In today’s increasingly competitive and unpredictable marketplace, delivering contextual personalization in digital marketing is no longer a “nice to have,” but a basic requirement customers have come to expect. Consumers prefer brands that feel like they listen to them, understand them, and pay attention to their specific wants and needs as fully rounded individuals.
What is Personalization in Marketing?
Personalization is a way for brands to contextualize the messages, offers, and experiences they deliver, based on a unique, single customer view (SCV) profile. For data-driven, customer-centric marketers, personalized experiences are becoming a critical part of managing and optimizing the customer journey. In fact, 75 percent of business leaders say personalization is table stakes for digital experiences, according to a Twilio report.
While personalization software and tactics in digital marketing have been around for a few years now, consumers today are much more digitally savvy than they were just a few years ago. These consumers now expect the companies they interact with to provide exceptional, digital-first customer experiences.
This massive shift in consumer behavior and exponential increase in data volume, velocity, and complexity requires a far more robust and strategic approach to personalization than before.
Leveraging personalization for customer and business value is essential for organizations to differentiate themselves and remain competitive. Effectively planned and executed personalization can help increase engagement and improve satisfaction by delivering contextually relevant and personalized customer experiences in real time.
It’s time for modern digital marketers to reevaluate their current marketing strategy and update their personalization tactics to more accurately reflect the acceleration of consumer behaviors and digital transformation over the last two years.
State of the Personalization Market
As of 2022, the personalization market is healthy and growing at a solid rate.
According to 360i Research, the global personalization software market was estimated to be $764.30 million in 2021 and is expected to reach $943.25 million in 2022, at a CAGR of 23.58 percent to reach $2.72 billion by 2027.
The real advances in personalization are happening due to the influx of artificial intelligence (AI) and machine learning (ML) technologies to create more intelligent, automated, and actionable software.
According to BusinessWire, analysts forecast the global artificial intelligence-based personalization market to grow at a CAGR of close to 13 percent between 2018 and 2022. Back in 2017, the website personalization segment held the largest market share, accounting for nearly 34 percent of the market. In 2022, expect display-ad personalization to surpass website personalization to become the leading personalization segment, accounting for a market share of 35 percent.
The recommendation engine market size is projected to reach $12.03 billion by 2025, up from $ 1.14 billion in 2018, with a CAGR of 32.39 percent between 2020 and 2025, according to IndustryARC.
Some Challenges Persist
Even with all this positive growth, some challenges still remain for marketers and companies that want to pursue a more customer-centric business strategy.
Forrester’s 2022 Predictions found that heightened expectations for digital experiences in the wake of COVID-19 will be one of several critical business trends going forward. Today, 8-out-of-10 consumers see the world as digital first. The problem for marketers is that they lack the necessary data to personalize customer experiences. Seventy-five percent of efforts to create automated, personalized engagements will not meet ROI goals because of inadequate buyer data.
Finally, a Twilio survey found that there is a gap between how marketers and consumers perceive personalization. Eighty-five percent of businesses believe they are offering personalized experiences, but only 60 percent of consumers agree. It seems there is a lot of opportunity to modernize personalization programs to be more reflective of consumers.
Why Digital Marketing Personalization Matters
The surge in online interactions since the onset of the pandemic escalated customer expectations, giving consumers more exposure to superior e-commerce personalization, raising the bar for everyone else. From web to mobile and in-person interactions, consumers now view personalization as the default standard for engagement.
In fact, 71 percent of consumers expect companies to deliver personalized interactions, and 76 percent get frustrated when this doesn’t happen, according to a McKinsey report. Consumers aren’t intimidated about switching brands or looking for a better experience, either. The report found that 30-to-40 percent of U.S. consumers have switched brands or retailers in pursuit of better prices, product availability, quality and purpose.
It’s not all about customers, though. In the end, it’s all about the bottom line. The McKinsey report found that companies that leverage personalization effectively generate 40 percent more revenue than companies that don’t. Personalization can reduce CAC by up to 50 percent, while increasing marketing spend efficiency by up to 30 percent. And, according to Evergage, 86 percent of marketers have seen a measurable lift in business results from their personalization campaigns.
The numbers don’t lie: Personalization is good for your customers, prospects, digital marketing performance, and business outcomes.
Digital Marketing Personalization Best Practices
Digital marketers who leverage personalization effectively follow these best practices to ensure successful customer-centric business programs.
1. Embrace a Data-Driven Mindset
How data-driven are you and your teams, really? For any working professional in an intense work environment, many decisions have to be made quickly to meet deadlines or other internal expectations. Infuse best practices surrounding data-driven operations into thought processes and behaviors, so even on-the-fly decisions can be anchored in good data-driven methodology.
Data-driven marketers will embrace data and analytics as a foundational step to identify opportunities and create operational efficiencies. They examine the full customer lifecycle, focusing on areas where the most value is found. Data-driven marketers also leverage customer segments and microsegments, and will factor in data like behavioral, transactional, and engagement trends into their strategy.
2. Maintain Clean Data
There is an old saying in computing called GIGO:Garbage in, Garbage Out. If you input poorly formatted or unclean data into any system, regardless of what type of system it is, you will get outputs that are only as good as what you put in. For data to be used effectively in personalization programs, you must have your data prepared for ingestion into a data management solution, like a Customer Data Platform (CDP). Many modern enterprise-grade CDPs will offer data integration capabilities within the platform after the data has been ingested, so it’s an important step to think about the quality and cleanliness of your data before it ever goes into any system.
3. Invest in Activation and Analytics
Personalization-ready marketers will invest in technology solutions that have activation capabilities and advanced analytics. Data-driven marketers should plan to develop scalable content and AI-driven functionality so they can respond to customers’ needs in real time.
4. Choose the Right MarTech
Personalization-focused marketers invest in the right MarTech for a particular goal. For instance, if you need to gather disparate data from multiple silos and integrate them into a single customer view profile, a CDP may be the appropriate MarTech solution.
5. Follow an Agile Operating Model
Personalization-oriented marketers are dedicated to an agile operating model, both internally on their team, and across the enterprise. Scaling personalization requires teams that cut across marketing, product, business, analytics, and technology.
Future Personalization Trends
While brands may have started their personalization journeys a few years back, many simply purchased an add-on for their content management system and did some website personalization. Looking forward over the next five years, here are some major trends in personalization.
Look for personalization to move towards full multi-touch, omnichannel marketing experiences (mobile, email, SMS and app personalization) driven by expanding customer expectations for a more unified brand experience across the whole customer journey.
With customers wanting brands to recognize them as individuals, it is incumbent for brands to develop more personal, one-to-one relationships with their customers. This individualized communication style is possible with deep contextual personalization driven by the right MarTech. With this type of interaction, you will be able to focus on customer long-term value as a key metric for maximizing your most valuable customers.
There are several areas where AI is also driving advanced personalization capabilities.
- Chatbots using natural language processing and machine learning are able to understand context in a sentence, and can carry on full conversations with a customer.
- AI can direct customers towards content they need and provide targeted, personal responses, and personalize content based on purchase history, customer service tickets, and other behaviors.
- AI allows brands to provide customers with personalized ads based on demographics, purchase history, and browsing.
- Recommendation engines are able to surface products and services based on a customer’s previous purchase history.
- AI-powered customer sentiment analysis analyzes voice, images, and behavior to better understand emotional states.
Companies that achieve the best results from personalization view it as an organization-wide opportunity, not just something that benefits marketing or customer service.
Brands that leverage data-driven, customer centric best practices look for long-term drivers of growth and focus more on emerging KPIs like customer lifetime value (CLTV), rather than focusing solely on short-term growth or immediate opportunities.
With a focus on CLTV as a key metric, companies can use personalization to increase their revenue, improve retention and reduce churn, and create brand advocates.
Today, tomorrow, and well into the future, personalization will continue to be a critical component of a brand’s digital marketing strategy.