Why brands need to take a strategic approach to personalization

Research earlier this year from Gartner claimed that by 2025 some 80% of marketers who have invested in personalization will abandon their efforts.

The report cited lack of ROI, the perils of customer data management or both (Read more...) key issues. Over a quarter of the global marketers questioned stated that data is the key obstacle to personalization and highlighted weaknesses in data collection, integration, and protection.

These statistics reflect that many brands are either at an early stage in their personalization journey or are taking a tactical approach.

Last year, a report from Boston Consulting Group stated that ‘most retailers are nowhere close to delivering the personalized experiences that their customers expect’ and that ‘the vast majority have not even taken the essential first step of defining what personalization means to their customers and businesses’.

The same study did identify that whilst currently, retailers are investing, on average, 0.7% of their revenues in personalization, those that are deemed to be ‘best-in-class’ are investing 1.3x more (around 0.9%, on average).

Nearly two thirds of consumers expect personalization

Whilst personalization can be complex, consumers respond positively to it. Recent global research found that 73% of consumers said they expect a personalized journey when they interact with brands digitally and 80% expect personalized emails.

And the Boston Consulting Group survey also found that consumers are 110% more likely to add additional items to their baskets and 40% more likely to spend more than they had planned when personalization is used.

So, how might the main areas of concern highlighted within the Gartner report be addressed?

The perils and difficulty of managing customer data

Brands face a privacy paradox – consumers want greater personalization, but also want greater privacy. At the same time brands have access to ever-greater volumes of transactional data on consumers, potentially making it difficult to focus on what is important.

But effective personalization doesn’t necessarily require huge amounts of identifiable information to operate successfully. We have seen that algorithms can be trained to reliably predict after just 2,500 conversions.

When it comes to customer information, brands have access to both ‘cold’ data (where for example customers have registered and their previous spending patterns) and ‘hot’ data which is essentially, behavioral information, generated by visitors when they are on a site and captures everything that the visitor does while browsing.

While it can be an advantage to combine both, however, in the real world it isn’t normally possible to identify the majority of people visiting a site since 98% of visitors are either not customers or have not signed in.

Additionally, storing and using cold data can require customer permission under privacy legislation.

Used properly, hot data can deliver real-time results, while avoiding any potential issues around privacy. Tests show that AI-based technology can predict the conversion intent of completely new visitors within 15 seconds of them arriving on a website.

It doesn’t rely on them being existing or identifiable customers but uses a trained algorithm to compare actions with those that have previously converted to deliver a conversion score that is accurate solely using behavioral data.

There’s no impact on privacy, yet consumers get the personalized experience that they want quickly and simply.

Personalization’s lack of ROI

The other chief concern identified in the Gartner report was a lack of return on investment from personalization projects. Whilst it’s true that no project will continue if it doesn’t show a distinct return on investment, many goals aren’t adequately defined in the first place.

Digital marketers therefore need to focus on their aims from personalization and use this to create a well-argued, measurable business case. Be clear on your objectives but also understand that personalization tools alone don’t deliver ROI.

Brands need to have access to the right skills and culture to harness them effectively. This means embracing experimentation and a ‘test and learn’ methodology within the team, aided by vendors/external agency partners as required.

The decline of consumer trust

As every digital marketer knows, consumers are now much more conscious of the amount of data that they are sharing with brands. However, this doesn’t mean they are averse to sharing it – provided they perceive there to be a benefit and that it is protected.

Kameleoon research found that just 9% of US consumers said being tracked was the most important factor when embracing digital.

According to Accenture, as much as 83% of consumers are ‘willing to share their data to enable a personalized experience as long as businesses are transparent about how they are going to use it and that customers have control over it.’

Furthermore, most brands appear to be acting responsibly given that 73% of consumers in the same study also stated, ‘that a business has never communicated with them online in a way that felt too personalized or invasive.’

This appears to indicate therefore that most brands are getting it right.

Increased scrutiny by regulators

Just as we know consumers are more privacy aware, legislation has also stepped up with GDPR in Europe being joined by the California Consumer Protection Act, along with other legislation across the world. All of this has had a major impact on how brands use identifiable consumer data.

However, it’s important to note that GDPR only applies to information that identifies consumers. Using anonymized, behavioral data is not covered, meaning that relying on hot data has much less of a compliance overhead.

For marketers that do want to combine existing cold data (such as from CRM systems), within their personalization platforms, it is vital to work with a supplier that understands all forms of relevant legislation and can ensure brands remain compliant.

Tracking barriers erected by technology companies

Many technology companies have created obstacles that prevent tracking and cookies. The most prominent example is Apple, with its Intelligent Tracking Prevention (ITP) technology, which is now part of the Safari browser.

The latest update of ITP limits the storage of cookies within JavaScript to just seven days – making it much more difficult to track visitors over a period of time. At the start of the year Google has also announced that it will ‘phase out’ third party cookies in Chrome by 2022.

This doesn’t necessarily mean the ‘end’ of cookie data which can power personalized experiences, but it does mean that brands might need to work with third parties more to help them overcome these barriers.

Deploying tools which can use cross-domain local storage (for instance) can help retain information which can be used to power ongoing personalization for site visitors.

Poor personalization technology

The personalization market is growing rapidly, but is not yet mature, meaning there are a large number of vendors all competing for attention and business.

Not all are created equal – and this perhaps explains the ROI concerns raised in the Gartner study. Those selecting a platform therefore need to plan carefully and scrutinize where it has been proven with similar brands and use cases.

The need for strong technology is particularly true when it comes to real-time personalization.

Delivering this successfully, at scale, is complicated and requires a robust technical architecture that is designed for real-time and AI that can learn to predict conversion intent, based on analysis of real-time behavioral data.

Need for a strategic approach to personalization

Companies must adopt a strategic approach to personalization that brings together real-time data, an experimentation culture and easy-to-use, focused AI-based technology.

Despite the many challenges with personalization it can be achieved today, and the technology is improving all the time. Talk of ‘abandoning’ personalization is therefore way off the mark, but it should act as a wake-up call for brands to be more strategic.

Using the right data, measuring efforts, and continually seeking to improve the experience is the key to a successful personalized future.

Jean-René Boidron is CEO of Kameleoon, a personalization technology platform for real time omnichannel optimization and conversion. Jean-René has over 20 years of international experience in the digital and software industries. In three years, he has turned Kameleoon – from a pioneer in online conversion optimization, into the European leader in personalization.