Personalisation – does it really work?

In the golden days of 1-to-1, personalisation was hot. Now, it seems it’s not. So is personalisation still the way forwards or just “the most over-hyped, under-delivered” part of e-commerce as one senior executive at Land’s End remarked?

*The Theory*

The Personalisation consortium (http://www.personalization.org/) defines personalisation as “the use of technology and customer information to tailor electronic commerce interactions between a business and each individual customer.” The purpose of personalisation, they say, is to:
- Better serve the customer by anticipating needs
- Make the interaction efficient and satisfying for both parties
- Build a relationship that encourages the customer to return for subsequent purchases

You might also add to that other business objectives such as improved customer retention, more effective marketing, greater customer insight, higher conversion rates, increased switching costs, higher order values and share of wallet etc. Essentially personalisation promises to deliver on the core CRM objective of improved value to both customer and business.

On a more macro level personalisation, enabled by technology, is about trying to recover the highly personalised levels of customer service apparent in the era of the village economy and yet retain the cost advantages delivered by the industrial revolution and the mass-market economy. Today customers prize service and their own time above all else, yet they also expect highly competitive pricing. In theory, technology-enabled personalisation can make this possible.

*The Practice*

The practice of personalisation online has so far come up against the following realities:

- Privacy, security and regulatory challenges. If you have ever had to deal with the complexities of data protection across multiple international jurisdictions you will appreciate just how complex (and expensive) this can be to get right.

- Cost. Achieving real-time personalisation is very expensive, often prohibitively so. Systems integration and maintaining accurate data alone are expensive mountains to climb.

- Skills gap. There aren’t that many people who really understand how to implement personalisation. Most implementations of enterprise personalisation platforms that I know of are actually being used for content management and not personalisation (yet).

- Return on investment. In these troubled times any spend must show a clearly demonstrable ROI and there hasn’t yet been enough published proof that personalisation actually delivers this. In fact, in some cases there is evidence that personalisation actually destroys value e.g. through losing customers whose preferences have been incorrectly inferred by a personalisation engine.

- It takes time for users to use personalisation features. Very few site users leap into personalisation right away. They first have to establish a relationship of trust and comfort with the site. It takes time to configure personalisation features and time is precious, so uptake is by no means swift or guaranteed. Many users can quite happily do without personalisation.

- Multi-channel challenges. Achieving cross-channel, integrated personalisation (which requires the ‘single customer view’) is a very large systems, data and process integration job. Furthermore different digital devices (mobile, TV, PC) have specific technology considerations e.g. most mobiles do not support cookies and most interactive TV users do not have keyboards making text entry (and therefore log in) an issue.

*Case Studies*

With so much distrust in the market about the value of personalisation, is there any evidence to prove that it really works? My experiences convince me that, if done properly, it can be an extremely powerful driver of value for both customer and business.

One great example of effective use of personalisation is Virgin Wines (http://www.virginwines.com), a UK-based e-tailer of wine. Personalisation features include a personalised homepage, access to my account, personal wine recommendations, ratings of wines I have drunk and my own cellar where I can see wines that I have bought in the past. Aside from the value that this gives me as a customer it has benefited the business as follows:

- The average repeat buy rate for all customers is around 36%%. For customers who have been through Virgin Wines’ CRM program, which is designed to increase loyalty and returns per customer, the repeat buy rate goes up to 50% on average. However, for those customers who have got involved with any of the personalisation features, the repeat buy rate exceeds 70%.

- Those customers that do have a personalised relationship with the site naturally up-sell themselves over time. The more involved the customer and the longer he or she has been a customer, the higher their average spend over time. As levels of trust and personalised involvement grow, the higher the switching barriers and, correspondingly, the lower the churn rates.

- Personalisation allows Virgin Wines to selectively make offers to different customer segments. Some customers need tempting to make a (repeat) purchase and a special promotion works well to acquire that custom. And some customers are more tempted by a premium product at full price. This form of dynamic pricing based on knowing who the customer is clearly maximises returns.

Personalisation works for content as well as commerce sites. We introduced personalisation features on this site (http://www.e-consultancy.com) nine months ago. These include personalised e-mail alert services, a personalised homepage letting users know what has changed on the site since they last visited as well as the usual profile management tools. We have found that over 90% of the site’s most frequent visitors are users of the personalised services and, notably, the time between when a user registers and when they first contribute content to the site is halved if they use one of the personalisation features. So personalisation does build loyalty and it can create value out of customers faster than would otherwise occur.

*Conclusions*

From what we have seen of online personalisation so far I would make the following observations:

1. Personalisation should feature as part of any eCRM program as it is an extremely powerful means of building relationships

2. Done properly, personalisation does work both for the customer and for the business. The 1-to-1 vision is correct but it needs to be understood as a concept and as an approach and not taken too literally. It is does not matter that personalisation is not actually one on one, even crude segmentation is a good start.

3. Don’t ever start with the technology. Start with the people, the proposition, the processes, the business rules. Focus on customer and business benefits to ensure ROI.

4. Do not underestimate the time and commitment required to make personalisation work. Providing customers with the tools and services is one thing but the majority will first need to develop a sense of trust in your site before they begin to personalise their experience.

5. Be wary of any ‘turnkey’ personalisation solution. Personalisation, like a relationship, grows from small beginnings. It is better to start small with your personalisation initiative, work out what works best, iterate and grow over time, than to throw every personalisation feature you can buy out of the box at your customers Tesco.com, the world’s largest and most successful online grocer, is only now beginning to introduce basic personalisation features to its site as only now do they feel their customers are ready for it. Dell took 4 years (between 1994 and 1998) to refine its customer groups from 2 initially to 8. Typically you might start by giving customers access to their profile, account details, order status etc, then allow them to edit and update that and other information, before moving onto more sophisticated content, product and service personalisation features.

Finally, I would point out that though I am a great believer in personalisation as a tool for competitive advantage and differentiation, I think there is no point even thinking about it until you’re sure you have other more important basics sorted out on your site. No amount of personalisation is going to make up for poor navigation, poor content or poor customer service, for example. Focus first on what customers care most about. And that isn’t personalisation. In most cases, they can live quite happily without it.