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How to comprehensively personalize the customer experience

A personalization strategy can increase brand loyalty and customer retention by providing relevant content to customers when they need it. Here's how to get started.

Today's customers won't tolerate being bombarded with irrelevant emails and advertisements. Instead, customers expect brands to understand and anticipate their needs and then tailor their experiences to those needs.

That's why personalization is often a make-or-break factor in CX. For successful CX, brands must know how to effectively personalize the customer experience.

What is personalization?

Personalization is about designing products and services to meet customers' individual needs and then matching customers and their needs with those products and services.

Brands can implement targeted advertisements when the advertiser has knowledge of customers, including their previous buying trends and demographic data points, such as age, sex, income level, race, employment, location, homeownership and level of education. Demographic data points can encompass all characteristics of the buyer, including preferences, hobbies and lifestyle choices.

An example of simple personalization is the "buy again" link or button on an e-commerce website. If customers have bought an item once before, they are likely to want to buy it again. Timing is also crucial; those customers are even more likely to want to purchase the item again if the product recommendation matches a known buying pattern, such as replenishment cycles of a consumable item. If customers replenish their washing detergent monthly, a well-timed targeted advertisement a month after the last purchase will hit the mark. Ineffective timing, however, could cause customers to be annoyed by an offer, unless it is incentivized.

Customer data sources

A more complex example of personalization is a teaser advertisement recommending a pension plan or healthcare product. Here, the factors that are relevant are the customer's age, income, knowledge of preexisting policies and medical conditions.

Personalization approaches can be explicit, implicit or contextual:

  • Explicit personalization relies on a brand knowing the types of services or products users are interested in based on users telling the company something about them, such as age, geographic location, sports, hobbies, food or vacation interests. Brands can collect this data in a variety of ways, including surveys, content preferences and loyalty program signups.
  • Implicit personalization is when a brand infers the types of services or products users might be interested in based on user behavior, such as previous browsing histories. It can also rely on other sources of information, such as a customer relationship management (CRM) system or sales order system that will have recorded previous purchases. The inference can also come from demographic data input sources, assuming the brand can place users in a specific demographic category.
  • Contextual personalization infers the relevant types of services or products to users with information such as location or time. Computers and smart devices can use GPS or Wi-Fi to provide approximate location; sensors such as Bluetooth beacons can provide a more exact location.

Why is personalization important?

In an increasingly commoditized world, it is often a brand's CX -- rather than the product or service itself -- that is the differentiator. The same or similar product or service available from at least two suppliers introduces the need for those organizations to strive to deliver superior CX. CX strongly influences brand loyalty, and brand loyalty strongly influences customer retention.

brand loyalty
Personalization can make customers feel understood, which increases brand loyalty.

Effective personalization is a major contributor to positive CX. The online environment has led to a noisy marketplace in which instant gratification, specificity and relevance are key. Today's customers are barraged with many emails, messages and notifications, so personalized marketing content and experiences can help a brand differentiate itself from its competitors. Using previous behavior and customer data, brands can suggest personalized recommendations that increase customer engagement and retention.

Personalization is relevant for face-to-face, as well as online, transactions. A customer walking into a hotel will receive better CX if the reception is aware of previous stays, dining preferences, newspaper room deliveries or reservations at the spa for a massage. For example, reception can automatically reserve customers a massage with a masseuse they have had a previous appointment with.

10 steps to personalize customer experience

To personalize customer experiences, CX teams must deeply understand their current and potential customers by collecting and segmenting customer data. Then, CX teams must know how to act on that knowledge.

Customer feedback methods

Brands can begin building a personalization strategy with these 10 steps:

  1. Build, manage and maintain customer profiles. CX teams should source data from a corporate CRM system and make it easy for customers to create and maintain their own profile. Then, companies should refine that profile with every touchpoint by regularly reviewing and cleaning profile data.
  2. Define and implement customer segmentation. Brands should divide the current and potential customer base into groups or segments, each with defined characteristics, such as comparable demographics and geolocation; communication methods, such as email, Facebook, Twitter, text and voice; and relevant targetability. There is no point in defining a segment if there is no target product or service applicable to it. The segment should have longevity with slowly changing characteristics to enable a useful revenue-generating duration.
  3. Catalog product and service characteristics. The goal is to define characteristics of the product or service that will marry the characteristics of the customer profile. Customers that hike, for example, are likely to be interested in small-dimension, lightweight equipment, such as chairs, tents and stoves. Customers that frequent open-air festivals would also be a match for the same product characteristic. Customers looking for that type of equipment will become frustrated if the online store does not enable searches and comparisons on those characteristics.
  4. Create a personalization rule base. The rule base is the logic used to marry the characteristics of the customer segment with characteristics of the product and service. Some examples of a rule base were given above, such as matching hikers with appropriate hiking equipment.
  5. Establish loyalty programs. Brands should define how to encourage customers to complete their profiles, return for repeat business and be incentivized to respond to offers. Loyalty programs are an effective method to check all those boxes.
  6. Architect messaging approach. Personalized messaging content provides value and helps brands to cut through the clutter that customers receive daily. Brands should use a customer's name in communication and refer to previous activities, such as holiday destinations or purchased goods and services. This reminds customers how good they felt and acts as a segue to new service or product offerings.
  7. Enable self-service options. Self-service channels enable customers to easily and quickly change their preferences and behaviors. For example, customers can use self-service channels to change the reordering schedule and frequency of household items, which enables brands to have a more accurate view of their behavior. Self-service options also enable customers -- and, by extension, brands -- to more easily maintain and update addresses and contact details. Enabling customers to service themselves without needing to resort to calling customer support also provides a faster turnaround for them.
  8. Integrate with social media. Personalization is critical at every customer touchpoint, including emails, phone calls and online chat. Each touchpoint provides more information to refine a customer's profile, thus improving personalization. Social media platforms offer additional touchpoints. Brands should take advantage of those platforms for more customer insights to improve customer profile characteristics.
  9. Incorporate and support customer feedback. Organizations must make it easy for customers to provide feedback, which, in turn, generates more accurate personalized experiences. Brands can act on customer feedback by refining customer segments and using that data to further personalize marketing content.
  10. Align the organization around the customer. Brands should centralize and analyze customer data and customer interactions, such as feedback, social media posts, call center conversations, transaction history and review ratings. Then, the CX team should define a corporate strategy to support personalization initiatives and align with business goals.

Tools to support personalization initiatives include CRM data and insights, personalization engines, link tracking and analysis, survey engines and data analytics.

Common pitfalls of personalization efforts

  • Legislation. Personalization is an area that relies on the collection and manipulation of personal data. Concerns over privacy and data usage are increasing and reflected in new legislation. Organizations must consider certain regulatory requirements, such as GDPR and use of third-party cookies, when collecting customer data. Companies should always involve their compliance and regulatory teams in a personalization project.
  • Distributed and disconnected systems. Data silos make it difficult to aggregate the personalization data for analytics. Companies that do not have strategic data warehouse initiatives should consider a data warehouse approach in the interim to support the CX team and personalization efforts.
  • Organizational silos and unclear roles. All departments must work together to fully understand customer touchpoints and how personalization can be beneficial at each stage in the customer journey. Organizational silos can prevent brands from gathering the right customer data. For example, the e-commerce team working independently from brick-and-mortar sales team or disjointed communications from the sales and marketing teams can make personalization efforts complex from technology integration to company and brand integration.
  • Waterfall project mentality. Tackling large personalization projects in a Waterfall approach -- a rigid, structured methodology -- rather than smaller, iterative Agile approaches can cause challenges in a personalization project. CX teams should seek to release personalization improvements frequently and validate the best approaches using A/B techniques.
  • First-time customers. During the initial touchpoint with a new customer, a brand will know nothing about that customer. The goal is to create a customer profile and retain that customer. Brands should make it easy for customers to self-create the start of their profile. At product checkout, for example, a simple checkbox and consent enable companies to potentially harvest address details and preferences around contact mechanisms.

Real-world examples of personalized CX

A measure of success for personalization is whether it is assistive or intrusive, which often depends on the customer's view. Two real-world examples can highlight how personalization tactics can fail or succeed, depending on the brand's strategy.

Many customers view Netflix's recommendation engine as assistive personalization. Two key aspects of Netflix personalization are the landing cards -- the images that users view when they scroll through content -- and the "because you watched" recommendations. The landing cards provide an easy, simple way to view content and entice the customer to watch a certain TV show or movie. The ease of scrolling through these landing cards creates intuitive UX. The "because you watched" recommendations can result in users enjoying shows and movies more often, which generates positive CX.

Netflix uses two major components to feed the recommendation algorithm: the customer profile and product data. The customer profile can include viewing history, personal movie ratings, time of day for watched movies, the viewing devices and how long a customer was watching. The product data includes movie or TV show characteristics, such as genre, category, actors, release year, match and similarities with other products. The problem with this type of personalization is that it becomes a self-fulfilling prophecy: The more recommended movies a customer watches, the more it recommends those types of movies.

Most consumers do not mind relevant advertisements but feel overwhelmed, interrupted and stalked by too much personalization. Many users view Facebook as an example of intrusive personalization. In 2018, Facebook broke the trust of many of its customers when news revealed that the company allowed Cambridge Analytica to harvest personal data without consent. Personalization is effective when done right, but it can easily veer into creepy territory and detract customers.

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