Ch7 Personalization
- 2. Topics Personalization and marketing Consumer benefits of personalization Implementing personalization
- 3. Personalization & Marketing Marketing has the responsibility to reflect customers’ goals, needs and wants The result is that companies create product lines with many product and service variations in order to meet the needs of various target markets Personalization is a special form of product differentiation A standard product is transformed into a specialized solution for an individual
- 4. Personalization & Marketing An explosion in the number of choices leads to customer confusion The Web is rapidly developing methods to help consumers choose wisely from the wide array of available products Choice assistance can help the consumer discover his or her own tastes Choice Assistance
- 5. Personalization & Marketing Mass customization has emerged by combining individual-level information and flexible manufacturing By incorporating individual preferences, marketing more closely reflects the “voice of the customer” Using specialized software, it is possible to deliver truly unique and dynamically personalized Web sites in real time The Web is emerging as an essential piece of the customization puzzle Customization
- 6. Personalization & Marketing Choice assistance and customization lead to more powerful personalization Personalization becomes the basis for retaining loyal and committed customers When successful, customers are satisfied and profits are high Relationship Marketing
- 7. Personalization & Marketing On the left of the continuum, there’s no personalization Further to the right, products are customized for individual tastes On the far right, consumers collaborate with companies to create customized products, which builds relationships Relationship Marketing Figure 7.4: The Personalization Continuum Mass Market Differentiated Customized Relationship Choice Assistance Design
- 8. Personalization & Marketing Digital technology makes it possible Encyclopedic storage of information provides a rich base of material The network makes it available Internet connections can tap into databases and data archives, get news feeds, and provide time-sensitive information or accumulate information for later use Individuals make it valuable Personalization provides value by focusing on specific individual needs Personalization and the DNI Framework
- 9. Personalization & Benefits Technology has the power to make available to the masses what was previously available only to the rich “ Democracy of goods” refers to open and low-cost access to products and services Automation and leverage of existing digital assets makes personalized goods and services cheap to provide and widely available to consumers The “Democracy of Goods”
- 10. Personalization & Benefits SEARCH GOODS are products and services that are easy for a consumer to evaluate Example – well-known branded products such as gasoline from Texaco The Internet Benefits Consumers By Turning Experience Goods into Search Goods EXPERIENCE GOODS tend to be difficult to understand and evaluate. They are too complex to judge easily. They may be highly subjective, with personal taste being the most important determinant of usefulness - Example – health care services
- 11. Personalization & Benefits Consumers benefit from reduced uncertainty about experience goods An accurate personalization system that can match products to taste can eliminate unpleasant consumption experiences The Internet Benefits Consumers By Turning Experience Goods into Search Goods
- 12. Personalization & Benefits Levitt’s rules for success through differentiation Any product can be customized Consumers use products to solve problems Do not ignore hard-to-measure features of the product such as fun or friendliness Make the intangible tangible. Provide signals that demonstrate quality and reliability Personalization and the Total Product
- 13. Personalization & Benefits Personalization is a rich area for augmenting the product and finding ways to achieve the potential product Use the Wells Fargo example to illustrate Levitt’s framework Figure 7.6: Increasing Amounts of Differentiation
- 14. Personalization & Benefits The Personalization Balance Providing Useful Information A key challenge is to determine the type and scope of information consumers will value and use Customers judge information programs by their efficiency and the ratio of usage costs with usage benefits Information programs that are linked to customers’ personal targets and objectives are often successful
- 15. Personalization & Benefits The Personalization Balance Personalization Backlash A natural result of personalization is treating customers differently More valuable customers will receive special/preferential treatment This can lead to a backlash among customers who don’t receive special treatment Preventing resentment may be easier online where preferred programs are less visible
- 16. Implementing Personalization Personalization has powerful potential competitive advantages The first company to create an effective personalization approach in an industry can capture many of the most profitable customers Personalization creates the opportunity to learn more about Customers’ current desires Future trends New opportunities for product features and extensions
- 17. Types of Customization Present a uniform representation & let users filter out most possibilities to create personalized service Possible to create personalization online via use of frames & cookies Observe users’ behaviors (implicit model) Dialogue with customers to help articulate needs, then create custom product Change No Change Change Cosmetic Adaptive Collaborative Transparent Product Product: attributes create unique functionality Representation Representation: how a product or service is portrayed to a customer Reflect.com Smart Ads Smart Offers Smart EPG’s NYTimes.com Sybase.com
- 18. Types of Customization Adaptive Customization Offer the same basic product and representation to everyone Let users filter out most of the possibilities using pop-up menus, search functions and preference settings Example: At Spinner.com, users can select the music they want to hear using a pop-up menu
- 19. Types of Customization Cosmetic Customization Present a standard product differently to each customer Use of unique packaging, presentation, etc. Example: New York Times uses cookies to store registration information and show the user’s name at the top of the page Essential requirement is modularization – division of a product into components
- 20. Types of Customization Transparent Customization User needs and behaviors are observed The product is automatically changed to reflect individual tastes The user isn’t told or made aware of changes Example: Smart ads – use observable behavior to show different ads
- 21. Types of Customization Collaborative Customization Conduct a dialogue with individual customers Help them articulate their needs Identify the precise offering that fulfills those needs Make customized products Example: Using a password protected extranet to communicate with customers via real-time sound and video sessions
- 22. Customization / Personalization Q: When is one-to-one marketing worthwhile?
- 23. 1:1 Matrix Highly Differentiated Uniform Highly Differentiated Quadrant II Quadrant I Quadrant IV Quadrant III Customer Valuations Valuations: How different are your customers in terms of their value to your enterprise? Customer Needs Needs: How different are your customer needs?
- 24. When Is Personalization Profitable? II I IV III Customer Needs Similar Highly Differentiated Customer Valuations Wide Range Uniform 1:1 Marketing Niche Marketing Target Marketing Mass Marketing Frequency Marketing Key A ccounts Figure 7.11: The 1:1 Matrix
- 25. Customization / Personalization Two Necessary Ingredients Software capable of delivering customization Direct interaction between the firm and individual customers / consumers
- 26. Determining the Correct Personalization System Customer Needs, Product Space Quantitative Few Highly Differentiated Qualitative Complex Uniform Figure 7.12 Key Product Attributes Collaborative Filtering CASE Rule Based Endorsement Mass Marketing Price Brand
- 27. Personalization Systems Observe behavior predict preferences Unobtrusive: consumers don’t have to answer questions or fill in extensive questionnaires Best when Product space isn’t complicated Product / service attributes can be quantified Example: American Airlines Require effective user models that are tied to observable online triggers A trigger is a user action that a model can use to decide what personalized information to send Rule-Based System
- 28. Personalization Systems CASE (computer-assisted self-explication) The system queries users about preferences matches user with the right product / service Best when users only have to evaluate a small number of well-understood attributes and features Example: Chipshot.com & Personalogic (Chapter 7 Online) Require user cooperation to get relevant user data Case-Based System
- 29. Personalization Systems Connects users with local preferred providers Best when Users’ product needs don’t differ greatly It’s a challenge for consumers to judge quality and for vendors to explain the value of available choices Examples: Autobytel.com Endorsement System
- 30. Personalization Systems Match users who share similar tastes Users share recommendations and preferences Best when Product space is complicated Preferences are subjective, qualitative and complex Example: Amazon.com instant recommendations Requires user cooperation to get relevant user data Collaborative Filtering
- 31. Personalization Flowchart Q1: Do customer lifetime values vary significantly? Q2: Do customer needs vary significantly? Q3: Are product attributes qualitative or complex? Q2 Q3 Q3 Collaborative Filtering CASE Endorsement Rules Based Q1 Don’t Personalize NO Q2 NO YES NO YES YES NO NO YES YES