Report by Andrew Larkin Saatchi & Saatchi 2004

Copyright. All rights Reserved.

How personalisation adds value?

• People want personalisation
• Revenue increases from personalisation
• Understanding customer interests is more valued than basic personalisation

How personalisation detracts value?

• Personalisation detracts value if there is no perceived benefit for the customer
• For personalisation to work you need to gain customer trust
• 25% of people don’t use personalisation because they are scared that their information will be abused

Key themes:

• Understanding consumer interests is more important than personalisation – “In a study conducted by Ponemon, 56% of consumers said that understanding interests is a key way for companies to demonstrate that they value a customers business”

• Those using personalisation believe their revenue has increased significantly because of this – “Of those that personalize all communication, 39% say their E-business revenue has increased significantly. Among companies that personalize only some of their communication, 25% report a significant increase in revenue.”

• The majority of consumers are interested in receiving personalised material online – “The ChoiceStream Personalization Survey found that more than 80 percent of online consumers claimed to be interested in receiving personalized online material that dynamically alters to match the presumed or stated interests of the consumer.”

• The use of personalised services will depend on the perceived value for the consumer, value will vary for different types of personalisation across individuals

• Consumers are willing to provide personal information if they believe that the personalised service will add value for them à if there is no value added they won’t use it – “Using data to send me the red banner instead of the blue banner is nice. Using data to help you understand that I’d be interested in the new Flaming Lips album is better.”

• 25 percent of consumers actually avoid personalized websites because they fear that their personal information will be abused. – This can be helped by building trust with consumers.

• “Given flexible, usable navigation and search, Web site visitors will be more satisfied with their experiences and will find fewer barriers to the profitable behavior sought by site operators, in fact, good navigation can replace personalization in most cases.”

Summary of Articles:

Consumers Will Provide Information for Personalization

http://www.clickz.com/showPage.html?page=236141

Consumer willingness to provide information in return for personalized messages;

• 61 percent are interested in receiving banner advertisements that are tailored to their personal preferences
• 68 percent of users would provide personal information
• 58 percent of respondents would agree to have their Web site visits used for personalization
• 51 percent of users would agree to have their online purchase information used
• 53 percent would be willing to have their offline purchase information from catalogs and stores used
• 52 percent would agree to have their offline and online purchasing information combined
• 53 percent of respondents say they would agree to the combination of personal information, Web site visits, and on/offline purchases

The Price of Personalization – A new survey shows that consumers are willing to part with personal data in return for personalized service. Wednesday, July 28, 2004

http://www.destinationcrm.com/articles/default.asp?ArticleID=4312

• More than 80 percent of online consumers claim to be interested in receiving personalized online material that dynamically alters to match their presumed or stated interests
• Amazon uses this to show products purchased by customers who bought similar items
• Personalisation is a persuasive technique that can bring value to the consumer
• 63 percent of respondents age 18-34 said they would be willingly to share demographic data about themselves but only 49 percent of people 35 and over said the same.
• 71 percent of the 18-34 age group was prepared to provide preference information, compared to 57 percent of the older segment.
• 40 percent of respondents said they were willing to let a Web site track their clicks and transactions in exchange for personalized content
• If people trust the retailer then they are more willing to share information as they know it will not be shared with other parties and they see that it is being used to provide them with value
• Personalisation can help people get what they want faster and make the online experience less cluttered and more convenient

Internet Stats Compendium

• 24% of marketers said they did not use any personalization. Of marketers using personalization, 84% only used simple name personalisation in salutations. [JupiterResearch, May 2005].
• Nearly twice as many marketers using targeted life cycle campaigns (e.g.birthday and product replenishment messages) achieve conversion rates of 5% or more, compared with marketers pushing simple limited time offers. [JupiterResearch, May 2005].
• The aggregate increase in net profits from targeted campaigns triggered through clickstream is 18 times more than is that from broadcast messages, even when figuring in additional costs (or 9 times more revenue).
• 43% of marketers using targeted birthday greeting campaigns achieve a conversion rate of 5% or more.

E-business communication gets personal

Beth Bacheldor. InformationWeek. Manhasset: Aug 7, 2000., Iss. 798;  pg. 96, 1 pgs

• 74% of the 375 business and IT managers who participated in the third wave of InformationWeek Research’s E-Business Agenda Study, personalize their E-business communication with customers.
• 61% of those companies using personalized E-business communication all the time are in the business-to-business market.
• 39% of those that personalize all communication say their E-business revenue has increased significantly
• 25% of the companies that personalize only some of their communication report a significant increase in revenue.
• 92% of the IT industry personalize E-business communication with their customers.
• 77% of banking, financial services, and insurance firms say they personalize communication with customers.

Personalization versus Privacy: An Empirical Examination of the Online Consumer’s Dilemma, 2005

• Companies who want the benefits of personalisation online need to consider consumer privacy and ways that they can build trust
• Only 62% of people accept cookies
• Individual customers find value in different types of personalisation
• Whether consumers will use personalisation or not is dependent on the value that consumers place on each type of personalisation. Consumers will only use the services that they find valuable.

Value of Message is Key for Consumers

http://www.imediaconnection.com/content/4932.asp

• Understanding customer interests is a far better way for a marketer to demonstrate that they value a customer’s business than simply sending personalized messages

• 25% of respondents felt that personalisation is a key way for companies to demonstrate they value a customers business
• 56% felt the same about understanding interests

Why personalisation hasn’t worked – 2003

http://www.gerrymcgovern.com/nt/2003/nt_2003_10_20_personalization.htm

• Personalisation does not work when people do not have a compelling reason to personalise
• Good navigation can replace personalisation, if the website is easy to navigate through and has a good search function then most users will be more satisfied with their experience and will has less barriers to purchase.
• Personalized websites are four times more expensive to run and are twice as likely to attract visitors who will never pay for anything.
• 25 percent of consumers actually avoid personalized websites because they fear that their personal information will be abused.

Appendix – Articles

Consumers Will Provide Information for Personalization

http://www.clickz.com/showPage.html?page=236141

Based on a survey conducted by Opinion Research that looked at Internet users’ willingness to provide information in return for personalized messages when notice and an opt out choice was provided they found:

• 61 percent are interested in receiving banner advertisements that are tailored to their personal preferences
• 68 percent of users would provide personal information
• 58 percent of respondents would agree to have their Web site visits used for personalization
• 51 percent of users would agree to have their online purchase information used
• 53 percent would be willing to have their offline purchase information from catalogs and stores used
• 52 percent would agree to have their offline and online purchasing information combined
• 53 percent of respondents say they would agree to the combination of personal information, Web site visits, and on/offline purchases

The Price of Personalization – A new survey shows that consumers are willing to part with personal data in return for personalized service.

http://www.destinationcrm.com/articles/default.asp?ArticleID=4312

Wednesday, July 28, 2004

The ChoiceStream Personalization Survey found that more than 80 percent of online consumers claimed to be interested in receiving personalized online material that dynamically alters to match the presumed or stated interests of the consumer. Not surprisingly, this marketing strategy has recently gained momentum. The most well known example of its use has been Amazon.com’s contextual presentation of products purchased by customers who bought similar items.

According to ChoiceStream CEO Steve Johnson, the survey reflects the growing pervasiveness of the technique. “The results show that people not only are beginning to understand what personalization is, they recognize when they’ve seen it. They’re beginning to appreciate that when it’s done right, it brings value,” he says.

Results also show a clear pattern in online behavior according to age: While 63 percent of respondents age 18-34 said they would be willingly to share demographic data about themselves, only 49 percent of people 35 and over said the same. And 71 percent of the 18-34 age group was prepared to provide preference information, compared to 57 percent of the older segment.

Although a majority of shoppers–regardless of age–expressed a willingness to enter their own data into the system, decidedly less appealing was allowing site operators to silently monitor their behavior. Just 40 percent of respondents said they were willing to let a Web site track their clicks and transactions in exchange for personalized content, a figure far lower than Johnson says he expected.

One possible explanation for the low figure is that participants weren’t given the opportunity to make a distinction between all sites, and what the industry calls trusted partners: Sites with which the consumer has an established relationship. “If we’d included the word trusted and spelled out a few examples, that number would be north of 65 percent,” Johnson says.

Johnson also says that consumers are becoming more tolerant of the practice, in the proper context. “If people see that the retailer is a trusted party, then they’re OK with sharing implicit information–their transactions, their downloads, or their browsing habits, such as news reading,” he says. “With Amazon, people understand that the personalization they see is based on transactions they’ve made. They see that Amazon’s not sharing the information, and that it’s being used [solely] to provide them more value.”

Amazon, he adds, “is showing people that when it’s done well it can actually reduce clutter and make [online] experiences…more convenient. [Personalization] can help them get what they want, faster.”

There has been a great deal of debate assessing the value or accuracy of customer data based on how it’s acquired. Transaction-based data has the benefit of explicitly capturing actual activity. Voluntarily contributed information, such as demographics or stated preferences, runs the risk of being inaccurate, either by accident or by design. Johnson says, “It’s much harder to glean information from transactions.” But when a consumer is posed seemingly arbitrary questions, he says, “there’s no real motivation to tell the truth.”

The ChoiceStream survey, in Johnson’s opinion, shows that the trade-off has to be worthwhile. “The whole key is the reciprocity,” he says. “When the consumer volunteers his information or knows he’s being watched, it provides incentives to provide value to him.”

Johnson says he expects that what once was a hard-fought battle to get consumers to opt in has become a generational slide into acceptance. “People now know personalization when they see it,” Johnson says. “And they’re more willing to click on it and answer a few questions [to get it].”

Internet Stats Compendium

• 24% of marketers said they did not use any personalization. Of marketers using personalization, 84% only used simple name personalisation in salutations. [JupiterResearch, May 2005].
• Nearly twice as many marketers using targeted life cycle campaigns (e.g.birthday and product replenishment messages) achieve conversion rates of 5% or more, compared with marketers pushing simple limited time offers. [JupiterResearch, May 2005].
• The aggregate increase in net profits from targeted campaigns triggered through clickstream is 18 times more than is that from broadcast messages, even when figuring in additional costs (or 9 times more revenue).
• 43% of marketers using targeted birthday greeting campaigns achieve a conversion rate of 5% or more.

E-business communication gets personal

Beth Bacheldor. InformationWeek. Manhasset: Aug 7, 2000., Iss. 798;  pg. 96, 1 pgs

Already, many E-commerce sites have followed Amazon.com – one of the first to apply online personalization – tracking what consumers have bought on their sites in the past so they can pitch similar items when customers return.

Mom-and-pop stores tend to have an advantage over large stores and E-businesses when it comes to customer service. Face-to-face encounters with shoppers supply local merchants with an abundance of information on which to build personalized service. The Internet has given businesses of all sizes a medium to communicate with more customers than ever. But getting to know electronic consumers isn’t easy Internet companies have different ways of establishing personalized service. They can rely on data-analysis tools to study past interactions and predict future behavior, then apply rules based engines and filtering to deliver customized service. Profiling, which aggregates data culled from multiple Web sites, allows an online session to be tailored before a potential customer is identified or places an order.

Already, many E-commerce sites have followed Amazon.com-one of the first to apply online personalization-tracking what consumers have bought on their sites in the past so they can pitch similar items when customers return.

Of the 375 business and IT managers who participated in the third wave of InformationWeek Research’s E-Business Agenda Study, a whopping 74% personalize their E-business communication with customers. Surprisingly, the majority of respondents are using personalization for business-to business initiatives. In fact, of those companies using personalized E-business communication all the time, 61% are in the business-to-business market.

The survey also shows that businesses that use personalization in their E-business communication are seeing real benefits in return. Of those that personalize all communication, 39% say their E-business revenue has increased significantly. Among companies that personalize only some of their communication, 25% report a significant increase in revenue.

Not surprisingly the IT industry leads the pack in using personalization, and 92% personalize E-business communication with their customers. But banking, financial services, and insurance firms aren’t far behind; in all, 77% say they personalize communication with customers.

Personalization versus Privacy: An Empirical Examination of the Online Consumer’s Dilemma, 2005

• Online vendors who seek to benefit from their personalization strategies should not only be mindful of their consumers’ privacy concerns but should also uncover ways through which they can build trust. In fact, the relative reputation of online vendors is one reason why consumers prefer to use personalization from one vendor while ignoring another, even if the services themselves are virtually undifferentiated.

• A recent survey by the Personalization consortium shows that only 62% of people accept cookies although it is well known that cookies do not carry any personal information but can only aid in creating the profile of an anonymous individual.

1. Online vendors can improve their abilities to acquire and use customer information through trust building activities;

2. It is of critical importance that vendors understand and evaluate the different values consumers may place in enjoying various types of personalization.

In the offline environment, consumers’ decision to use personalized services depends primarily on the value it provides to the individual and the monetary premium that one has to pay to enjoy these services. Even if consumers do not pay a premium to use online services, they will do so only if they value personalization. Further, even if the services themselves are valuable, a consumer may still not choose to use them if their privacy concerns that arise from the associated information sharing outweigh any benefits of using the services.

Types of personalization:

First, a store can offer personalization based on individual specific characteristics like name, shipping address and preferred mode of delivery, and preferences on volume discounts, etc. The store can also offer to deliver these services to a hand-held device, e.g., an instant alert sent to the customer’s PDA when prices of particular stocks in her “watch list” drop to a predefined level or when an auction comes to close. Further, firms on the Web can also personalize purchase experience of the customer.

For example, Amazon and Barnes and Noble leverage the collective knowledge of their entire customer base to anticipate the preferences of each individual customer to make personalized recommendations. Using collaborative filtering technology, the store can propose new CD selections to particular customers based on recommendations by other users who exhibit similar preferences. Some stores even allow users to personalize other attributes like the colors of their Web pages, the name by which an individual prefers to be greeted, and the ranking of search results based on the purchase and search histories of the customer.

In addition to personalization based on customer characteristics and browsing/purchasing preferences, firms on the Web can instantaneously personalize product offerings themselves. Firms such as Dell and Gateway provide personalized page views that are tailored for individual customers to configure, order, and pay for products online.

Many also personalize after sales support specifically for the system purchased. Such services may include static information (e.g., FAQ) as well as dynamic interactions such as automatic system detection and delivery of corresponding updates. While physical product vendors such as car manufacturers and furniture designers use the Internet to create an interactive environment that allows consumers to provide inputs into the final production of their physical products, digital goods and services (e.g., music albums, software bundles, and stock quote recommendations) can themselves be fully personalized according to consumer profiles. Broadly speaking, consumer profiles are constructed by online vendors based on various criteria, and different matching techniques are used to personalize products and services for a particular consumer profile [45]. The number of criteria describing a consumer profile varies with the context and technologies used for personalization. For example, Doubleclick is known to use 22 criteria in describing an anonymous consumer’s Web browsing profile [45]. Thus, the net benefit of online personalization to consumers can be considered as being made up of the convenience from having different parts of the online browsing and purchase experience personalized.

As consumers may place different emphases on different types of personalization discussed above, we need to incorporate items to measure each type separately during scale development. A consumer may choose to use or not use one or more of these types depending upon their value for each attribute that is personalized. For example, a consumer who travels frequently may place greater value on having notification of changes in flight schedules delivered to her mobile and hand-held device, whereas a frequent shopper may prefer to have personalized coupons delivered to her email account.

This implies that the former consumer would provide her phone number to an airline Web site while the latter would provide her email information to the shopping Web site. Thus, we can argue that the overall usage of personalization services is dependent upon the aggregate value that consumers place on each possible type of online personalization, i.e. a consumer will use only those services that he finds valuable.

The online consumers’ intention to use personalization services is dependent upon their individual specific value for personalized products, services and purchasing experiences.

Value of Message is Key for Consumers

http://www.imediaconnection.com/content/4932.asp

Personalized messaging is not necessarily the same thing as relevant messaging –The Ponemon study notes that understanding customer interests is a far better way for a marketer to demonstrate that they value a customer’s business than simply sending personalized messages. In fact, over twice as many respondents indicated that understanding interests (56 percent) is a key way for companies to demonstrate that they value a customer’s business. Only 25 percent of respondents felt the same way about personalization. Permission marketers are wise to take this lesson to heart.

The email marketing space is rife with examples. Email marketers like to pull a customer name and some basic preference data from their database, and use that to personalize a message to the email recipient. While I certainly don’t think that’s a bad thing, the real trick is to take personalization to a much higher level. Using data to send me the red banner instead of the blue banner is nice. Using data to help you understand that I’d be interested in the new Flaming Lips album is better.

Why personalisation hasn’t worked – 2003

http://www.gerrymcgovern.com/nt/2003/nt_2003_10_20_personalization.htm

Personalization hasn’t worked because most people don’t have a compelling reason to personalize. It hasn’t worked because the cost of doing it well usually significantly outweighs the benefits it delivers. It hasn’t worked because managers have seen it as some Holy Grail of content management.

Many personalization projects are duds according to a new report by Jupiter Research entitled “Beyond the Personalization Myth.” This is no surprise. What is surprising is that some organizations still cling to the hope that portal and personalization software will solve their content problems.

“Given flexible, usable navigation and search, Web site visitors will be more satisfied with their experiences and will find fewer barriers to the profitable behavior sought by site operators,” the Jupiter report states. “In fact, good navigation can replace personalization in most cases.”

The best definition I have found for a portal is as follows: “A portal costs four times more to buy and operate than a normal website. It delivers half the benefits.” Yes, that big, cumbersome, complex portal of your dreams may well make you long for the days when you were running a simple but effective HTML website.

Not surprisingly, the Jupiter report finds that personalized websites are four times more expensive to run. It also finds that personalized websites are twice as likely to attract visitors who will never pay for anything. Worse still, it finds that 25 percent of consumers actually avoid personalized websites because they fear that their personal information will be abused.

Let’s Get Personal: Enhancing the Customer Experience with Web Personalization

By Patrice-Anne Rutledge, Dot-Com Builder, 2003

www.patricerutledge.com/Art_pers.htm

A survey taken by the Personalization Consortium in March 2000 indicated that 73 percent of consumers prefer that a website remembers information about them. Of those, 62 percent actually dislike having to enter any personal information they already provided on a previous visit.  Martha Rogers, partner in Peppers and Rogers Group and a co-founder of the Personalization Consortium, views this fact as a predictor of personalization’s future: “a key trend I see is the expectation of personalization. Now that we’ve learned how efficient and effective it is, it will become more expected in the future.”

Jupiter Research defines six levels of personalization you can deploy on your site. These are:

• Customization—personalizing the layout, language, and content of a site
• Registration—gathering personalized data by requesting or requiring visitors to register
• Demographic branching—using demographic data gathered by registration or other user input to personalize content
• Pattern matching—delivering personalized content based on matching the preferences of one site visitor to other visitors with similar tastes, derived from either information the visitor provided or observation of the visitor’s online activity
• Situational—an enhanced form of pattern matching, personalizing based on predicting seasonal trends (such as suggesting holiday-related items regardless of a visitor’s demonstrated preferences)
• Sensitive—detecting real-time preference changes and delivering personalization based on these sensitivities

Types of technology à

• Rules based—dynamically generating personalized content based on demographic information
• Collaborative filtering—personalizing content based on an analysis of one site visitor’s preferences and actions as compared to other site visitors with similar preferences and actions, enabling a pattern matching personalization strategy
• Neural networks—using statistical probability algorithms to deliver personalization based on an analysis of variables such as a visitor’s actions