, and how brands use social channels to interact with those consumers.

But before I dig into some of those findings, it is only fair to set the scene and explain how we got where we are today.

Because frankly, it’s a royal mess. And not the kind of sweet and sugary mess, full of meringue, raspberries, and cream. No — this type has a bitter taste.

Here’s a quick history lesson.

A Brief History of Personalization

Personalization, or one-to-one marketing as it is often called, has its roots in database marketing, which in turn was born from direct marketing. The earliest recorded definition of database marketing was in Shaw and Stone’s 1988 book of the same name:

“Database Marketing is an interactive approach to marketing, which uses the individually addressable marketing media and channels (such as mail, telephone, and the sales force): to extend help to a company’s target audience; to stimulate their demand; and to stay close to them by recording and keeping an electronic database memory of the customer, prospect, and all commercial contacts, to help improve all future contacts and to ensure more realistic of all marketing.”

This revolution in the way we gather and store information regarding prospects and customers started the ball rolling, and it is one we’ve been pushing forward ever since — sometimes uphill. It took a while before marketers started to become sophisticated in their use of this data.

Personalization, in the direct marketing days, typically meant calling out the prospect or customer by name somewhere within the message you were sending them, which was traditionally delivered by mail through the local postal system. This was very much a one-way communication.

Database marketing, however, is linked much more closely to “direct response marketing,” a two-way communication with the prospect or customer. It’s the real precursor to today’s personalized marketing.

Personalization in Action

A good example of this distinction comes from an old Xerox/Ford Motor Company case study. The car manufacturer was using basic personalization, such as customers’ first names and the vehicles that they owned. While using name and vehicle data produced a 2.5 percent increase in response, it plateaued at that level.

The mailer was reworked pulling in customer data from various departments, including vehicle type, length of ownership, address, age, income, and gender. This meant the company could send different messages to each individual in the list, as each would have different reasons for buying a car.

Despite incredible market pressure at the time — they were being delivered at a time when car manufacturers were struggling to stay afloat — Ford tested these new mailers. The fully personalized self-mailer achieved a 5.7 percent increase in response rates and a 35.7 percent increase in sales penetration as compared to the original mailer. It was so successful at the time that campaign production ramped up to two million pieces of personalized mail annually.

Has Personalization Plateaued?

But truth be told, we’re not much further along from those heady days of the earliest forays into personalization. Instead of storing just name, age, gender, and other basic personally identifiable information, we’re told that we have to move toward storing brand affinities, product relationships, interest, hobbies, and behavioral data.

Yet 96 percent of marketers say building a single, comprehensive view of customers is a challenge, let alone being able to send them truly hyper-personalized marketing. Even the most basic of personalizations — using a name in a communication — is a struggle for many.

We’ve all seen the stories.

Earlier this year, Time Warner Cable sent a letter to its customer, Esperanza Martinez. It was a decent letter, telling her that it was a company committed to bringing her a great experience. Unfortunately, the experience was not so great for Martinez.

Prior to the letter, she had complained to a support representative regarding poor service, and that customer service employee decided to change her first name to an utterly vile swear word (which I won’t repeat here). When the letter arrived — her modified name emblazoned on the front of the envelope — it was more than a shock for Ms. Martinez.

Needless to say, this isn’t the first time that a customer database has been updated to reflect the feelings of a vindictive support rep, and it won’t be the last, but it shows that companies of all sizes still struggle with data quality (and database update permission) issues.

Do Consumers Even Want Personalization?

So it’s clear that many marketers are not in any position to personalize their communications in the first place. But that’s okay because customers aren’t ready for that yet, right?

Wrong.

A lack of website personalization, as a prime example, is an issue if you sell to “digital natives” — aka late Gen Y and Gen Z types who’ve grown up using computers, smartphones, and other digital devices. It turns out, according to my own research, that 77.5 percent of respondents in this age group want you to give them a truly personalized experience, both on your website and within messages.

This is no surprise to me. As I discovered in my report on how people complain to brands using social media, these digital and social media natives are a new breed.

They were born and raised on social media. They’re young, and social media is their native environment, making them skilled in its use. For them, collaborative creation is practically the reason the internet exists. Digital natives expect your social presence to be as immediate and engaging as they enjoy with their friends and connections.

And that is a problem. In my study of big brands and how they use social media, nearly 70 percent use Twitter in broadcast-only mode, never engaging with the audience. In fact, a third of social media complaints are never answered. That is an ever-increasing pot of up to 289 million unanswered complaints every year — all of them indexed by Google. The retail sector performs particularly terrible in this regard, ignoring eight out of ten questions asked on social channels.

Get Ready for Personalization Now

Of course, the needs of one age-bracket of consumer can’t drive the personalization agenda. But it is worth pointing out that — in all our combined research on personalization — almost every age of consumer either wants a more relevant experience or is happier when personalized delivery increases the value they get from the brands they interact with.

The lesson here is that consumers want personalized communications, websites, emails, and other content. They want you to listen on social media, and respond to them. And they want you to do all of this while treating them like humans, not a database record. Start by cleaning up your single view of the customer, then dive in to the world of personalized marketing as soon as you can.

Getting involved right now gives you an immediate competitive advantage because so few organizations are personalizing effectively. With the average return on investment from personalized marketing at well over 200 percent, the reasons for diving in are multiplied.

Isn’t that right, [first_name]?

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