In his book The Paradox of Choice Barry Schwartz has shown that an excess of choice for the consumer usually has a negative impact on sales results.
A shop with 24 varieties of jam will, as a general rule, sell less jam in total than a shop with only six varieties. The use of big data can overcome this problem, because big data makes possible big personalization. A better focusing on the known preferences of consumers in terms of products, services and communication helps consumers to make their choices. The more personal and relevant the content communicated to a customer, the more likely that the customer will generate positive feedback and eventually make a purchase. Instead of showing your customers all the options in your product range, the trick is to show them just the three options you think will interest them the most. At Amazon, 35 per cent of all sales result from personalized recommendations; at Netflix the percentage is as high as 75 per cent. Personalization is therefore a key step in your data strategy. It is the ultimate way to raise your digital customer relationship to a higher level.
Many consumers are open to the idea of receiving the right (commercial) message at the right time. My own research has shown that 33 per cent are either positive or very positive towards the concept of personalized advertising. Consumers like to buy products. Consumers therefore like to have information about products – but only relevant information provided at the moment when they most need it. The ability to manage big data effectively will be a major tool in helping to achieve extreme customer orientation in the years ahead. The expectations of consumers will continue to evolve. They will almost certainly be less tolerant about receiving the wrong message at the wrong time.
This presents a serious challenge to the modern marketer. Instead of focusing on the average customer, from now on they will need to focus on the individual customer. Classic marketing involves getting to know and understand the average customer. This often resulted in the drawing up of a profile that was so general as to almost be meaningless. Many companies have ‘athletic males between the ages of 25 and 45’ in their target group. This type of profiling was necessary to select the right media and to adjust the message to reflect the target group. But the problem of working with averages is that they also tend to produce average results. One of the classic marketing dictums is that ‘half of the marketing budget is always wasted; the trick is to find out which half’. This is the result of failing to pay sufficient attention to the wants and needs of individual customers.
Personalization Equals Power
There are already many different forms of personalization at work in our modern world. Google searches usually produce different results for different people, because Google can identify what we are looking for. Similarly, the Amazon homepage is different for each visitor. This type of personalization is also becoming increasingly common in communication. When the Belgian energy producer Nuon was bought by Eni, the change of name and the necessary contractual changes were notified to customers in a highly personalized manner. Each customer (roughly 180,000) was sent a new tariff proposal that made clear whether the take-over would mean a price reduction or a price increase for the customer in question. In other words, Eni opted for hyper-personalization on the basis of existing customer data. No two letters were the same and the results were very impressive. For the customers who could expect a price reduction, the company achieved 189 per cent of its commercial objective. For the customers who would have to pay more, it achieved an even more remarkable 159 per cent. The greater the focus on individual needs, the greater the impact.
Not everyone is convinced. You often hear people say that companies should focus on using their small data (well-structured data in a company database) correctly, before attempting to deal with the more serious challenges of big data. But this underestimates the value of the predictive power of big data. Personalizing even relatively minor matters on the basis of existing customer data can mean a major step forward for many companies. For example, I have bought shoes from Amazon on several occasions. So why don’t they now offer me a selection of standard shoes in my size? Things like this can be easily arranged and make the purchase experience so much more pleasant for the buyer. It often seems that brands immediately go in search of the most difficult challenges, instead of dealing with the simple ones first.
Contributed to Branding Strategy Insider by: Steven Van Belleghem, excerpted from his book, When Digital Becomes Human with permission from Kogan Page publishing.
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