What is personalized marketing?

Summary

Personalized marketing is the ultimate frontier of data-driven digital marketing, and it exploits a dynamic that has worked for as long as commerce has existed: targeting each individual person differentially. In this post, we start with a personalized marketing definition.

Personalized marketing definition: an introduction

Personalization is the most promising frontier in digital marketing.

But to understand its strengths, we can take as an example something that is very “old” – and also very “everyday”.

Think of your favorite retailer. Or your favorite restaurant. Why do you go back there so often? We have talked about the power of personalization in retail sector.

Sure, the quality of the products or the dishes is part of it. Also the environment. But there’s something else that plays a decisive role: the fact that you don’t feel like you’re just a consumer, one customer among many. Instead, you’re treated as individuals with your own unique and unrepeatable characteristics.

In fact, the shopkeeper or restaurateur knows you; he calls you by name. Over time, he has learned about your tastes and habits. As a result, he knows what you might like, and therefore what to propose, without ever becoming pushy or annoying.

As you can understand, these optics are win-win. It leads to loyalty, and it benefits both those who offer a service (or product) and those who use it. 

But that’s not all: certainly you will be likely to recommend that same store or that same restaurant to your friends, spontaneously, sincerely therefore, in the most convincing way possible.

We’re talking about a dynamic that is as old as commerce. The good news, however, is that thanks to the most advanced digital tools, this same dynamic can be implemented by companies in a wide variety of industries, even when we’re talking about potentially endless and very diverse audiences of customers.

This is what personalized marketing definition is all about. And this is what we’ll focus on in this post.

Personalized marketing – definition…and practical operation

So, let’s start with a definition of personalized marketing.

Personalized marketing is a marketing strategy that is all about the one-to-one dialog between the company and individual customers (and it applies to both actual and potential customers).

Let’s immediately ask the most important question: what is at the root of it all? The answer is very clear: it’s data.

No wonder. Indeed, in the age of Digital Transformation, data is a company’s true asset, the most valuable resource, the new “oil”. But – beware! – not all data is equal. It’s not just a matter of learning how to collect the greatest amount of it…it is also a matter of quality; we’ll return to that shortly. For a moment, let’s take a small step back and put all the steps in order.

Big Data constitutes the digital traces that we all litter everywhere, and at all times, in the online world. For companies it is, first and foremost, a matter of collecting these traces. Analyzing them. Interpreting them.

Then, cross-referencing all of this information, so that a very high-resolution snapshot of their customer base emerges: demographics, interests, habits, preferences, geolocation, purchase history, and more. 

At this point, it’s a matter of “zooming in”. And from this “group snapshot” to isolate and “zoom in” on individual profiles.

To put it another way: through data analysis you can gain a very deep understanding of your audience, down to the detail of the individual person.

What is the goal, the ultimate goal? 

Calibrate all communications and marketing strategies based on the individual customer. 

Translated: to move from one-to-many marketing to truly one-to-one marketing.

Put this way, it sounds like an uneconomic effort.

Nothing could be more wrong: by relying on companies that specialize in personalized marketing such as Babelee, the personalization processes are put on track in an automated way, even when dealing with very large targets.

For more on Babelee’s Video Personalization systems, see here.

Now, before we focus on the challenges of personalization and the areas that you have to pay close attention to, let’s dwell on a key intermediate step.

We’re talking about segmentation.

Segmentation: a fundamental intermediate step

You can’t talk about personalization without talking about segmentation. 

But, even further upstream, there is a need to grasp the power of “data-driven marketing“.

We could emphasize its effectiveness in so many ways. But let’s let the data speak for itself:

• For 64% of marketing leaders, data-driven strategies are vital to today’s business (source: invespcro.com).
• For two-thirds of marketers, decisions made based on data are far more effective than those made based on intuition (source: thinkwithgoogle.com).
• And 76% of marketers base their decisions on data analytics processes (source: gartner.com).

Here, again, is the central importance of data. 

We have already mentioned that it’s not just about quantity, but also about quality.

So, let’s go deeper and isolate a few macro-categories of data, which are key to getting to first implement segmentation and then personalization:

• Demographic Data: everything related to age, gender, marital status, employment, and income status. 
• Psychographic Data: behaviors, beliefs, values, interests, lifestyles of people that can be inferred from their online data.
• Geographic Data: here, we are in the area of geolocation. This is a key topic, especially for some types of business and for Proximity Marketing. 
• Behavioral Data: this is data based on users’ web surfing behaviors, extracted from “cookies.”
• Contextual Data: a very broad field that concerns the context, the environment surrounding a user or customer; from news, sentiment, market fluctuations, weather, geopolitics…just to name a few possible metrics.
• First Party Data: the data a company collects directly from its users and customers, such as through CRM (Customer Relationship Management) and CCM systems.

It’s from the collection and cross-interpretation of all these different types of data that a snapshot of a company’s audience emerges. And it is this snapshot that needs to be segmented, identifying clusters of people who demonstrate common and homogeneous characteristics.

In short, it’s no longer about a single broad and indiscriminate target, but many increasingly specific and circumscribed targets to be hit with tailored actions.

The final frontier, as we have already seen, is to match these micro-targets with individuals. And therein lies the realization of personalization.

In an upcoming post on our blog, we’ll take a closer look at the many advantages and benefits of personalized marketing.

However, before we close, here is a very significant finding from McKinsey & Company research:

• Personalized marketing can increase sales, on average, by 10%; it demonstrates an ROI that is, again on average, 8 times that of other types of strategies (source: mckinsey.com).

The slippery slopes to watch out for

We opened this post by giving you a definition of personalized marketing. Then, more concretely, we looked at how personalization works, going through the intermediate step of data-driven marketing and segmentation.

Now, we want to address some slippery slopes that you’ll want to play close attention to, lest they turn into boomerangs capable of causing great damage.

We divide them into 4 separate points:

1) Maximum attention to privacy.

This is a really sensitive point when it comes to data collection. We always have to be aware of regulations (which can vary significantly from nation to nation) and know that they can also change rather quickly.

In addition, more importantly, it is the customers themselves who are increasingly concerned about their privacy and the companies’ use of their data. There is more awareness and maturity: and that is good news for everyone.

2) Security first.

Data must be collected and interpreted. But even before that, they need to be protected, allocated in the most secure way possible. Hence the importance of relying on companies that specialize in data-driven and personalized marketing, without venturing into dangerous improvisations.

3) Never overdo it.

Let’s make one thing clear: customers want personalization. There are very clear statistics about this. Take this one, for example:

• 87% of consumers believe that personalized content positively influences their attitude toward a brand (source: outgrow.com).

Be careful, though. There is a big difference between one-to-one communication with a customer and disrespectful insistence.

So, never overdo it. Never try to win attention with aggressive personalized campaigns.

If something doesn’t seem to be working, it’s better to question what the problem could be and recalibrate your campaign instead of stubbornly reintroducing it!

4) Data is a compass…but you are always in the driver’s seat.

We’ve dwelled on the power of data-driven and therefore personalized marketing. And its effectiveness is beyond discussion. 

However, don’t make the mistake of relying on data blindly. That’s because data does not have meaning alone, but they always have meaning in relation to a company’s identity, its goals, and the goals of each individual campaign.

You can’t go anywhere without data. But it will always be up to you to set, from time to time, the goals you want to achieve.