Transcript GSB 582 High-Tech Marketing

Internet Marketing
Personalization
Topics
• Personalization and marketing
• Consumer benefits of personalization
• Implementing 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
Personalization & Marketing
Choice Assistance
• 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 to discover his or her own
tastes
Personalization & Marketing
Customization
• 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
Personalization & Marketing
Relationship 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
Personalization & Marketing
Relationship Marketing
Figure 7.4: The Personalization Continuum
Choice Assistance
Mass Market
Differentiated
Design
Customized
Relationship
• 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
Personalization & Marketing
Personalization and the DNI Framework
•
•
•
–
–
–
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 & Benefits
The “Democracy of Goods”
• 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
Personalization & Benefits
The Internet Benefits Consumers By Turning
Experience Goods into Search Goods
• SEARCH GOODS are products and services that
are easy for a consumer to evaluate
– Example – well-known branded products such
as gasoline from Texaco
• 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
Personalization & Benefits
The Internet Benefits Consumers By Turning
Experience Goods into Search Goods
• Consumers benefit from reduced
uncertainty about experience goods
• An accurate personalization system that
can match products to taste can eliminate
unpleasant consumption experiences
Personalization & Benefits
Personalization and the Total Product
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 & Benefits
Use the Wells Fargo example
to illustrate Levitt’s framework
Figure 7.6: Increasing Amounts of Differentiation
Personalization
is a rich area
for
augmenting
the product
and finding
ways to
achieve the
potential
product
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
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
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
Customization / Personalization
Two Necessary Ingredients
• Direct interaction between
the firm and individual
customers / consumers
• Software capable of
delivering customization
2 ingredients needed
• Direct interaction between the firm
and the individual (the individual’s
information are collected, see
figure 7.8)
• Software abilities of data retrieval,
dynamic web page generation, and
capturing user choices)
Types of Customization
Change
Transparent
Smart Ads
Smart Offers
Smart EPG’s
Product
Attributes
Observe users’
behaviors
(implicit model)
Adaptive
Sybase.com
Present a uniform
representation & let
users filter out
most possibilities to
create personalized
service
No Change
Collaborative
Reflect.com
Dialogue with
customers to help
articulate needs,
then create custom
product
Cosmetic
Possible to create
personalization
online via use of
frames & cookies
NYTimes.com
Representation
Product
Attributes:
create unique
functionality
Representation:
how a product or
service is
portrayed to a
customer
Change
Types of Customization
Adaptive 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
Types of Customization
Cosmetic 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
Types of Customization
Transparent 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
Types of Customization
Collaborative 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
Customization / Personalization
Q: When is
one-to-one
marketing
worthwhile?
1:1 Matrix
Quadrant
Highly
Differentiated III
Quadrant
IV
Quadrant
I
Quadrant
II
Customer
Valuations
Uniform
Customer
Needs
Valuations:
How different
are your
customers in
terms of their
value to your
enterprise?
Needs: How
different are
your customer
needs?
Highly
Differentiated
When Is Personalization Profitable?
Figure 7.11: The 1:1 Matrix
Wide Range
III
IV
Frequency Marketing
Key Accounts
Customer
Valuations
I
1:1 Marketing
II
Mass Marketing
Similar
Uniform
Customer
Needs
Niche Marketing
Target Marketing
Highly
Differentiated
Figure 7.12
Brand
Mass Marketing
Qualitative
Complex
Quantitative
Few
Key Product Attributes
Determining the Correct
Personalization System
Endorsement
Collaborative Filtering
Rule Based
CASE
Price
Uniform
Highly Differentiated
Customer Needs, Product Space
Personalization Systems
Rule-Based System
• 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
Personalization Systems
Case-Based System
• 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
FIGURE 7.14 (4875 ->294)
FIGURE 7.15 (294 ->285)
FIGURE 7.16 (285)
Personalization Systems
Endorsement System
• 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
Personalization Systems
Collaborative Filtering
• 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
TABLE 7.1
TABLE 7.2
Personalization Flowchart (See
Figures 7.11, 7.12, 7.17)
Q1
YES
NO
YES
Q2
Q3
YES Collaborative
Filtering
NO
NO
CASE
Q2
NO
Don’t
Personalize
YES
Q3
NO
Rules
Based
YES
Endorsement
Q1: Do customer lifetime values vary
significantly?
Q2: Do customer needs vary significantly?
Q3: Are product attributes qualitative or
complex?
Personalization Challenges
• Varying Benefits (Figure 7.18,
Table7.2)
• Data Needs (Figure 7.19)
FIGURE 7.18
FIGURE 7.19