Abstract

• Personalization is treating different customers in different ways. This focus demands meticulous knowledge of the customer, based on his or her value and potential lifespan in the heart of the company.
• Personalization is a very fashionable term in the marketing world, but to apply it is a complex thing, since it demands a previous capacity for segmentation and very refined profiling.
• Personalization strategies are directly related to Marketing One-to-One theories, which entail an entire organizational shift towards the customer, instead of the product.
• The four basic pillars on which One-to-One Marketing rests are: identify high-value customers, differentiate proposals for different customers, interact with the customer, and customize the business culture.
• Not all personalization strategies are profitable: every company must predict the return on investment in this type of strategy, before they go into it.
• We should not offer excessively personalized products and services.
  “A la carte” Marketing must satisfy the customer’s need to be individualized; in no case should that be confused with an excess of proposals.
• It’s not the customer who must define him or herself to the provider, personalizing their demands. It is the obligation of the provider to know these needs and anticipate them.

“Treating different customers in different ways”. This is the premise underlying One-to-One Marketing, a new concept of sales and marketing management, whose philosophy puts the customer at the center of the company. Derived from One-to-One Marketing theories, personalization strategies and Individualized Marketing opt for exhaustive knowledge of the customer and his or her needs, in order to provide them with what they need, when they need it, and differentiate them clearly from the rest of customers. However, One-to-One Marketing techniques have limitations, which can only be overcome by an accurate Customer Intelligence strategy.

1. Individualized Marketing: treating different customers in different ways

Sales has traditionally been an assisted process... When someone goes to a dealer to buy a car, the salesperson acts as an advisor, steering the customer towards the product that most fits his or her tastes and needs. It is up to the salesperson’s intuition to figure out what impulses move that potential customer and play with those purchasing impulses and habits in order to close the coveted deal. Intuition is an excellent sales tool, but it relies on factors as arbitrary as they are subjective. The skills of the people monitoring a sales process must be supported by empirical and provable information, and that only exists if a Customer Intelligence strategy has been implemented in the company.

“Personalization” has been a very fashionable term in the marketing world recently. If we go back to the example we opened the chapter with, we will see that the principle of “personalizing” the relationship with the customer is not very far from the elements we mentioned: orienting, guiding, collaborating with the customer not only in the purchase / sale process, but also before and after.

However, for several years now, the term “personalization” has proliferated to the point of being applied to almost any marketing action, from a mere letter to a customer with their name and surname, to setting up a mobile phone or PC screen according to the consumer’s taste. Today, “Personalization” is a word on the minds of the majority of marketing and sales experts, but which translates into true results on only a few occasions.

. What is personalization? Perhaps the simplest and most accurate definition is “treating different customers in different ways”, in order to increase their level of linking and loyalty to the company. It’s as simple and as complicated as this. When there are a dozen customers, personalizing treatment is relatively easy. But what happens when there are thousands or millions? Every company with a large customer portfolio, especially those that are aimed towards the final customer – although this includes companies that work in B2B -, know that in a market as competitive as today’s, in which the customer is well-informed and changes providers with extreme ease, “personalizing” its relationship with the customer is one of the keys to success.

“Personalization is not only being able to call the customer by his or her first name. It involves creating very refined profiles, based on the customer’s value and potential lifespan”

Several years ago, Don Peppers and Martha Rogers revolutionized the world of marketing when they coined the phrase “One-to-One”, which calls for differentiated strategies for differentiated customers, within the framework of an entire organizational shift towards the customer. Since then, “personalization”, “One-to-One” , and “Individualized Marketing” are expressions that have invaded marketing plan presentations, obsessed directors in this area, and appeared in thousands of articles; but in practice, they are efficient in very few cases.

Personalization is not only being able to call someone by their first and last names from a “contact center”. Personalization is not only running a direct marketing campaign that identifies its target audience one by one. Personalization is about refining segmentation strategies until we obtain very specific individual or company profiles, with similar characteristics, but also with a similar value and potential lifespan for the company, and apply marketing and sales actions with them accordingly.

2. Accurate personalization requires intelligent segmentation

It is essential to understand that there can be no accurate personalization without first adopting accurate segmentation strategies. The American banking entity First Union recently launched a complex strategy to segment its customer portfolio, assigning them importance according to their current value and potential lifespan in the heart of the bank. The bank’s sales reps have a scorecard in which not only are customers rigorously classified by these two factors, but which invites the reps to offer maximally personalized treatment to those customers of greatest interest. At First Union’s customer service center, operators have weather information for each state in the United States at their disposal at all times, so that the first thing they do is ask the most potentially “interesting” customers about the weather in the place they’re calling from…It’s a curious and intelligent way of making the customer feel that their financial entity is following their steps very closely…

If we stop to examine the differences that separate traditional marketing’s customer strategies from those of “One-to-One Marketing” or Individualized Marketing, we find that:

• While traditional marketing focuses on market share, Individualized Marketing opts for the “share of customer”
• Traditional marketing speaks of products that are differentiated for the market as a whole, while Individualized Marketing entails strategies for differentiated customers.
• Traditional marketing focuses on product management, while Individualized Marketing focuses its efforts on customer management.
• Traditional marketing sees the customer as an “enemy to be conquered”, while Individualized Marketing relies on the customer as a collaborator in the growth and improvement of the company and its products and services.
• Traditional marketing struggles to find customers that adapt to new product launches, while Individualized Marketing strives to find products adapted to the customers.
• Traditional marketing is based on mass marketing, while Individualized Marketing is founded on personalized messages.
• Traditional marketing uses standard promotions, while Individualized Marketing employs incentives that adapt to each customer.

When a company is dealing with thousands or millions of customers, the key is to identify in the greatest detail possible the groups and segments with very similar characteristics, using profiling techniques and offering solutions that are practically custom-made.

Based on these premises, a well-known American pharmaceutical company has adopted an extremely interesting personalization strategy for its services on the Internet. It used this strategy to loyalize chronic patients, who are potential consumers of their pharmaceuticals. It divided these patients into four groups, each with very specific characteristics: “individualists”, “connected”, “abdicators” and “newly arrived”. The first group includes patients who are well-informed about their disease and who want to make their own decisions about it, and the laboratory attends to them with on-line medical support, a personalized newsletter, and tools for carrying out routine checks over the Internet. The pharmaceutical company has invited the “connected” patients, who like to be informed in order to make the most appropriate decisions, to participate in forums and chats about their disease.To the “abdicators”, patients who do not want to be informed regularly and resign themselves to living with the disease without fighting it, the laboratory offers resources for home care, nutritional information, diets… resources that help them live with their disease. Finally, the “newly arrived” patients are those that were recently diagnosed and completely lack information and resources. Therefore, the company offers them basic information about their disease, medical directories, etc...

3. The four pillars of One-to-One Marketing

The rules of One-to-One Marketing rely on four axes to focus customer relations:

• Identify customers individually (Identify)
• Differentiate customers by value and needs (Differentiate)
• Interact with customers, optimizing costs (Interact)
• Customize the business culture (Customize)

Identifying our customers forces us to respond to the following questions:

• Who are our highest-value customers?
• Does our company have a customer strategy defined according to that value?
• Which customers do we still need to identify and how do we solve it?
• What customer information do we have and where is it?
• Do you have accurate customer information analysis?
• Does that analysis translate into an appropriate customer strategy?

Differentiating our customers forces us to respond to the following questions:

• Do we know how to distinguish our customers according to their potential lifespan?
  (Lifetime Value)?
• Do we know how to distinguish our customers by need segments?
• What are the key questions we must ask ourselves in order to know exactly what our customers’ value and needs are?
• What information must we have in order to determine our customers’ value and needs?

Interacting with our customers forces us to respond to the following questions:

• Through what channel and in what way can we optimize our contact with the customer?
• What customer needs are we able to anticipate?
• How can we measure this interaction with the customer?
• Can we transform our monologues at the customer into dialogues with the customer?
• How does the customer knowledge we have benefit the customers?

Customizing our strategy forces us to responder to the following questions:

• Is our organization aimed at the customer or is its structure still marked by the product culture?
• How can we improve our products, services, and messages in order to adjust to the customer’s needs?
• What must we offer our highest-value customers in order to increase our share of customer?
• How can we save the customer time, effort, and money, and at the same time generate more income for the company?

Asking this barrage of questions is a duty and a necessity for any company that wishes to bury the orientation towards the product once and for all, and opt for sales growth based on dialogue with and exhaustive knowledge of the customer.

4. From profile strategy to lifespan strategy

Personalization and Individualized Marketing strategies have relied in the past on the study of customer behavior and spending habits in one segment or profile, in order to offer similar proposals to similar customers. The leading on-line bookstore, Amazon.com, usually proceeds in the same way: if it observes a customer’s purchases, it sees that that customer fits one of the company’s previously determined profiles, and it offers products accordingly. There is one drawback: the on-line bookstore’s recommendations are “automatic”, not truly personalized.

This strategy is valid, but it is beginning to reveal itself as incomplete. Moreover, we must base our strategy on the customer’s lifespan in the company, and not only on similar customers, in order carry out cross-sales activities with that customer. The final customer evolves over time (they get older, obtain higher incomes, have children, etc…), and their provider must know how to anticipate those life changes in order to offer them appropriate products and services. Therefore, personalization demands not only segmentation by behavior, but also by moments.

5. Is it profitable to personalize? The limits of “marketing a la carte”

Although any company with the desire to grow must consider an Individualized Marketing strategy in which each customer is attended to according to their needs, an excessive zeal for market micro-segmentation can have its risks. As we mentioned in previous chapters, an accurate segmentation strategy is that which allows us not only to detect groups of customers with similar characteristics, but also to generate profitable sales and marketing actions in those segments.

                              Moving in the right direction

The risk of excessively segmenting the market in order to offer practically customized products and services, is undertaking actions of dubious economic benefits.Hence the need to have an accurate profiling strategy that justifies the return on the investment foreseen, before it is made.

Behind an Individualized Marketing strategy, it is essential to have a meticulous evaluation of costs, not only sales and marketing costs, but also logistical and human resource costs. Several years ago, the automobile company Renault decided to create an on-line system in order to manufacture cars “a la carte”, with elements chosen by the customer. The company had to face over 50 million euros of investments in production, logistics, and training...

“Personalization strategies are not always profitable. A proper, previous segmentation that justifies future sales and Individualized Marketing actions is obligatory”

It makes sense that personalization is costly and return on investments is slow, if not unprofitable. That is why some are starting to speak of One-to-One Marketing more as a business culture philosophy than a theory capable of being applied without difficulties… The limits to excessive personalization are not just economic: the excessive diversification some companies have turned to, especially consumer goods companies aimed at the final customer, has ended up confusing the consumer, when what the company wanted was to satisfy their most specific needs as much as possible. In some eating establishments, just reading the menu is an extremely laborious task... Whoever has ordered a pizza over the telephone will know what it means to face several dozen combinations of toppings, drinks, sized, and condiments. These end up overwhelming the customer, when the idea was exactly the opposite, that is, to free the customer from standardization and let them order according to their own taste.

This trend is expanding into other sectors as diverse as telecommunications, where the customer often faces real headaches by trying to figure out which telephone contract is best for their needs. It is essential to remember that knowing “what type of customer the customer is”, is not the customer’s task, but rather the provider’s. Hence, the previous portfolio segmentation, potential market, and profiling strategies must be accurate and appropriate. And this is only possible if the company’s strategy is based on true Customer Intelligence, capable of practicing not only One-to-One Marketing, but also a profitable, studied, and effective “One-to-Few” Marketing…