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Internet Marketing Personalization

Ch7 Personalization

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Page 1: Ch7 Personalization

Internet Marketing

Personalization

Page 2: Ch7 Personalization

Topics

• Personalization and marketing• Consumer benefits of

personalization• Implementing personalization

Page 3: Ch7 Personalization

Personalization & Marketing

• Marketing has the responsibility to reflect customers’ goals, needs and wants

• The result is that companies create product lines with many product and service variations in order to meet the needs of various target markets

• Personalization is a special form of product differentiation– A standard product is transformed into

a specialized solution for an individual

Page 4: Ch7 Personalization

Personalization & Marketing

• An explosion in the number of choices leads to customer confusion

• The Web is rapidly developing methods to help consumers choose wisely from the wide array of available products

• Choice assistance can help the consumer discover his or her own tastes

Choice Assistance

Page 5: Ch7 Personalization

Personalization & Marketing

• Mass customization has emerged by combining individual-level information and flexible manufacturing

• By incorporating individual preferences, marketing more closely reflects the “voice of the customer”

• Using specialized software, it is possible to deliver truly unique and dynamically personalized Web sites in real time

• The Web is emerging as an essential piece of the customization puzzle

Customization

Page 6: Ch7 Personalization

Personalization & Marketing

• Choice assistance and customization lead to more powerful personalization

• Personalization becomes the basis for retaining loyal and committed customers

• When successful, customers are satisfied and profits are high

Relationship Marketing

Page 7: Ch7 Personalization

Personalization & Marketing

• On the left of the continuum, there’s no personalization

• Further to the right, products are customized for individual tastes

• On the far right, consumers collaborate with companies to create customized products, which builds relationships

Relationship Marketing

Mass Market Differentiated Customized Relationship

Choice Assistance

Design

Figure 7.4: The Personalization Continuum

Page 8: Ch7 Personalization

Personalization & Marketing

• Digital technology makes it possible– Encyclopedic storage of information

provides a rich base of material

• The network makes it available– Internet connections can tap into databases

and data archives, get news feeds, and provide time-sensitive information or accumulate information for later use

• Individuals make it valuable– Personalization provides value by focusing

on specific individual needs

Personalization and the DNI Framework

Page 9: Ch7 Personalization

Personalization & Benefits

• Technology has the power to make available to the masses what was previously available only to the rich

• “Democracy of goods” refers to open and low-cost access to products and services

• Automation and leverage of existing digital assets makes personalized goods and services cheap to provide and widely available to consumers

The “Democracy of Goods”

Page 10: Ch7 Personalization

Personalization & Benefits

• SEARCH GOODS are products and services that are easy for a consumer to evaluate– Example – well-known branded products

such as gasoline from Texaco

The Internet Benefits Consumers By Turning Experience Goods into Search

Goods

• EXPERIENCE GOODS tend to be difficult to understand and evaluate. They are too complex to judge easily. They may be highly subjective, with personal taste being the most important determinant of usefulness- Example – health care services

Page 11: Ch7 Personalization

Personalization & Benefits

• Consumers benefit from reduced uncertainty about experience goods

• An accurate personalization system that can match products to taste can eliminate unpleasant consumption experiences

The Internet Benefits Consumers By Turning Experience Goods into Search

Goods

Page 12: Ch7 Personalization

Personalization & Benefits

Levitt’s rules for success through differentiation• Any product can be customized• Consumers use products to solve problems• Do not ignore hard-to-measure features of the

product such as fun or friendliness• Make the intangible tangible. Provide signals

that demonstrate quality and reliability

Personalization and the Total Product

Page 13: Ch7 Personalization

Personalization & Benefits

Personalization is a rich

area for augmenting the product and finding

ways to achieve the

potential product

Use the Wells Fargo exampleto illustrate Levitt’s framework

Figure 7.6: Increasing Amounts of Differentiation

Page 14: Ch7 Personalization

Personalization & Benefits

The Personalization Balance

Providing Useful Information

• A key challenge is to determine the type and scope of information consumers will value and use

• Customers judge information programs by their efficiency and the ratio of usage costs with usage benefits

• Information programs that are linked to customers’ personal targets and objectives are often successful

Page 15: Ch7 Personalization

Personalization & Benefits

The Personalization Balance

Personalization Backlash

• A natural result of personalization is treating customers differently

– More valuable customers will receive special/preferential treatment

• This can lead to a backlash among customers who don’t receive special treatment

• Preventing resentment may be easier online where preferred programs are less visible

Page 16: Ch7 Personalization

Implementing Personalization

• Personalization has powerful potential competitive advantages– The first company to create an effective

personalization approach in an industry can capture many of the most profitable customers

• Personalization creates the opportunity to learn more about – Customers’ current desires– Future trends– New opportunities for product features and

extensions

Page 17: Ch7 Personalization

Change

No Change

Change

Types of Customization

CosmeticAdaptive

Collaborative

Transparent

Product

Product: attributes create unique functionality

Representation

Representation: how a product or service is portrayed to a customer

Present a uniform representation & let users filter out most possibilities to create personalized service

Possible to create personalization online via use of frames & cookies

Reflect.com

Observe users’ behaviors (implicit model)

Smart AdsSmart OffersSmart EPG’s

NYTimes.com

Sybase.com

Dialogue with customers to help articulate needs, then create custom product

Page 18: Ch7 Personalization

Types of CustomizationAdaptive Customization

• Offer the same basic product and representation to everyone

• Let users filter out most of the possibilities using pop-up menus, search functions and preference settings

• Example:

At Spinner.com, users can select the music they want to hear using a pop-up menu

Page 19: Ch7 Personalization

Types of CustomizationCosmetic Customization

• Present a standard product differently to each customer

• Use of unique packaging, presentation, etc.

• Example:

New York Times uses cookies to store registration information and show the user’s name at the top of the page

• Essential requirement is modularization – division of a product into components

Page 20: Ch7 Personalization

Types of CustomizationTransparent Customization

• User needs and behaviors are observed

• The product is automatically changed to reflect individual tastes

• The user isn’t told or made aware of changes

• Example:Smart ads – use observable behavior to show different ads

Page 21: Ch7 Personalization

Types of CustomizationCollaborative Customization

• Conduct a dialogue with individual customers

• Help them articulate their needs

• Identify the precise offering that fulfills those needs

• Make customized products

• Example:Using a password protected extranet to

communicate with customers via real-time sound and video sessions

Page 22: Ch7 Personalization

Customization / Personalization

Q: When isone-to-one marketing worthwhile?

Page 23: Ch7 Personalization

HighlyDifferentiated

Uniform

HighlyDifferentiated

1:1 Matrix

QuadrantII

QuadrantI

QuadrantIV

QuadrantIII

Customer

Valuations

Valuations: How different are your customers in terms of their value to your enterprise?

Customer

Needs

Needs: How different are your customer needs?

Page 24: Ch7 Personalization

When Is Personalization Profitable?

III

IVIII

Customer

Needs

SimilarHighlyDifferentiated

Customer

Valuations

Wide Range

Uniform

1:1 Marketing

Niche MarketingTarget Marketing

Mass Marketing

Frequency Marketing

Key Accounts

Figure 7.11: The 1:1 Matrix

Page 25: Ch7 Personalization

Customization / PersonalizationTwo Necessary

Ingredients

• Software capable of delivering customization

• Direct interaction between the firm and individual customers / consumers

Page 26: Ch7 Personalization

Determining the Correct Personalization System

Customer Needs, Product Space

Qu

an

tita

tive

Few

Highly Differentiated

Qu

alita

tiv

eC

om

ple

x

Uniform

Collaborative Filtering

CASERule Based

Endorsement

Figure 7.12

Key P

rod

uct

Att

rib

ute

s

Mass M

ark

eti

ng

Price

Brand

Page 27: Ch7 Personalization

Personalization Systems

• Observe behavior predict preferences– Unobtrusive: consumers don’t have to answer

questions or fill in extensive questionnaires

• Best when– Product space isn’t complicated– Product / service attributes can be quantified

• Example: American Airlines • Require effective user models that are tied

to observable online triggers– A trigger is a user action that a model can use

to decide what personalized information to send

Rule-Based System

Page 28: Ch7 Personalization

Personalization Systems

• CASE (computer-assisted self-explication)– The system queries users about preferences

matches user with the right product / service

• Best when users only have to evaluate a small number of well-understood attributes and features– Example: Chipshot.com & Personalogic

(Chapter 7 Online)– Require user cooperation to get relevant user

data

Case-Based System

Page 29: Ch7 Personalization

Personalization Systems

• Connects users with local preferred providers

• Best when– Users’ product needs don’t differ

greatly– It’s a challenge for consumers to judge

quality and for vendors to explain the value of available choices

• Examples: Autobytel.com

Endorsement System

Page 30: Ch7 Personalization

Personalization Systems

• Match users who share similar tastes– Users share recommendations and

preferences

• Best when– Product space is complicated– Preferences are subjective, qualitative and

complex

• Example: Amazon.com instant recommendations

• Requires user cooperation to get relevant user data

Collaborative Filtering

Page 31: Ch7 Personalization

Personalization Flowchart

Q2

Q3

Q3 Collaborative

Filtering

CASE

Endorsement

RulesBased

Q1: Do customer lifetime values vary significantly?

Q2: Do customer needs vary significantly?

Q3: Are product attributes qualitative or complex?

Q1

Don’t Personaliz

e

NO

Q2

NO

YES

NO

YES YES

NO

NO

YESYES