Introduction

Nowadays with the dramatic development of e-commerce and online services, the
market has become a more demanding one. Consumers are asking for immediate
answers to their questions and expect a flawless customer service. All of these have
been possible thanks to the internet, and of course, the rapid adoption of smart phones
and tablets from the market side as well as a change in the strategies and e-marketing
plans developed by e-marketers all over the world.

Today with this demanding market, it is of vital importance that all companies adapt not
only the way they deliver information to their target market, but also the strategies used
to approach, acquire and retain their customers. One of the most used ways of doing
this is by using Personalisation. There are many different definitions for this strategy in
the marketing field, however one that achieves to illustrate what personalisation is about
is the following: the ability of a company to recognise and treat its customers as
individuals through personal messaging, targeted banner ads, special offers on bills, or
other personal transactions (Imhoff et al., 21 p. 467)

According to Postma and Brokke personalisation is a segmented form of communication

that sends different recipients different messages tailored to their individual preferences.
(Postma and Brokke, 2002, pp. 137) Personalisation can be applied through many
different media such as direct marketing, direct e-mail, websites, and mobile
advertisement to name a few. But what is the relevance of this strategy in today’s
changing environment? How can it help managers achieve their strategic goals? Studies
have been made to prove the success of this strategy across the world and in all types
of industries, but as every worthy strategy there is always a downside, and in this case
the most relevant has to do with privacy issues. In order for personalisation to work,
customers have to give a considerable amount of their personal information, and that is
where it gets complicated. How much is enough? As it will be addressed later on this
paper, personalisation sure can be an effective way of building brand equity and loyalty
but it has to be managed properly.
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It should be clear by now that personalisation is basically the process of collecting
consumer’s information in order to use that data in their favour, by offering them relevant
promotions, and individualized treatment. However in order for a site to be considered
personalised, according to Jackson (2007) six specific characteristics are required:

1 Identification

2 Data capture

3 Analysis and refinement: Analyzing the data captured before in order to draw insights

4 Match: After a number of user interactions a user profile is created.

5 Merge and delivery

6 Optimisation: The more interaction a user has with the site, the better understanding of
its preferences the system will have. Improving its profile and the effectiveness of the
technology.

The role of personalisation

For many online and offline businesses, personalisation is seen as vital for their
performance. It is well known that personalisation is not a new concept in the marketing
area, but still many companies are having difficulties applying it in an effective way. Also,
various companies are just beginning to embrace the opportunities for enhancing the
customer experience afforded by digital technology and data. (Econsultancy, 2013, pp.
1-16)

As established before, customers have become more digitally mature, but along with
them businesses have grown as well. Thus, e-marketers have to become more
conscious of the need to deliver experiences and not only simple transaction processes,
which are more personalised not only for existing customers, but also for potential ones.

Econsultancy together with Monetate completed a survey this year (2013) in which the

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majority of the responding companies (out of 1,100 respondents) agreed that
‘personalisation of the web experience is critical to current and future success’, and
more than half (61%) said this is ‘definitely’ true. (econsultancy, 2013, pp. 1-16)

Meanwhile Adobe made a global consumer survey, and the results showed, as seen in
Figure 1, that 42% of respondents (out of 8,750) said that they were neutral about the
value of personalised product and service recommendations online, which is better than
the 26% who said that it’s either not very or not valuable at all. (Adobe, 2013, pp. 2--21)

Figure 1 How valuable do you find it when a website makes personalised product and
service recommendations to you?

What is relevant to question from these findings is why did respondents find
personalisation somewhat valuable or didn’t care about it all?, What type of information
are they receiving in order for them to think this way? But what is more important to
consider is the fact that more businesses believe personalisation is vital for the success
of their business compare to the percentage of consumers that think personalisation is
somewhat or very valuable. In other words there are a significant number of consumers

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that don’t care much about personalisation, while a significant number of companies
think is a key component for success.

The situation established above might be answered with a recently released (June
2013) survey conducted by The Economist Intelligence Unit (EIU) and sponsored by
Lyris, in which it is discovered that consumers are quite receptive to certain elements of
personalisation. See figure 2. The survey conducted found that 28% of consumers
prefer recommendations for specific products they might like and 10% prefer
communication that includes content that is individualised for the consumer personally.
What this information tells us is that e-marketers are falling in a gap by ignoring what
consumers really value regarding personalisation, which is what would, in the long term,
create positive feelings towards the brand or company if the personalisation strategy is
the adequate.

Figure 2

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Offering personal customer service, personalised web sites and services, shopping
suggestions and special promotions could be the key to reach the personal contact with
the customer that is found on a traditional point of purchase. But for these strategies to
work, all the information consumers receive should be relevant for them, which is why it
is called personalisation, to make the customer feel as if he or she was the only one.

The perks of using personalisation

The “big data” era has made consumers more and more exigent regarding the
interactions with the brands they like. When we found ourselves shopping online, for
example, we value that the company keeps track of what we’ve bought before in order
for them to suggest us similar items. As well, when we finish shopping with that same
company, we appreciate receiving an e-mail as a gesture of gratitude or receiving a
discount coupon for future purchases. In this new digital era a lot is going on around
personalisation, but what are the real benefits companies achieve from an adequate
personalisation approach and why should they aim for it?

Personalisation can enable marketers to reach their potential customers in a very

individualised way by providing consistent, timely and relevant interactions and offers to
each customer and thus strengthening the relationship with the consumers. (Kim and
Jun, 2008, pp.131) If the bond or relationship between a customer and a company is
strong enough, customer loyalty and lifetime value will increase. Currently, the most
promising strategies to gain e-loyalty are represented through online personalisation,
especially in the segment of younger, highly educated, highly paid, or wealthy inheritor
customers. (Salmen and Muir, 2003, pp. 144). It is important to mention that marketers
must also consider adding value across the entire customer lifecycle and through
different channels and devices.

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According to Salmen and Muir, 2003, the individualisation of customer relations offers
marketers the opportunity for differentiation, which can work for the company as a
sustainable comparative advantage if the tactics used are rare and hard to copy for
competitors.

Positive word of mouth is another benefit that can result from personalisation. With
today’s social media phenomenon and the need of consumers to constantly share their
thoughts and feelings, companies should care about creating a positive word of mouth.
Personalisation can achieve this by offering their customers a digital experience of great
quality, such that consumers feel the need of spreading the word.

Econsultancy’s report reveals that personalisation will not only improve the customer
experience, but also the overall business performance. Data included in the Realites of
online persoionalisation report shows that for 66% of client-side respondents, both
improved business performance and customer experience are the main drivers for
personalising the website experience. (Econsultancy, 2013, pp. 1-16) As for the
customer experience, personalisation can delight and surprise customers triggering
loyalty. As for business performance refers, personalisation can develop purchasing
behaviour and drive customers through the sale cycle. To support this statement, the
report shows that the participating businesses that currently personalise web
experiences saw an increase on their sales of 19% on average.

Qualitative benefits reported by companies according to Jackson’s research, 2007

include: increased customer loyalty increased brand awareness, increased share of
customers, increased switching costs / effort of choosing a competitor’s offerings, and
increased customer satisfaction scores. On the other hand the reported quantitative
benefits included costs savings and profit generation. (Jackson, 2007, pp. 24--36)

But alas, every rose has its thorns

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Much can be said when talking about the benefits incurred when personalisation is
applied, and as it has been established already, the positive outcomes are numerous.
Nevertheless one of the biggest and most controversial problems of personalisation
revolves around privacy and mistrust motives.

As the adobe survey reveals, 84% of consumers agreed that there are too many
technologies tracking and analysing their online behaviour, and 68% of consumers
found targeted advertising creepy. (Adobe, 2013, pp. 2--21) Personally I consider this a
comprehensive response as we might ourselves have experienced some kind of
targeted advertising. We know from previous literature that this is not coincidence,
companies such as Google work together with other companies to use personalisation
strategies in a way that they are able to know your current interests according to the
information you provided them with the searches you did. With this data they are able to
apply targeted advertising to consumers, which in some cases as the survey ratifies is
considered as creepy.

The problem with personalisation is that is has become a tactic used excessively, which
results in a decrease of the receptors trust towards the brand. When a customer
receives a large number of emails from certain company, the feelings towards it may
change from positive ones to negative ones. This in case the information customers are
receiving is neither relevant nor interesting for them. Rather than building customer
loyalty, the message the company is sending is that they do not care enough about their
customers, otherwise they would not be sending massive messages which from the
customer point of view are consider as useless. Personalisation is like walking over thin
ice, since it has to be done carefully in order for the strategy to succeed. Once
personalisation is completely and correctly managed it can lead to improvements with
customers loyalty, otherwise the company might just see a decrease on its market
share.

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One of the Adobe research objectives was to find out at what point consumers felt the
collection of personal information cross the line from customization to invasion of
privacy. The global results showed that “when the information is collected without my
knowing it” had the higher percentage with 79% of respondents considering this option.
See figure 3. (Adobe, 2013, pp. 2--21)

Figure 3

Chellappa and Sin (2005) argue that there is not many marketers can do to change
customer’s feelings about privacy concerns; nevertheless they can still build trust which
will indirectly and positively change their feelings. (Chellappa and Sin, 2005, pp. 181--
202) This means that companies that are applying personalisation strategies and at the
same time care about their customers privacy concerns, should consider having
stronger strategies towards building brand trust in order for their customers to associate
positive feelings towards the brand and decrease their anxiety of privacy invasion.

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Even though it is not the main subject of research it is relevant to mention that according
to Gleeson (2012) strategies that some companies can apply to gain brand trust include:
being transparent, having a rapid and responsive customer communication, ensuring
accountability and being socially responsible. (Gleeson, 2012)

Challenges and Implications

Effective personalisation is not an easy task, but it is not impossible to make it effective
and congruent with the company’s goals if it is applied correctly and if constantly under
evaluation and renovation to keep up with today competitive environment. According to
The Economist Intelligence Unit Report (2013) major gaps exist between consumer
online engagement preferences and digital marketing strategies employed to meet their
needs. This means there is a challenge for marketers not only to find out what their
customers value as relevant information, but also the way they must approach them so
they won’t feel their privacy is being invaded and they are receiving the information they
want when they need it.

As seen in Figure 4 the biggest obstacle to more effective digital marketing strategies
corresponds to the inadequate budgets for digital marketing and database management.
This implies a budget restructuration from the managerial side in order to provide
marketers with the tools to create an effective personalisation strategy. Personalisation
should not be under valuated since it has been proven that if applied correctly it brings
benefits to both the company and the customers. It is consider a win-win situation.

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Figure 4

But having enough budget is not the only challenge marketers face. The content
Marketing Institute together with the Association for data-driven marketing and
advertising (2013) found that producing the kind of content that engages, producing
enough content, and the lack of budget are the major challenges that Australian content
marketers face. It has been established that in order for personalisation to be effective,
relevant information must be offered to customers, but this is not possible if marketers
are having difficulties producing the kind of content that engages. Marketers must get to
know their consumers and target market, take advantage of the social media platforms
available and the fact that the market is willing to share information, is just a matter of
figuring out how to approach them. This again will help tailor better messages to
recipients according to their preferences, resulting in overall better results.

But personalisation by itself will not be the remedy for businesses looking forward to
grow and retain customers. Personalisation must be part of a broader strategy in order
for the business to succeed. (Jackson, 2007, pp. 24--36) This means that marketers
should consider incorporating personalisation with CRM systems in order to have the

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best results. However delivering and implementing CRM strategies also requires
resources such as people processes, technology, and analysis, so managers should
consider it when deciding the budget corresponding to personalisation activities.

It is also recommended for businesses to have a better communication with their

customers in order for the company to be able to deliver them what they want. (Jackson,
2007, pp. 24--36) Personalisation will not be useful if the content is not the one the
customers want or need to see. Engaging the market requires a fully understandings of
their wants, their needs, motivations, and interests; only then will the e-marketers be
able to establish a relationship with them through the personalisation path.

Finally, according to Jackson, (2007) even though major efforts have been made to
make personalisation a company’s point of differentiation, a source of customer loyalty
and a way of increasing profits, customers would not directly identify that personalisation
is the reason why they choose company A over company B. Personalisation is
considered an invisible tool however its results affect customers decision making more
than what they think. This is why, when personalisation is effectively applied customers
keep coming back.

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References

Adobe. 2013. The State of Online Advertising. Global Report, Regional Comparisons.
[report] Adobe Systems Incorporated, pp. 2--21.

Awad, N. and Krishnan, M. 2006. The personalization privacy paradox: an empirical

evaluation of information transparency and the willingness to be profiled online for
personalization. MIS quarterly, pp. 13--28.

Chellappa, R. and Sin, R. 2005. Personalization versus privacy: An empirical

examination of the online consumer’s dilemma. Information Technology and
Management, 6 (2-3), pp. 181--202.

Econsultancy. 2013. Consumers doubt the value of online personalisation: study.

[online] Available at: http://econsultancy.com/au/blog/62905-consumers-doubt-the-
value-of-online-personalisation-study [Accessed: 18 Sep 2013].

Econsultancy. 2013. The Realities of online personalisation. Sample report. [report]

Econsultancy, pp. 1-16

Gleeson, B. 2012. 6 Ways Brands Build Trust Through Social Media. [online] Available
at: http://www.forbes.com/sites/brentgleeson/2012/10/31/6-ways-brands-build-trust-
through-social-media/ [Accessed: 18 Sep 2013].

Imhoff, C., Loftis, L. and Geiger, J. 2001. Building the customer-centric enterprise. New
York: Wiley.

Jackson, T. 2007. Personalisation and CRM. Journal of Database Marketing \&

Customer Strategy Management, 15 (1), pp. 24--36.

Kim, M. and Jun, J. 2008. A case study of mobile advertising in South Korea:
personalisation and digital multimedia broadcasting (DMB). Journal of Targeting,
Measurement and Analysis for Marketing, 16 (2), pp. 129--138.

McLaughlin, L. 2002. The Straight Story on Search Engines. PC World, pp. 115
(available online at http://www.pcworld.com/news/article/0,aid,97431,00.asp).

Postma, O. and Brokke, M. 2002. Personalisation in practice: The proven effects of

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 personalisation. The Journal of Database Marketing, 9 (2), pp. 137--142.

Salmen, S. and Muir, A. 2003. Electronic customer care: The innovative path to e-
loyalty. Journal of Financial Services Marketing, 8 (2), pp. 133--144.

The Economist Intelligence Unit. 2013. Mind the Marketing Gap. [report] The Economist
Intelligence Unit Limited, pp. 1—18.

Summary

Personalisation according to Postma and Brokke is a segmented form of communication

that sends different recipients different messages tailored to their individual preferences.
It can be applied through different channels such as via e-mail, direct marketing and
mobile advertising, and it requires 6 characteristics to be considered an effective
personalisation strategy: Identification, Data capture, Analysis and refinement, Match,
Merge and delivery, and Optimisation.

Much research has been made in order to know how is personalisation affecting
companies and their customers, how is it considered by them, and if it is being helpful or
not. All of that research has led to the conclusion that mayor benefits can be
experienced if the strategy is applied correctly. Among the pros of using personalisation
are: reaching customers faster, creating stronger bonds which increase customer loyalty
and customer life time value, creating a differentiation point that could become a
comparative advantage, spreading a positive word of mouth that might increase brand
awareness as well as customer satisfaction, and an overall improvement on business
performance, cost savings, and profit generation.

Regardless the large amount of benefits that can be related to personalisation, privacy
and mistrust are on the negative side of this strategy. Customers don’t enjoy giving away
valuable information, especially if they have had a bad experience already. It has also

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been argued that personalisation has been overused, suffocating customers with
useless or irrelevant information, which will only lead to a decrease on the customer or
market share of the company.

Among the recommendations for a better application of personalisation are: Delivering

the necessary budget in order for marketers to have the required tools to make this
strategy work, considering the possibility of investing on a CRM system; Creating
relevant content for the customers, which can only be done through a deeper
understanding of their wants and needs, and a wider communication which enables
them to participate in order to get to know them better.

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