October 08, 2003

Personalization Strategies

Is Web-Page Customer Personalization a Bust?

Several years ago, just before the bubble burst, the term "one-to-one marketing" was all the rage. Capturing information about every site visitor and customer was crucial, because marketers assumed that using that data to serve up highly customized Web pages would vastly increase what a customer was willing to buy.

Well, things did not work out exactly that way, and many companies became disillusioned with the whole project. And since the days of the one-to-one marketing revolution may be over, many are wondering if personalization is going down the drain along with it.

Segmentation Before Personalization

Not necessarily -- but enterprises will have to change their thinking about what personalization can do for them, Aberdeen Group research director Guy Creese told CRMDaily.com. Segmentation, a more pedestrian marketing technique, is a necessary first step to an effective personalization strategy, Creese stressed. "You can think of segmentation as personalization on training wheels," he said.

Companies go through stages of maturity in their marketing development, explained Creese. He pointed to JC Penney as an example.

"Four or five years ago, they sent their catalogue to everyone," he noted. Now, the retailer has developed a set of smaller catalogues targeted to specific segments of customers. The customers are more likely to buy from a more manageable catalogue that includes just those items in which they are interested, the logic goes. JC Penney also saves money by not mailing those huge tomes of yesteryear and by mailing catalogues only to interested people.

This is an example of effective segmentation, said Creese. Before beginning a personalization strategy, enterprises should make sure they can plan and execute this type of marketing well.

Low-Tech Options

There are some instances, of course, where an even finer grain of detail can serve both the enterprise and the customer -- for example, an online grocery retailer that tallies which products a customer buys most frequently. When the customer signs on, the retailer can prefill the customer's cart with those products.

"This is a relatively low-tech task," Creese said. "There's no wild data mining going on in the background." But for a harried shopper -- exactly the type of person inclined to use on online grocery retailer -- the convenience can make the relationship.

Vertical Difference

Companies in some vertical industries are more likely to have achieved a good view of their market segmentation needs than others, Tareef Kawaf, product manager with ATG (Nasdaq: ARTG) , told CRMDaily. Media and entertainment is one; retail is another.

In retail, companies are applying analytics to learn how to use information on customer behavior -- frequency of site visits, for example -- to gain more revenue from each customer. That is one of the instances where one-to-one personalization might be profitable, said Kawaf, but those occasions are few and far between. In general, one-to-one marketing is "not something that you want to engage in," he added.

Applications Versus Technology

Some level of personalization functionality has become "mainstream" in CRM software, ATG's CTO Fumi Matsumoto told CRMDaily. Thus, many companies use personalization features without necessarily buying personalization software. This gives a somewhat artificially negative spin to the term -- because, in fact, the pure-play personalization technology vendors are having a tougher time than other vendors that incorporate such tools into multifunction suites.

ATG customers justify personalization tools only as part of other systems, according to Matsumoto, such as e-commerce and customer service.

"In the past, lots of personalization vendors offered engines with algorithms or rules that did things like making product recommendations -- and that was all." Now, he said, enterprises are looking for ways to wrap the information they gather back into their marketing efforts more quickly.

That bodes well for personalization as a marketing approach, but not necessarily as a software niche.

Posted by Craig at October 8, 2003 06:44 PM