Nothing has the potential to increase a company's revenues and enhance customer loyalty in today's ultra-competitive marketplace like personalization
Nothing has the potential to increase a company's revenues and enhance customer loyalty in today's ultra-competitive marketplace like personalization. Unlike customization, which asks the customer to choose from a finite set of options, personalization enables the customer to uniquely configure the desired product to meet his or her specific requirements. And such personalization can make a company.
Witness L.L. Bean, Pottery Barn Kids, and even industry trailblazer Lillian Vernon, a small, mail-order monogramming business that transformed itself into a multimillion dollar enterprise thanks to the simple application of customers' initials to accessories.
The success of these companies, whose business models are based on personalization, is no surprise to most executives. According to the findings of a recent study of 328 senior executives conducted by the Economist Intelligence Unit, personalization has already had an impact on their revenues, delivering higher or much higher revenues for nearly two-thirds of the companies participating in the survey. Eighty percent of respondents predict a positive impact of personalization on revenue growth in the next five years, when nearly one-half of all products or services will be personalized in some way.
Small and medium-sized businesses, which encourage and tolerate organic growth, have the potential to reap the most benefits from personalization, but their ability to do so rests on two key factors. One, these companies must use information technology to drive personalization or risk being limited by the scale they can achieve through manual personalization in the face of global competition. Two, personalization will significantly increase the need for people with interpersonal skills. Employees will need to listen to individual customers, ask scripted questions designed to elicit customer-specific formulas, and design and implement complex custom solutions. Let's look at these two factors in more detail.
Technology is the primary engine of growth for many firms' personalization strategies, leading to the rise of new products and services for both businesses and consumers. A good example of a company that has based its business model on technology is Plaxo, the electronic address book company. The company uses technology to link people to their colleagues and friends through their electronic address books. With only 50 employees, the company relies on technology to deliver personalization to its customers, helping 15 million Plaxo users keep their email addresses and contact information updated. As information changes, Plaxo automatically populates the correct information into each affiliated member's address book. And, thanks to Plaxo's highly personalized interface, users do not have to change how they work to take advantage of Plaxo's benefits.
Whereas Plaxo and others, such as WebEx, Apple, Amazon, and Wikipedia, base their business models purely on technology, others combine technology and face-to-face interaction to create personalized services that they can scale to many customers. One of the most prominent examples of this so-called 'hybrid model' of personalization is Netflix, the movie distributor. Netflix allows user to browse and select movies online, then delivers them via the US Postal Service. The company tracks the customer's purchase history, enables the customer to rate the movies he or she rents, and automatically correlates these ratings to make movie recommendations.
As evidenced by the hybrid model, personalization does not eliminate the need for people. In fact, quite the opposite is true. For a company to effectively deliver a personalized experience, it must rely on its people and their interpersonal skills even more than before. Why? Because the company must recognize the customer individually during every interaction, collect information on the customer's product usage and buying preferences, and use the information collected to make the next transaction a better experience for the customer. All of this depends on extending a common transaction into a personalized interaction through the human touch.
According to 59 percent of respondents to the Economist Intelligence Unit survey, front-line salespeople are the primary manner in which their companies capture customer buying preferences and behavior, and 43 percent of respondents said that their employees must possess good communications skills more than any other attribute to deliver a meaningful customer interaction. The most important 'people' skill enabling the success of a company's personalization strategy may well be simply listening to customers.
For small and medium-sized businesses that find the right combination of technology and people to implement a personalization strategy, the results are significant. Technology will help these companies scale their operations and become more competitive. Although today's applications are focused predominantly on email and the telephone, many other technologies, such as wireless telephone and integrated voice and data platforms, are rapidly becoming important vehicles for delivering personalized solutions. However, while technology is critical to personalization, it will not replace human beings. If anything, people will become more interconnected as technology provides more opportunities for them to deliver personalized solutions--increasing customer loyalty and driving revenues.
Michael Astle writes for Cisco Systems, Inc.
