Personalization is the process of tailoring communications or customer experiences to individual customers based on their unique attributes, behaviors, and preferences. You can apply personalization on any digital channel if you have access to customer data — often unified through a customer data platform — including name, address, shopping habits, products purchased, preferences, behavioral data, etc.
Types of Personalization
Personalization strategies differ depending on the level of personalization required. For example, some personalization is one-to-one, meaning it’s directly related to the customer’s specific information — a technique increasingly powered by AI personalization. Other times, personalization is applied using a segmented approach through customer segmentation, where you define a set of characteristics or customer attributes. Customers whose personal data puts them into the segment receive a personalized experience.
Personalization can be as simple as having a person’s name in an email (Hi, John) or as intimate as including the details of a person’s recent purchase or web browsing in that email. It could also include showing particular product promotions on a website based on a person’s past purchases, or sending special promotions via SMS or a mobile application.
Other examples of personalization include:
- Product recommendations based on past purchases or web browsing
- Product promotion on the website based on the visitor’s location
- An email offer to a segment of customers who own a particular product
- SMS notifications about a sale for a product a customer is interested in purchasing
- Communicating with a customer post-purchase to ensure they are happy and have no issues with what they bought
Building Personalized Experiences
Many consumers expect some type of personalized experience from the brands they engage with regularly. A McKinsey research study found that 76% of consumers are more likely to purchase from a brand that personalizes. They want to know that the brand understands who they are and their needs and does not send irrelevant messages or offers. That means brands need to provide some degree of personalization to their customers and prospects. And they need data to provide that personalization.
Zero-party and first-party data include information about each customer collected directly from interactions with the customer. It’s this data that customers expect a brand to use to personalize the experiences. Second-party and third-party data comes from partners and other third parties. Depending on the data sources and their reliability, second- and third-party data may not always be the best to leverage directly for personalization unless it’s carefully combined with first-party data.
The Challenges of Personalization for Retailers & Brands
When, where, and how a brand or retailer should personalize the customer experience is often debated. Sometimes brands go too far personalizing experiences to the point of feeling like the brand is stalking its customers and prospects. On the other hand, sometimes they don’t go far enough. (For example, putting a customer’s name in an email is not true personalization.)
Companies have provided personalized experiences for many years to varying success. However, they face new challenges with the end of third-party cookies that track consumers across websites. As a result, brands have had to rethink their personalization strategies and focus on the importance of collecting and leveraging zero-party and first-party data that customers willingly provide.
With the continued growth of customer data available, brands and retailers have more opportunities to understand their customers better and improve their experiences through real-time personalization and omnichannel marketing in a way that makes customers feel known and supported. Brands and retailers that choose not to personalize at all will quickly find themselves losing both profits and consumer mindshare.
FAQ
What is the difference between personalization and customization?
Personalization is when a brand automatically tailors experiences based on customer data and behavior without requiring user input, while customization involves users manually adjusting their preferences or settings. Personalization uses AI and algorithms to predict what users want, whereas customization puts control directly in the user’s hands. Both approaches can work together to create optimal customer experiences.
How can small businesses implement personalization?
Small businesses can start with basic personalization like using customer names in emails, segmenting email lists by purchase behavior, and recommending products based on browsing history. Affordable tools like email marketing platforms with built-in personalization features and website plugins for product recommendations make it accessible. Focus on first-party data from your website and email interactions to build personalized experiences without major investment.
What are the privacy concerns with personalization?
Customers worry about brands collecting too much data, using information in unexpected ways, or creating experiences that feel invasive or “creepy.” The key concerns include lack of transparency about data usage, sharing data with third parties, and data security breaches. Addressing these requires clear privacy policies, explicit consent mechanisms, giving customers control over their data, and only personalizing in ways that genuinely add value.
Related Terms
- Next-Best Action — Uses customer context to recommend the most relevant personalized action
- AI Decisioning — Automates the logic behind which personalized experience to deliver
- Customer Journey — The end-to-end path where personalization is applied at each stage
- Customer Engagement — The outcome personalization aims to improve across all touchpoints