Personalization Strategies to Attract and Retain Customers

Overview

With recent changes in consumer shopping habits, many companies are adopting sales and marketing strategies that reflect a more personalized approach to servicing their customers. This article focuses on personalization and on ways you can gear your business to provide products and services individualized to your customers' tastes and needs. The steps outlined in this discussion are designed to help you increase customer traffic and realize larger profits — whether you operate in the retail sector or in the realm of e-commerce.

By citing specific cases, this article reveals how you can establish an individualized approach through marketing strategy and product offerings, and it provides assessments that will help you determine if your company is a good candidate for customization. It also explains how to best handle implementing a strategy, which particular strategy is best for you, and whether your personalization plan is ready for the Internet.

Outline:

  1. Going One-to-One With Products
  2. Going One-to-One Through Marketing
  3. Plan Your Strategy
  4. Personalization and the Web
  5. Putting Online Personalization Into Action
  6. What Your Personalized Site Should Include
  7. When Personalization Works, and When It Doesn't
  8. Resources

I. Going One-to-One With Products

With people so overextended with family, work and general life demands, it's no surprise that consumers are forcing corporate America to provide products, services, and information in a fast, easy and personal manner. No longer are consumers willing to spend hours browsing shopping malls and department stores at inconvenient hours to find generic goods. They want customized solutions that are easily accessible and available when they're ready to buy. The result? The birth of personalization, a strategy being adopted by more and more companies that address this widespread consumer desire.

Think about it. If you were standing in your local mall, surrounded by hundreds of stores, wouldn't you be more apt to re-enter a store where the salespeople already know what styles you like? In addition, wouldn't you prefer to shop at a store that alerts you of discounts on the types of products you're likely to need?

Likewise, if you were shopping on the Internet, wouldn't you be drawn to sites that catered to your individual needs? Wouldn't you prefer sites that offered products and services that were tailored to your particular preferences?

If you're like most consumers, your answer to these questions is a resounding "yes!"

These days, salespeople, clerks and customer service reps are attempting to build one-to-one relationships through such personalization measures because they lead to repeat customers and higher profits — two difficult things to achieve. However, effective relationship-building doesn't end with providing personalized products and services to clients. It is also necessary to personalize your marketing strategy — an ongoing process that takes a great deal of effort and planning, whether you're doing it in the traditional retail sector or online world of e-commerce. In either case, if done properly, the results can be a big boost in traffic and profits.

Retail salespeople and Internet e-retailers both rely on personalization, but they do so in very different manners. The reason for the differences is mostly due to the different technologies and personalization avenues available to each. However, the consistency between both is that they both practice the art of building long-term relationships by providing individualized service. In the fast-moving, crowded worlds of retail and e-commerce, managers have quickly learned how to use these strategies to their advantage, and they've proven to be the difference between the success and failure of their organizations.

So what exactly is personalization? Generally speaking, personalization is the strategy of establishing an individualized approach to servicing customers through products and services (which we will address in this section) and through your marketing strategy (which we will address in the next one).

Personalizing products and services is a very effective way to build loyalty among customers. After all, if your company is providing tangible offerings that match clients' specific needs — and your competitors aren't — your organization will have a solid competitive advantage.

Regardless of the methods you use, the goal of personalization is to find out what products and services individual customers will be willing to spend money on — and to boost your sales by tailoring your offerings to them. Products that work especially well with personalization include clothing, footwear, food services, entertainment, travel, and so on. And almost all services can be tailored in one way or another to meet clients' individual needs.

"Personalization is a range of things," says Richard Dean, strategic planner at Organic and an expert on personalization marketing strategies. It can be something as simple as making recommendations based on a client's purchase history or allowing a shopper to say, "These are the kinds of products and services I like. Tell me more about them and show me more like them," he says.

Prescriptives Cosmetics follows a similar one-to-one premise for its line of makeup and skin care products. The company produces customized color-printed foundations rather than blends for general skin types. Customers can create custom shades right at the store counter that complement their skin tones. There is no guessing, as the match is made perfectly and immediately.

A similar case of customized product offerings is illustrated in the case of Bed Bath & Beyond, a kitchen and bath retail chain. The retailer has set up a showroom and design center to help its customers find the products that fit their specific needs. No longer do shoppers simply search for basic features of a product; they look for what will fit into their specific home decorating plans.

"They want customized products," says Jeff Burton, Bed, Bath & Beyond's CEO. "They want refrigerators that can be set up so when the styles of doors change, they can just change it instead of buying a whole new [refrigerator]."

In fact, with networked homes popular once again, home equipment retailers have activated customized programs. At Bed Bath & Beyond, store associates walk customers through different arrangements for kitchens and baths and find out what future decorating plans the customer may have. Then, they sell products that can be changed later to accommodate fast changing styles and technologies. The result: repeat customers.

Self-Assessment

Personalization works best when you either have a large number of different types of products and services to sell, or your customers come from many different walks of life. For example, personalization greatly aids a bookstore or a music store because customers are young and old, male and female, and have different tastes in genres, subjects and authors. Meanwhile, a company that sells highly specialized items to a distinctive audience may find the effort and expense of personalization less beneficial. Take this test to find out if you should be using personalization:

  1. Do you offer a large selection of products or services?
     Yes No
  2. Do you have multiple target audiences with diverse demographic profiles?
     Yes No
  3. Do your customers have multiple buying motives, and do you know what they are?
     Yes No
  4. Can you satisfy those motives with different approaches?
     Yes No
  5. Do different customers use your products for different purposes?
     Yes No
  6. Can you adapt your products to adapt to address those uses?
     Yes No
  7. Do you currently have — or could you develop — a means for gathering and analyzing personalized information about your customers?
     Yes No
  8. Do you currently have — or could you develop — a way to offer different products and services to different customer groups?
     Yes No
  9. Do you have a budget for personalizing your offerings?
     Yes No

If you answered yes to all of the above questions, your company is a likely candidate for personalization. So get ready to get personal.

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II. Going One-to-One Through Marketing

Personalizing your marketing strategy not only allows you to tailor promotional messages to customers, but it also allows you to identify key customer traits so you can more easily make sales to particular clients. It allows you to reach individual customers directly and on a one-to-one basis rather than hoping to reach an entire group at once, as with mass marketing techniques. In the traditional retail sector, this can simply involve a carefully crafted conversation between a sales representative and a client, or it can be through technical means that determine what products or styles interest a specific customer.

One-to-one marketing targets individuals within a particular audience and uses various methods and technologies to deliver customized messages to them. The process varies from traditional target marketing, which typically involves sending uniform messages to a particular audience.

Radio Shack is an example of a retailer that utilizes this strategy through the use of direct-mail sales circulars. Remember all of those advertising brochures you've found in your mailbox over the years from them? Those are the results of a one-to-one personalized marketing strategy. Most likely your relationship with Radio Shack began when you walked into one of their locations and purchased a stereo. At that point, personalized information about you, including what you bought and how much money you spent, is entered into a database for future reference. Then, the store identifies a pattern in your buying habits and makes assumptions based on your personality and interests. Finally, you receive notices for sales on woofers and tweeters and other stereo-related equipment. Meanwhile, circulars that are sent to someone who bought a camera might include sales on video equipment instead. For more information see Create a Direct Mail Package.

A similar strategy works for catalog retailer Fingerhut. The company sends out a general merchandise catalog once a month. When a customer buys an item, his or her buying habits are logged into an extensive database and analyzed for potential future buying habits. Then, the company sends the customer up to 25 different catalogs featuring products that were identified as potential items of interest based on his or her past purchases.

"Say they buy cookware; then we send them our specialized cookbook catalog," says Fingerhut's president Will Lansing. "If they buy tools, we send them our home improvement catalog. Once we understand their purchase profile, we send them more specialized books with a broader assortment of products."

Over time, and with more purchases, Fingerhut's database can help narrow the individual's preferences and continually personalize the company's strategy toward that person.

The constant interaction involved in personalized marketing strategies, whether it is through conversation, database management, customer input or software tools, provides you with benefits that your competitors won't have if they are employing mass marketing strategies. These benefits include:

  1. A loyal and long-lasting relationship - With so many options to choose from, loyalty among shoppers is fleeting, at best. However, because you can customize your sales pitch to reflect the interests and personality of individual buyers, you can make them feel as if your store is their own. Therefore, the chances of that person coming back to your company, rather than your competitors, greatly increase.
     
  2. A rich collection of customer information - Because personalization tactics can track the movements and habits of an individual, you can receive valuable data on your customers that you wouldn't be privy to if they remained anonymous. This interaction allows you to make a more effective sales pitch. With this information, you can direct customers to the merchandise they will most likely buy, or you can market merchandise that might be of interest that the customer might not have otherwise seen.
     
  3. Valuable insights on your company -- Information gained from tracking customers can be valuable information for you in determining what works and what doesn't, as well as what sells and what doesn't. By knowing the interests and habits of the people who find their way into your store, you may uncover other important information about their opinions and preferences for your products and services.

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III. Plan Your Strategy

Before you decide to implement a one-to-one marketing strategy, there are a few important questions to consider. To begin thinking about that decision and how you will handle implementation, ask yourself the following questions:

  1. What behavior from my customers am I hoping to enable (increased purchases, repeat visits, heightened trust, etc.)?
    _______________________________________________________________________
     
  2. What message about my business do I want to send to people?
    _______________________________________________________________________
     
  3. What technical resources do I have that will complement one strategy over another?
    _______________________________________________________________________
     
  4. Do I have enough manpower to implement the preferred strategy?
    _______________________________________________________________________
     
  5. Does the plan require a short- or long-term obligation?
    _______________________________________________________________________

Once you have chosen a plan for personalization and know what you want to accomplish, it's time to set up your program. You can begin by identifying and becoming familiar with one-on-one marketing techniques and when to use them.

Techniques for gathering information for personalization strategies include:

Keep in mind that long, drawn-out questionnaires, forms and interrogations tend to drive people away. The secret to successful information gathering is to gain as much value as you can in as little amount of questions as possible. It's often wise to begin with only a simple question or two whose answers can be used to influence the direction of the subsequent questions.

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IV. Personalization and the Web

As important and as basic as personalization is for retailers, it is even more vital for e-retailers, where the chances of online stores being lost in the shuffle are great. And in light of the recent e-commerce boom, building relationships and getting to know customers can mean the difference between survival and failure. With e-commerce sales hitting $209.6 billion in 2009, sites that provide the best online shopping experience for Web customers stand to grab a large chunk of that pie. And personalization is universally accepted as one of the best means to that end.

Why is personalization the latest trend in "Netonomics"? Because, similar to traditional retailing, it establishes customer loyalty, which leads to repeat visitors, which leads to repeat sales, and ultimately, to higher profits. In fact, several studies have shown that Web sites providing personalization are five times more likely to attract repeat visitors than non-customized sites.

"It can be the difference between a static site or a successful one," says Mike Porter, marketing director for NetPerceptions, a personalization system developer. "Personalization takes information and makes recommendations to pitch products that have a 70 to 90 percent likelihood of being a match [with the interest of the customer.]"

Furthermore, a customized approach allows you to get to know your customers in the impersonal online atmosphere and to tailor your offerings to them. It can utilize direct input from the customer, or it can be done without the customer even realizing what's happening. For example, Web sites can now identify a particular customer through registered contact information, and then present products and services in a manner that fits his or her interests and personality. It can also allow the customer to dictate what content and information he or she sees while visiting the site.

"That's what e-commerce on the Web is all about," says Dean. "If you're not providing personalized service, then you're not using the Web to its full advantage."

How It Works

The good news is that the Web and its burgeoning technologies allow e-retailers to take their personalization strategies to an even higher, more sophisticated level.

There are a few basic approaches for Web-based personalization that have emerged, and all are derived from traditional retail marketing strategies. The two main categories are rules-based filtering and collaborative filtering. Keep in mind that while these are the current standard approaches, e-retailers are consistently pioneering new ideas for personalization.

Rules-Based Filtering - Rules-based personalization generates a profile of each customer, which is stored in a database and used to identify patterns of behavior. The patterns are transformed into assumptions, or rules, which are then used to predict a shopper's future likes and dislikes. Then, the retailer or e-retailer can customize his or her content accordingly and tailor sales and advertising efforts.

There are several ways to accumulate this data. The most basic collection process is the use of a registration form, which requires visitors or shoppers to fill out a questionnaire and submit it to the store or Web site before they can shop. Requested information might include age, occupation, address, household income level, hobbies, interests, and so on.

One of the more common strategies you see today is the use of clickstreams, which track the path that users take through a Web site. An example of this method is Accipiter AdManager software developed by Engage Technologies, which allows companies to track the number of times viewers click on advertising banners, giving them the data they need to customize advertising campaigns to their viewers' preferences. This practice is similar to what traditional retailers do when they log in purchases for future direct marketing campaigns. Another strategy growing in popularity is the use of if/then scenarios, in which e-retailers attempt to direct the movements of users by basing the user's options on what they've done in the past.

Collaborative Filtering - This is the process by which retailers and e-retailers track customers' likes and dislikes and look for patterns similar to other customers. This concept is designed to simulate a "word-of-mouth" campaign. "Personalization isn't just looking at one person's behavior," explains Porter. "It's looking at the behavior of people who are alike. And it's making a set of suggestions based on what a particular group of similar people [think is] popular."

The more times a person visits and makes purchases from your site or store, Porter explains, the more likely you will be to make helpful purchasing suggestions to that person.

Self-Assessment

Ask yourself these questions to help you decide which strategy is best suited to your Web marketing plan. Once you have the answers to these questions, you can begin to analyze what approach seems best for you.

  1. How much do I know about the visitors coming to my site?
    _______________________________________________________________________
     
  2. How much information am I comfortable asking those customers for?
    _______________________________________________________________________
     
  3. What do I plan to do with the information after I receive it?
    _______________________________________________________________________
     
  4. How much money can I spend to track visitors?
    _______________________________________________________________________
     
  5. Will I be able to implement a database system?
    _______________________________________________________________________
     
  6. Do I want to keep the process simple, or can I afford to be more elaborate?
    _______________________________________________________________________
     
  7. Am I going to program it myself or can I hire someone to do it for me?
    _______________________________________________________________________

If you currently don't know much about your visitors, then you might want to think about a collaborative-filtering approach since it allows you to use minimal information to infer that a customer is interested in a particular subject matter. However, collaborative filtering is a complicated process, and it normally takes an experienced hand to program such a system. Collaborative filtering is also a relatively expensive technique. Luckily, software vendors, such as Broadvision, Epiphany, Teradata, IBM and ATG can do most of the work for you and thereby cut costs. Using these software packages can be a week long project or take several months.

"It really depends on the complexity of the plan," says Porter. "In many cases, more sophisticated sites take a great deal of planning, and the more complicated it becomes, the more expensive it's going to be."

Additionally, at online bookseller Amazon.com, referencing tools allow the site to automatically suggest books of similar subjects to the ones a customer is already looking at. Should the customer stop and look at books on boating, the site offers up information on other books on the same topic that might be of interest. Therefore, the possibility of impulse sales increases, and on the Web, impulse sales are important revenue boosters.

A slightly different customization approach is employed by online grocer Peapod. Peapod's personalization tools are designed to get to know you so well that they do your food shopping for you — a very personal task, indeed. The site's system learns the items on your personal shopping list, then scours the aisles of real grocery stores to find the best price for your groceries, selecting products that meet your needs and delivering them to your home.

Furthermore, the site allows shoppers to store information on their favorite foods, favorite butcher, and so on, enabling the site to identify and deliver meats, cheeses and produce just the way you like them continuously over time.

Finally, the site offers specialized features, such as electronic coupons and sales advertisements, through the use of custom-designed software called the Universal Event Processor. These features, when combined, contribute to the creation of an atmosphere of trust and increase the likelihood of increased purchases. If you're leaning toward a simpler strategy, companies such as BroadVision have developed programs that run rules-based programs. This may be a dollar better spent for the starter in a personalization plan.

Issues to Consider

Planning is important when dealing with personalization on the Web. Just as you wouldn't want to waste a retail customer's time with irrelevant products and services, you won't want to waste online viewers' time with time-consuming and ineffective personalization features and functions.

You'll also want to remember that personalization, if it is right for your company, should become an integral feature of your existing sales and marketing plan. This will help you discover additional important opportunities for reaching your target audience.

"The problem is people think of these things as features to add to marketing," argues Dean. "They're not. This is what the personalization is supposed to be about. If you're thinking about it as a separate effort, then you're thinking about it the wrong way."

In order to identify whether your personalization plan is ready for the Web, ask yourself these questions:

  1. Does the Internet normally provide the type of people that I need to reach?
    _______________________________________________________________________
     
  2. What personalized products and services do my customers typically want off-line that I could offer online?
    _______________________________________________________________________
     
  3. What do I want my Web site to accomplish in terms of marketing?
    _______________________________________________________________________
     
  4. What standards do I want my plan to meet?
    _______________________________________________________________________
     
  5. How can I measure the results of my online personalization plan?
    _______________________________________________________________________
     
  6. Will I get more "hits" by marketing my site on a one-to-one basis?
    _______________________________________________________________________
     
  7. Will I get more "hits" by offering information that is of interest to individual visitors on a regular basis?
    _______________________________________________________________________
     
  8. What customizable attraction(s) do I have to offer?
    _______________________________________________________________________
     
  9. What technology is available to help me accomplish this feat?
    _______________________________________________________________________
     
  10. Can I do this in a cost-effective method, or will it require too many added costs?
    _______________________________________________________________________

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V. Putting Online Personalization Into Action

On the Web, it's important to set up your personalization tools while keeping the mindset of a typical salesperson. As most salespeople know, helpful information can be gained from such simple information as the user's Zip code, which allows you to localize information and product offerings that may be pertinent to the user's local area. For example, a sporting goods retailer may want to concentrate a South Florida user's offerings on water sports equipment, while opting for skis and snowboards for a user in Maine in December. However, a good salesperson — and a good personalized Web site — always delves deeper into a person's personality.

"It's easy to say something like, 'Anybody who likes Eric Clapton is going to like Johnny Lange.' But that's based on an arbitrary assumption," warns Porter. "You have to look at the whole database."

Also, keep in mind your sales approach when setting up your program. For example, some salespeople sell a complex product on its features and introduce the price late in the sales process. Another company selling the exact same product might compete on price, so they want to get that up front to pull the prospect in, then talk about how many customers they have and give a few features that separate them from the competition. Your Web site should be set up to reflect your personal style.

It is also important to remember that personalized Web sites should strive to retain serendipity. One of the big mistakes made by many sites is that they don't try to emulate the "on-the-fly" thinking that live salespeople do. For example, a salesperson can use the knowledge they gain to offer up other products and services that the customer might not even know that they want yet. "A lot of people buy music or books because they just happen to see it in the store and decide they like it," argues Dean.

It's not that Web sites can't be programmed for serendipity, either; a lot of them just aren't. However, implementing this strategy can help the company generate sales that it wouldn't normally get had it been narrow-sighted.

But how do e-retailers actually set up a personalized Web site and gain information in the first place? In truth, most turn to help from one of the many software developers listed in Section IV that specialize in the subject. These software developers are constantly upgrading their tools to include such things as artificial intelligence and open protocols. But no matter what technology you choose, technically receiving the information usually requires one of at least two basic features: log-ins or "cookies."

What are these?

Log-ins are simply input fields, user names and passwords that allow you to have users register with your site. Once they are registered, your site can then personalize information on the user and store it in a database. Then, any time a user signs on to your site, the software immediately recognizes the user and shows content relevant to that user. Log-ins are simple and inexpensive, but often disrupt the seamless nature of your personalization strategy. "You can actually see the technology at work," says Dean. "Personalization should be seamless."

The second way to track identities online is through the use of cookies, which are a little more high-tech and a little more controversial. Cookies are files sent to the user's computer that secretly live on the customer's hard drive. These little buggers are often maligned because many question their moral standing in regards to privacy issues. But as Dean points out, cookies only know as much about a user as the user tells them. What's more, this technology adds a seamless element to your personalization. And the server that sends out a cookie is the only thing that can read it, so security is not an issue. The cookie stores information on the user, and whenever a person visits your site, the artificial intelligence and learning agents in the cookies recognize the user and store useful information as he or she goes. Then, the information that the cookie produces can be analyzed by the system to reflect which type of personalization strategy (rules-based filtering, collaborative filtering) that you choose.

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VI. What Your Personalized Site Should Include

While there are no set standards for personalization, and everyone finds different ways to approach the process, there are a few things that your personalization program should include to make it effective. First, Web sites should start people off with a generic version of their site and allow users to customize it gradually as they see fit. Second, they should watch what users are doing and actively recommend personalized ideas. Third, they should combine personalized services with a generalized segment where readers can keep in touch with the rest of the community, read about new ideas and get recommendations from expert editors.

Here are few examples of Web sites that are using personalization effectively. You may want to use these sites as models for your personalization strategy, as they have proven to be some of the most effective personalization methods on the Internet.

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VII. When Personalization Works, and When It Doesn't

Typically, most off-line offerings can be personalized and customized in one way or another to increase the value of a shopper's experience. That could include customized service, colors, sizes, shapes, packaging, delivery and so on.

It is important to realize, however, that some products might not lend themselves well to the personalized online approach. For example, books and CDs, which are the biggest selling items on the Web, are perfectly suited products for personalization because they are usually purchased as people are searching for a specific title, subject or author, or in the case of music, a specific title, artist or genre. However, products such as calendars might not be a good fit, since people generally like to browse through them and usually do not know exactly what they want before they do their browsing. Although there are cases where someone may be looking for a specific calendar, in general, the only information people are certain of when they buy a calendar is the year. In this case, personalization can only take you so far.

It is also important to remember that creating a successful personalization plan is challenging, and you should not take the effort lightly. Just as any advertising plan relies on repetition for success, so, too, does personalization. When developing your personalization plan, it is important to implement features that will keep people coming back on a regular basis. You will need them to come back regularly in order to track their habits.

Web portals and news organizations have adopted this strategy very well. Google, Yahoo! and Go.com all have designed strategies to keep regular visitors coming back day-to-day and, in some case, more than once a day. How?

Although the basis for their revenues is to sell advertising, and their main product is their search engine, these sites have turned to personalized news and information as one of their main draws for traffic. The information they supply isn't just daily news; instead, it is targeted, constantly updated news. And when a visitor registers with any of the three portals, he or she is able to personalize the page they view each subsequent time they log on. For example, the regular Excite home page is general in content, including top news articles, general links, and so on. However, the personalized My Excite home page asks users to select specific types of news, such as technology, science, sports and business articles. It also allows users to localize their news to reflect their home state or select specific sports teams that the site will track. Excite does the same with personalized television listings and weather, based on the user's zip code.

The benefit of personalization for each of these sites is that these users will return regularly for their personal updates and then use the site's search engine as opposed to one of the competitors'. With the added visits, the sites' hits rise dramatically and attract additional advertising revenues.

The strategy has paid off handsomely for these sites, as it can for yours if you do the proper research and implement the concept correctly.

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VIII. Resources

Books

Cliff Allen, "Internet World Guide to One-to-One Marketing" (John Wiley & Sons, 1998)

Cliff Allen, "Web Catalog Cookbook" (John Wiley & Sons, 1997)

Rick E. Bruner, "Net Results: Web Marketing That Works" (Hayden Books, 1998)

Larry Chase, "Essential Business Tactics for the Net" (John Wiley & Sons, 1998)

Daniel S. Janal, "Online Marketing Handbook: How to Promote, Advertise and Sell Your Products and Services on the Internet" (John Wiley & Sons, 1998)

Web Sites

Apple Computers

Aptex

ATG Art Technology Group

Broadvision

GuestTrack

Like Minds

Native Minds (formerly Neuromedia)

Net Perceptions

Organic

WiseWire

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