Customers Want The Personal Touch

Personalization may be the next big thing in IT, yet it's an ancient concept.

InformationWeek Staff, Contributor

June 21, 2002

6 Min Read
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Personalization may be the next big thing in IT, yet it's an ancient concept. Ever since humans began to barter, trading partners have known that success hinges on identifying each other's behaviors and preferences, then offering products or services that answer those needs.

What's new in personalization today is technology's impact on how businesses gather customer information and respond to their needs. Customers know that many competitors are vying for their business. They also can access a wide array of information to help them make buying decisions and get the most for their money. In this environment, personalization is critical to helping suppliers use customer-relationship management technologies to find more customers, keep them, and give them better service than before.

Personalization is all about providing information that reflects what you know about a certain customer--and what you know is changing all the time. Basic personalization starts with simply using his or her name, such as in a direct-mail campaign, on a Web page, or in a customer-service agent's script. But the name game is no longer enough. When customers contact you, you gain their appreciation by having the answers they want--and that appreciation can be deepened by serving up additional information and offers that respond to their needs.

The goals of personalization are simple: Learn and understand what the customer really wants, then ensure that the customer gets the same "look and feel" and message across any channel. In our experience, the businesses that are most successful with their CRM strategies are those that learn to create solutions for their customers instead of finding customers for their products.

To accomplish that goal, businesses want technology that lets them leverage the reams of customer data they collect. By observing customers' clickstreams, buying patterns, contact history, and life events--such as an address or job change, the birth of a child, or a change in marital status--businesses can understand their behavior and extrapolate trends.

Businesses use two types of personalization techniques to build such customer profiles. Implicit personalization is the capture of customers' session-specific Web-site behaviors. Explicit personalization draws on user-provided information, such as registration accounts and profiles. During a customer interaction, both types of data are analyzed in real time by use of powerful algorithms to determine behavioral patterns and predict the customer's next need, and to deliver new, targeted information before the customer moves on.

Such real-time personalization can significantly boost the relevance of your customer communications. For example, if you can create a self-service site with "my site" capabilities that not only knows who the customers are but learns more about them over time, you boost your chances of winning repeat business and new customers.

Building a better understanding of customer preferences also can aid in cross-selling and upselling. By gathering and processing simple dynamic data, companies can use personalization to suggest promotions or offers. For example, when a company knows whether the purchaser of a camcorder prefers contact via the Web, E-mail, or phone, it can use that customer's preferred channel to cross-sell camcorder accessories. Or, if the customer has declined cross-selling offers in the past, the company may forgo any new attempt.

In the CRM world, customer-service vendors and marketing-automation vendors address different facets of personalization in different ways.

Most customer-service vendors traditionally have focused on E-mail response management, which, when tied to a knowledge base powered by a search engine, can personalize outgoing E-mail responses. Typically, the search engine uses key-word, full-text, or parameterized searching of the knowledge base to look for a potential match. Customer-service products such as those from Kana Inc. and Siebel Systems Inc. are extending these capabilities to help customer-service agents personalize the service experience for a customer on the phone or in a Web chat. Some systems, including Kana's, RightNow Technologies', and Siebel's, also let Web self-service apps personalize Web interactions.

Marketing-automation vendors traditionally have provided personalization capabilities for outgoing direct-mail and E-mail campaigns by conducting advanced analysis on customer data and segmenting customer populations. The nirvana for marketers is to define a "segment of one"--the ability to aim unique messages, offers, and promotions at a single customer. While almost all marketing-automation applications tout an ability to achieve this ideal, reality tells another story. For the large companies that can afford these million-dollar systems, analyzing the behaviors of tens of thousands of customers and devising unique offers for each one would be a Herculean task. For smaller businesses, whose smaller customer bases would make it easier to target individuals, high cost puts these systems out of reach. What's far more doable is grouping customers into segments that share similar behaviors and tailoring campaigns to each group.

Marketing-automation tools have analytics capabilities that let marketers more effectively identify segments and define more-specific segments than would otherwise be possible. These applications use this data to drive marketing campaigns that are based on customer events or transactions. Marketers can design campaign workflows with predetermined events that qualify customers for promotions or offers, such as a discount on a dryer for someone who's bought a washing machine.

The applications then look for changes in customer profiles that may be triggered by a transaction or an information change. This updated profile is analyzed and may shift a customer to another segment, which may trigger a new promotion or offer. Marketing-automation products such as E.piphany's E.6, SAS's EMA, and Unica's Affinium are augmenting their capabilities for customer event-and transaction-based campaign design by providing workflow-based design tools.

Few of today's leading marketing-automation offerings leverage widely adopted content-management systems to create and manage personalization content--which is surprising, because more and more content is being created for personalization. Exceptions include E.piphany, which provides out-of-the-box adapters for content-management systems from BroadVision and Vignette, and SAS, which provides data-level integration with BroadVision's system.

Most other marketing-automation systems still require custom interfaces, though vendors such as Aprimo and Unica plan to include out-of-the-box adapters to leading content-management systems in upcoming releases.

For many businesses, implementing advanced personalization in their CRM strategies still means integrating third-party personalization engines from vendors such as Blaze, Brightware, Calico, LikeMinds, Luna, Manna, Net Perceptions, Open Sesame, Personify, and Verbind. Such products can be expensive, and they require integration with existing systems and additional support. Other options include using the personalization engines embedded in existing content-management or E-commerce platforms, such as Art Technology Group's or BroadVision's. This approach allows the use of existing systems, but it still requires integration into the CRM components.

There's no one set of real-time personalization tools that will fill a given company's needs. Instead, an approach comprising multiple components is necessary to fully address real-time personalization. This will hold true for at least six to 12 months, until customer-service and marketing-automation application vendors evolve their products' capabilities or embed more-advanced personalization capabilities from third-party vendors.

Doculabs
Todd Hollowell is a VP and Gaurav Verma is a senior analyst at Doculabs, an independent research and consulting firm. Reach them at [email protected].

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