Overhead view of cups with different types of coffee. One of the cups sits higher up in the frame with a foam flourish on top.
Personal greeting, personal touch, personal best. Close, personal friends. All good things, right? Right, according to consumers in a recent McKinsey survey. When asked to define personalization, consumers associated it with positive experiences that made them feel special. Personalization marketing represents an opportunity for companies to benefit from those warm, fuzzy feelings.
Personalization marketing has real advantages for companies: it can reduce customer acquisition costs by as much as 50 percent, lift revenues by 5 to 15 percent, and increase marketing ROI by 10 to 30 percent. Personalization has also been shown to improve performance and provide better customer outcomes. Companies with faster growth rates derive 40 percent more of their revenue from personalization than their slower-growing counterparts. McKinsey research also shows that personalized experiences drive up both customer loyalty and a company&#;s gross sales. And the COVID-19 pandemic has only made personalization more urgent for brands: three-quarters of customers switched to a new store, product, or buying method during the pandemic, proving that store and product loyalty is increasingly a thing of the past.
But it&#;s a tricky needle to thread. Getting it wrong can have lasting consequences for brands. You probably already know the uncanny feeling of being served a too-relevant ad. Sometimes it&#;s just a little unsettling; other times, it can put us off the product altogether.
Even so, the modern customer does expect a personalized experience&#;even if they take it for granted. McKinsey research shows that 71 percent of consumers expect companies to deliver personalized interactions. And the story doesn&#;t end there: 76 percent get frustrated when this doesn&#;t happen.
How can companies get started with personalization and scale up? What trends can we predict for personalization in the future? And&#;critically&#;how can companies toe the line between creepy and helpful? Read on to learn more.
Learn more about McKinsey&#;s Retail and Growth, Marketing & Sales Practices, and McKinsey Digital.
McKinsey asked 60 shoppers to create mobile diaries of their personalized interactions with various brands over two weeks. They made over 2,000 entries, which helped us see what works for customers and what doesn&#;t. Here are four things customers said they wanted from brand interactions:
Customers see value as what they get from a message relative to how much it costs&#;meaning how much personal information they have to share to get it. To understand how to deliver value while retaining trust, the following questions are helpful:
Learn more about McKinsey&#;s Growth, Marketing & Sales Practice.
Most marketers know that personalization is important. But we anticipate that, in coming years, personalization will transform the way companies approach marketing. Here&#;s what brands should focus on to prepare for the future:
Learn more about McKinsey&#;s Growth, Marketing & Sales Practice.
As with most things, the hardest part of personalization marketing is getting started. Here are four steps companies can take to establish and scale digital personalization, without investing millions in IT:
Focus on processes and technology that help teams work faster. Agile processes are key here&#;they enable teams to quickly mix and match copy, creative content, and templates to find out what works and what doesn&#;t. Mistakes will happen, and that&#;s OK. Learn lessons and move on.
The right automation technology is also needed to work at this pace. Too often, automation software spits out messages that customers perceive as spam. It&#;s the tech team&#;s responsibility to guide the tech stack to find signals and efficiently deliver triggers that work.
Here&#;s how a personalization journey might work.
Mary is a mother with two children in primary school. Early last August, she visited a store to buy items for her kids, including several she&#;d previously viewed online. That&#;s signal one. The items she purchased were logged and attached to Mary&#;s profile in the store&#;s database.
This summer, almost a year later, Mary browses children&#;s clothes on the same retailer&#;s website but doesn&#;t buy anything. This interest combined with her purchases last summer together comprise signal two: Mary might be open to making her first back-to-school online purchase for her children this year.
Within 24 hours of browsing the clothes, Mary receives a trigger message: a personalized offering a 10 percent discount on some of the items she&#;s been reviewing if she purchases them online. The message explains how to make the online purchase and suggests additional items she might consider based on her history with the retailer.
Learn more about McKinsey Digital.
Sephora is a great example of a real-world brand that has excelled at personalization. The beauty retailer has used personalized experiences that are truly omnichannel, encouraging shoppers to book in-store makeovers and fashion consultations via its online channels, particularly its mobile app. The app lets makeup artists log each product used in makeovers into each customer&#;s profile, and lets customers virtually try on products and receive personalized recommendations.
Sephora&#;s personalization program also demonstrates the effectiveness of focusing on the most loyal customers. The retailer&#;s loyalty program offers its highest-level members perks such as early access to new products, invitations to exclusive events, free custom beauty services, and more. And all of Sephora&#;s customer communications, no matter the platform, display the customer&#;s loyalty points.
The results speak for themselves. In , members accounted for 80 percent of Sephora&#;s total transactions. As of , the loyalty program had about 25 million members. And in , for the fifth year in a row, Sephora ranked first in Sailthru&#;s Retail Personalization Index.
Learn more about McKinsey&#;s Retail and Growth, Marketing & Sales Practices.
According to McKinsey&#;s research, four factors&#;or four &#;Ds&#;&#;drive personalization at scale. These four factors can be further broken down into eight core elements.
Data should be centralized and made available so activity in one channel can immediately support engagement in another&#;in real time or close to it.
Introducing McKinsey Explainers : Direct answers to complex questions
Marketers should create an integrated decision-making engine that uses machine learning and AI models to score various propensities for each customer.
Marketers should break content into small pieces that can be mixed and matched for maximum flexibility.
Integrate channels to coordinate communications and react to customer actions.
Advances in AI, analytics, and data over the past few years have created new frontiers for marketers. But to capture the opportunities, marketers need to understand the three main shifts in personalization and build the skills to respond to them.
Learn more about McKinsey&#;s Retail and Growth, Marketing & Sales Practices and McKinsey Digital. Also check out personalization-related job opportunities if you&#;re interested in working at McKinsey.
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Imagine a world where every interaction with a brand feels like it was crafted just for you. Where websites anticipate your needs, apps deliver recommendations you&#;ll love, and marketing messages resonate with your deepest desires. This is personalization&#;s promise, and it&#;s transforming the way businesses understand and form long-lasting connections with their customers.
In this comprehensive guide, we&#;ll explore the ins and outs of personalization, from its fundamental principles to cutting-edge strategies. You&#;ll discover the channels, data sources, and technologies needed to implement a personalization program that builds lasting customer relationships and drives business growth. Whether you&#;re a marketing professional, entrepreneur, or simply a curious consumer, this guide will empower you to unlock the power of personalization and create unforgettable experiences.
Personalization is the discipline of providing the most relevant experience to a particular audience or individual. Personalization is made possible with personalization engines, which help brands automate the collection and interpretation of customer insights and determine, deliver, and measure the optimum experience for an individual customer or prospect based on their past interactions, current context, and predicted intent.
Personalization dynamically responds to an individual customer&#;s unique needs to increase a communication&#;s relevance, whereas segmentation addresses the &#;average user&#;s&#; needs in a correlated group.
While they are different methodologies, a successful personalization strategy lies in a strong segmentation foundation. The best practice is first to discover and analyze the most valuable and profitable visitor segments, then to personalize.
Learn more about the difference between A/B testing, segmentation, and personalization, and how to efficiently orchestrate your marketing strategy and serve customers across all your inbound, outbound, and real-time channels.
Personalization is increasingly recognized as a cornerstone of a positive customer experience, offering a kaleidoscope of benefits for both consumers and brands alike. The evolution of personalization technology has significantly transformed consumer expectations, leading to a growing demand for customized experiences in every facet of daily life.
The impact of personalization in the realm of eCommerce is particularly striking. Research shows that nearly 90% of consumers are swayed by personalized online shopping experiences. Similarly, an almost equal percentage of marketers report a noticeable effect on revenue growth attributed to eCommerce personalization efforts. This strong connection between personalized experiences and commercial success underscores the critical need for businesses to invest in and continually improve their personalization strategies.
By focusing on personalization, companies can not only meet but exceed customer expectations, fostering loyalty and driving business growth in the process. The dynamic nature of consumer behavior necessitates an agile approach to personalization, one that is capable of adapting to the ever-changing preferences and behaviors of the market.
On the brand side, personalization impacts several key performance indicators (KPIs), driving:
Looking for quantified measures of the benefits of personalization? These personalization statistics were compiled from original Dynamic Yield research:
You can find more personalization stats from three of our comprehensive reports, highlighting opportunities you can start capitalizing on today.
Additionally, brands have self-reported the following gains from their personalization programs:
Personalization is a capability that spans far more across the organization than a single marketing campaign or program. While emerging technologies have helped organizations implement personalization, its long-term management requires additional organizational investments in culture, resources, processes, and effectiveness to transform into a key differentiator and competitive advantage. However, even the beginning stages of a personalization maturity journey can offer organizations a distinct ROI.
The GDPR is a comprehensive framework for privacy and data protection. Its objective is to standardize privacy and data protection across the EU, ensuring the protection of residents&#; personal data. The regulation supersedes the EU&#;s privacy directive, introducing new concepts and modifications to the existing privacy and data protection framework. These include stricter consent requirements, enhanced rights for data subjects, such as the right to access, rectify, delete or port their data, and significant penalties for non-compliance.
The GDPR&#;s influence extends beyond the EU, applying to any organization that processes the personal data of EU residents, regardless of the organization&#;s location. This global applicability ensures that virtually every significant website worldwide must comply with GDPR if it handles data from EU visitors. The regulation&#;s broad scope underscores the importance of adhering to its provisions for organizations worldwide, including those in North America, Asia, and beyond.
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Personalization engines, acting as data processors, play a crucial role in helping data controllers manage customer data in compliance with GDPR. These engines provide the infrastructure and tools necessary for GDPR personalization and enable businesses to allow their customers to:
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By facilitating these processes, personalization engines enable organizations to honor the rights of individuals under GDPR, thereby contributing to a more transparent and respectful handling of personal consumer data.
Effective personalization varies across different channels and touchpoints, including tailoring content, products, offers, and complete customer experiences on websites, in emails, through native mobile apps, and even in physical retail environments such as in-store kiosks, drive-thrus, and more. Each channel offers unique opportunities for personalization, with the end goal of delivering a unified customer experience:
Website personalization comes in many different shapes and sizes. It encompasses a variety of techniques and use cases, each tailored to achieve specific goals for different customer segments or scenarios. From targeted content or product recommendations to dynamic web page layouts, individualized banners, and personalized messages, marketers can meticulously test, refine, and tailor these experiences to create a &#;just-for-you&#;-type experience for every visitor.
You can learn more about website personalization, including strategies to implement, challenges to consider, and examples to get started.
In B2B, many marketers send personalized landing pages directly to prospects rather than offer personalized opportunities on their websites, as they&#;re better geared to one distinct call-to-action. A personalized experience that builds upon customer data such as geo-location, time and past behavior will offer a dramatically compelling advantage over a static page virtually every time.
As of , mobile traffic accounts for nearly 60% of web traffic, meaning that brands&#; mobile websites offer a unique experience for most users and is essential for all brands. Mobile web personalization is the act of transforming static mobile websites into adaptive native experiences.
Extending personalization from desktop to mobile websites allows brands to adapt content, notifications, layouts, and recommendations dynamically based on individual preference, purchase history, and data like browsing behavior, device type, and location to create a seamless and engaging mobile experience for each customer.
Mobile app personalization expands upon the benefits of mobile personalization, offering the competitive benefit of requiring users to sign in to use the app. Because of this, mobile apps offer brands boundless opportunities for zero-party and first-party data capture to provide additional context and build rich user profiles that can be deployed across platforms. This owned-and-operated platform additionally has the functionality of deepening customer engagement and loyalty with in-app messages, push notifications, and triggered emails.
Brands can implement personalized search across mobile, app, and web to populate search results according to visitor preferences and real-time behavior. Customers who visit e-commerce sites anticipate finding products as quickly and painlessly as possible: 80% of them head to the search bar as soon as they land on a retailer&#;s homepage. Highly personalized search results can accurately deliver relevant items using individual customer behavior, overall trend, or a tailored mix.
remains a marketing powerhouse for many brands because it delivers high ROI and direct customer connection. Thanks to interactive elements, personalization, and automation, marketers can send more engaging and effective emails. personalization is tailoring content and campaigns according to subscribers&#; unique identifiers, such as location, loyalty status, shopping behavior and affinities.
Allowing connections outside their website, brands can use personalized strategies to capture their customer&#;s attention at every critical moment, whether helping them pick up where they left off, delivering relevant content and recommendations, guiding them to learn more about the company or offering exclusive benefits.
Learn more about personalized strategies.
Brands use personalized advertising to engage users through more relevant content in the hopes of responding positively. Digital advertising also allows marketers to personalize the layout, content, and design of post-click experiences according to user preferences in real-time across multiple touchpoints and marketing campaigns.
Sending the right messaging at the right time can positively impact conversion rates. You can nudge customers to complete actions depending on their behavior and couple it with product recommendations, educational content, or offers in personalized emails, push notifications, or SMS to help close the conversion loop.
Organizations are adding more channels to their customer journeys as the digital revolution continues. Engineering teams are moving from a monolithic architecture to those built on microservices, API-first, cloud-native and headless (AKA MACH architecture). These changes have opened up opportunities for brands to embed personalization and user-level data into additional channels like:
Personalization can be used across industries and channels. Here are some examples of select personalisation, as illustrated through customer use cases worldwide.
Organizations across industries can increase ROI by serving personalized content, recommendations, and offers from the first page view. For example, this leading small business bank implemented pop-up and overlay surveys across their mobile app, mobile web, and website to successfully understand new cardholders&#; unique needs and interests. They used this survey to recreate an in-person consultative experience that enabled self-segmentation by asking visitors about their industry, goals, and more. They used the responses to recommend the right small business product and/or service. As a result, the bank saw an overall increase in acquiring new small business cardholders.
View use case: Guided selling to increase product discovery
For eCommerce-based businesses, including retailers and online grocers, the opportunity to surface additional products is limited once the user drives down the purchase funnel. However, a product-recommendations-infused popup modal on a product page can help encourage discovery until purchase. For example, once a website visitor adds an item to their cart, this retailer surfaces complementary items to drive upsells&#;a strategy that resulted in a 7% uplift in revenue per user.
View use case: Complimentary cart page recommendations
Brands can use dynamic content and offer different promotions to specific audiences to increase their conversion rates and overall purchases. For example, a large international sunglass retailer targeted specific coupons to the audiences most likely to act on their offers to increase promotional activation.
View use case: Targeted promotional offers
Disengaged customers aren&#;t likely to return to a brand without a reason. By promoting personalized offers to customers at risk of attrition, companies can expect to see reengagement from this audience. For example, a leading Fintech company leveraged user predictive spend to identify and target customers likely to disengage from their card with relevant offers. By delivering personalized time-bound offers across the mobile app, mobile web and website for recommended products, the company was able to decrease attrition rates.
View use case: Serve relevant offers to disengaged customers
eCommerce personalization offers retailers a unique slew of real-time benefits that energize an existing customer base and increase profitability.
Among personalization tactics, recommendations stand out for their profound impact, making them a popular choice from the onset and throughout the journey of personalization. Powered by product recommender systems, product recommendations use aggregated data and predefined algorithms to predict and present the products or services consumers are most likely to be interested in.
Encourage creative thinking about locations that can expedite customer goals more effectively. For example, introducing a recommendation widget on product detail pages (PDP) is an effective way to familiarize yourself with and assess basic personalization techniques. Recommendations on PDPs significantly contribute to direct revenue, sometimes representing 60-70% or more of a personalization program&#;s total effect. This success is attributed to the high traffic and lower funnel position of PDPs, where customer are more inclined to move ahead with purchase decisions, making it an ideal spot for product recommendations.
Expand the placement of recommendation widgets or campaigns to other strategic areas such as the homepage, category pages, cart pages, navigation menus, and even overlays or popups. discover the most effective solutions for your business. New advances in natural language processing, personalization algorithms and image recognition have also led to more dynamic, interactive forms. Shopping Muse, for example, guides customers through large product catalogs from discovery to conversion, making shopping online feel like chatting with a friend.
Read more about product recommendations.
Successful eCommerce brands know there is no better way to make an online customer feel special than through a personalized shopping experience that makes the customer feel connected to a brand. In these cases, sales and loyalty both increase. And while the way we shop online now seems like a natural extension of catalogues, the probability of looking for content via a website will be close to zero in as little as 50 years from now. This leads brands to experiment with different technologies to improve the customers&#; shopping experience. There is enormous potential for retail in the metaverse to make online shopping more engaging, allowing customers to explore and discover in a way that more closely resembles the in-store shopping experience. However, with short attention spans, we can&#;t expect consumers to go to a Metaverse and spend thousands of hours looking for content. They will only spend time there if they&#;re continually provided with relevant experiences.
Read more about why personalization is the key to optimizing the metaverse shopping experience.
Today&#;s consumers interact with a company across channels, perhaps browsing a site once, then clicking on an , and later scrolling through a mobile app. These interactions should feel cohesive, and consumers expect companies to tailor these experiences, no matter the channel. Marketers can create omnichannel campaigns by delivering personalized experiences for each consumer throughout their journey, ensuring consistent and cohesive engagement.
To deliver a cohesive, personalized customer experience across all channels, brands need to do three things:
Learn more about omnichannel personalization.
Complementing your omnichannel personalization platform data with Customer Relationship Management (CRM) data unleashes the true potential and value of what can be achieved when visitors arrive at your site. Onboarding your organization&#;s CRM data is an invaluable step towards 1:1 personalization, enabling you to target your visitors as efficiently and accurately as possible. This can be done with online behavioral data and any online or offline data available exclusively in your CRM.
Learn more about CRM onboarding.
Taking an individualized approach to marketing involves several moving parts, requiring brands to connect, consolidate, analyze, and activate their data to deliver highly targeted interactions. However, this can only happen when the following technological components are present at a personalization provider&#;s core (also called &#;personalization engine&#;).
Personalization engines enable marketers to identify, deliver and measure the optimum experience for an individual customer or prospect based on their past interactions, current context and predicted intent.
The critical capabilities of a personalization engine include:
A unified dataset. The ability to collect and harmonize data from diverse sources is fundamental. This ensures a comprehensive understanding of customer interactions across various channels, such as web, app, and in-store. A unified dataset enables the creation of detailed audience segments, offers insights into audience behaviors, and highlights opportunities for targeted engagement.
Open architecture.An engine with open architecture is essential for seamless integration with existing marketing technologies. This flexibility minimizes the need for extensive engineering work, speeds up the deployment process, and potentially lowers the overall costs associated with your marketing technology stack.
Decisioning and activation logic. Look for a system that employs advanced analytics and machine learning to automate decision-making. This includes managing and optimizing a growing number of targeted experiences across various digital platforms, regions, and currencies. Effective decisioning and activation logic supports running intricate tests, setting up variations, triggering messages, and building segments, thereby enhancing operational efficiency, scalability, and ensuring personalized experiences for each customer.
Employing the right personalization provider is incredibly important, ensuring initial marketing dollars are well spent, and results are generated in a sustainable, scalable fashion.
To build great digital experiences with more control and flexibility, robust Personalization APIs allow product managers and developers to run experiments, deploy deep-learning product recommendations, and confidently roll out features targeted for each user across all customer touchpoints.
While traditional client-side implementations call personalization from the browser via Javascript, server-side integration enables organizations to call the personalization service from within their proprietary technology stack before the page is rendered. As the web evolves, more organizations are making the switch from client-side A/B testing and personalization to server-side APIs for reasons including:
Discover an in-depth analysis of the most important technical considerations when implementing A/B tests and campaigns with server-side testing and personalization, explained. Server-side solutions also help brands partake in cookieless personalization, allowing teams to deliver personalization via API using the same data but without third-party cookies&#;a contentious issue in the new era of data protection fueled by GDPR and privacy concerns.
Now that you&#;ve explored the comprehensive world of personalization, you might be excited to unlock its potential for your business. Remember, personalization is a journey, not a destination. It&#;s about continuously learning, adapting, and evolving your approach based on data and insights.
Ready to take the first step? We&#;re here to help! We offer services to guide you through personalization, from strategy development and implementation to ongoing optimization and testing. Submit a Request for Proposal (RFP) or Request for Information (RFI). Need help with drafting an RFP? Download our free Personalization RFP template.
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