Personalization in marketing: The guide

Last updated
May 15, 2024
When it comes to personalization, customers want more than just an email with their name in it. They want customer experiences (and offers, ahem) that are truly tailored to them.

When it comes to feeling seen, customers want more than just an email with their name in it. They want experiences and offers that are truly tailored to them.

When they broke it down via survey for KPMG, there are four main things customers want: 

🤝 Meet me where I am

🍦 Know my tastes

🎁 Offer something just for me 

👋 Check in with me

What is personalized marketing?

At its core, personalization in marketing is the act of tailoring messages, product offerings, and the overall marketing experience to cater to specific people or groups. This individualized approach relies on leveraging data and psychological insights to anticipate and meet the unique needs of each customer.

Personalization is increasingly expected, especially with the changes brought about by COVID-19 and the subsequent rise in digital activity. During the pandemic, 75% of consumers made the switch to different stores, products, or methods of purchase - indicating that loyalty is up for grabs as digital experiences evolve and new generations enter new eras of their lives.

An overwhelming 71% of consumers now anticipate personalized interactions from businesses. Moreover, a significant 76% express frustration when these expectations are not met.

The impact of personalization on business success is clear. Fast-growing companies report that personalization contributes to 40% more of their revenue compared to those with slower growth. This demonstrates that personalization not only meets customer expectations but also drives improved business outcomes.

Businesses are seeing the benefits

According to Forrester, 89% of digital businesses are investing in personalization. And according to Adobe, 95% of organizations are maintaining or increasing personalization budgets over the next 5 years.

Two Adobe graphs showing how personalization will take a larger share of marketing budgets in the next few years.
Source: Adobe.com

Emerging trends in personalized marketing

  • Hyper-personalization: Using advanced data analytics and AI technology, brands can create highly tailored experiences for individual customers based on their preferences, behavior, and browsing history. A little scary to some consumers that value privacy and want to balance personalized experiences with limiting how much data they give away to get it.
  • Gamification: While not an emerging trend, mixing gamification strategies with personalization can mean increased engagement overall, for example with goal setting, leaderboards, personal records, and more.
  • Omnichannel personalization: Providing a seamless and consistent experience while sharing rewards across all channels, from email to social media to in-store visits, demonstrates that the brand values each customer's time and effort.
  • User-generated content: Encouraging customers to share their experiences with the brand through reviews, photos, and videos not only creates a sense of community but also provides valuable insights for personalization strategies. We love seeing examples of little 'inclusion' surprises that thank customers.
  • Personalized product recommendations: Leverage customer engagement and purchase data to suggest products that align with past purchases.
  • Real-time personalization: Delivering perks or offers in the moment based on current actions or behaviors, such as abandoned cart reminders or location-based promotions.
  • Pointless rewards. Loyalty programs are notoriously hard to manage for both the consumer and company. More and more brands are ditching complicated rewards tiers in favor of generating authentic relationships with customers; which includes rewarding them for their actions, instead of making them do more work.
  • You don't even know me. There seems to be a disconnect between companies' perceptions of their understanding of the customer, and what the customer actually thinks they understand about them. Proactively identify the places where your company is falling short so you can make up this gap.

AI's impact on tailored marketing

Can you go anywhere without talking about AI these days? AI will definitely impact personalization in marketing, if we can get it right.

It isn't just data processing - it's about understanding the heartbeat of your market, enabling predictive personalization that not just responds to customers' actions but anticipates them.

With AI, brands can craft dynamic customer profiles that evolve in real-time, ensuring that the marketing messages and offers are always relevant, resonant, and timely.

Imagine delivering the perfect recommendation before your customer even realizes they want it — that's the potential for AI in personalization.

As a first step, AI-driven chatbots and virtual assistants offer 24/7 customer interaction, handling inquiries and providing helpful guidance, while not personalized necessarily (unless the user is logged in), you can certainly help guide them to next steps.

Yes, it's worth it

Data is clear that personalized marketing can boost engagement, sales, and customer satisfaction.

  • 94% of businesses saw an increase in conversion rates after implementing personalization strategies. (Econsultancy.com)
  • Personalized emails have 600% higher transaction rates (Experian)
  • Marketing personalization can reduce acquisition cost by as much as 50 percent. (Idomoo.com)

83% of organizations believe that personalization is a differentiator

Among those organizations with extensive personalization, 94% believe that their personalization distinguishes them from their competitors. (Source: Adobe.com)

Source: Adobe.com

Challenges are plentiful

Personalization requires data

Among the many challenges of applying AI, data-related issues stand out. Forrester confirmed this in their personalization study, revealing that 55% of firms feel technology limitations inhibit their ability to execute on personalization strategies.

The acquisition, analysis, and application of large volumes of data are foundational to personalization. Yet, ensuring data quality, dealing with incomplete customer profiles, and navigating the complexities of data integration from various sources can be daunting.

Source: Forrester
Forrester says, "the potential is endless if done right."

Tech access and scalability is another big one

Crafting personalized experiences for a few customers is manageable, but as a business grows, scaling these efforts to meet the needs of thousands or millions without losing the personal touch, breaching privacy laws, and ensuring consistency, requires sophisticated tools and strategies.

Segmentation further complicates this picture. Effectively grouping customers in a way that genuinely reflects their preferences and behaviors — and keeping these segments up-to-date — requires effort.

And privacy regulations

Data privacy and protection is always a hot topic and the government is getting more and more involved. Regulations such as GDPR in Europe and CCPA in California, put additional constraints on how organizations can collect, store, and utilize customer data. Compliance, however, can be a way to build trust with the consumer. It's an interesting balance that companies will need to strike.

The data disconnect

Forrester reports that "Ninety percent of firms say that personalization is imperative to their overall business strategies. But 52% of consumers say they don’t see their experiences improving, even though they feel like brands are trying to get to know them."

Forrester whitepaper showing a huge disconnect between companies' perception of their personalization efforts, and how its being received by customers.

How to use perks to personalize 

To truly leverage perks in a way that personalizes the marketing experience, businesses need to understand their customers' preferences, purchasing history, and behavior. Customers want offers and discounts from your and other brands – 64% of them say its a high priority.

Here are 10 ways to use perks to personalize the user experience

  1. Always send milestone emails with a perk inside.
  2. Include a gift in a customer birthday email.
  3. Celebrate any type of engagement with a built-in thank-you: signing up for a mailing list, becoming a member, or following on social.
  4. Include a perk in your referral program so it's easy to get thanked for sharing.
  5. Social shares deserve a perk, too.
  6. Need app downloads? Thank every new log in with an immediate welcome perk.
  7. Reward and incentive cost-saving measures like signing up for paperless billing.
  8. Thank your members.
  9. Thank your top returning customers, top spenders, and top reviewers.
  10. Thank everyone that comes to your website, just for showing up.

Personalization and showing customer gratitude sound they go hand in hand, huh?

Personalization examples we love

Spotify Blend mixes two tastes based on two audio histories

One example of personalization in action is Spotify, which uses algorithms to analyze user listening habits, preferences, and even the time of day users are most active. 

Metadata that relates songs to each other enables Spotify to offer personalized playlists such as "Discover Weekly" and "Daily Mix," which are tailored to the individual tastes of each user and the same way Pandora built their "music genome". These playlists feel incredibly personal, as if a friend who knows your music taste is texting you new songs and artists.

In 2021, they also rolled out "Blend", a feature that allows users to create personalized playlists based on the compatibility of their listening habits with friends or family. 

We also love Spotify for their annual year in reviews.

Personalization in ecommerce: Amazon

An example screenshot of Amazon's personalized recommendation lists

Amazon stands as a prime example of personalization done right. Early on, they pioneered related recommendations in a variety of ways that piqued customer interest - and purchases. The “Customers who bought this item also bought” and “Frequently bought together” sections are testament to Amazon's ability to cross-sell and up-sell effectively through personalization. On the logged-in homepage, Amazon uses this same purchase and browsing data to completely customize your welcome page.

Personalization in streaming

Screenshot of "procedural TV" category in hulu
Source: My Hulu account

Hulu and other streaming services use a similar recommendation method to leverage viewing history data, and tailor suggestions to suit each subscriber. There's always rotating content and categories based on season and subscription level, like sports, hallmark movies, lifetime originals and even subcategories like cooking reality shows. 

As someone who does not shy away from sharing my love for crime dramas, I just discovered that I have an entire section in my Hulu called "Procedurals". If you need me, that's where I'll be after work.

Personalization in retail: Nike

Personalization in marketing example: Nike By You
Source: Nike

Through its "Nike By You" customization service, the sports apparel giant allows customers to design their own sneakers, choosing colors, patterns, and materials to create a product that is truly unique. Nike then leverages customer data to offer personalized shopping experiences both online and in-store. 

For example, members of the NikePlus program enjoy access to exclusive products, personalized workout plans, and priority at events, all based on their individual preferences and purchase history.

Will personalization become the table stakes? It's looking like it

Providing tailored services and perks – beyond just sticking {{first_name}} in an email – not only boosts customer contentment but also nurtures a deeper emotional tie between buyers and brands. As customers get used to seeing more targeted communications, they'll come to expect it.

About the author
Adrienne Kmetz
Adrienne is a marketing expert with a career history of working in startups of all sizes, from early stage to series A. She has 17+ years of experience writing about business, finance, and entrepreneurship. She went to Colorado College where she majored in skiing.
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