An Overview of Marketing

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Chapter 8 PERSONALIZATION
E-Mar-SProf. Eun Hoon Lee
E-Commerce Management, by Sandeep Krishnamurthy
Sept, 21st 2004. Kea-Nai KAING
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Learning Objectives

• To understand the basics of personalization.
• To learn how personalization differs from other
  targeting approaches.
• To understand when an organization should
  implement personalization.
• To understand the different technological
  approaches to personalization.

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Introduction

• What is personalization?

Personalization proposes a consumer segment of
size one. Rather than having one product or
service for everybody, a company can customize
its offerings based on individual tastes.
Example
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Terminology (1/2)
Marketing versus Personalization

• marketing first focused the attention of
  marketers on the idea of a segment of size of
  one.
• marketing focuses only on the company-led
  approach, whereas personalization also considers
  the consumer-led approach.
• marketing does not incorporate content
  management systems.

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Terminology (2/2)
Customization versus Personalization

• Customization is company-led, not
  consumer-led.
• Mass customization focuses on developing
  production systems to enable a company to provide
  a unique product to a customer.
• Personalization is the term appropriate for
  e-commerce, broad enough to include both
  company-led and consumer-led approaches to
  targeting a segment of size one.

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Why personalize ?

• From the consumers perspective,
  personalization reduces the transactional
  burden.
• From the companys perspective, personalization
  builds loyalty.

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When must an organization adopt personalization?
(1/3)

• Dispersion in customer lifetime value and
  needs.
• Customer sensitivity.
• Process amenability.
• Competitive environment.
• Organizational readiness.

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When must an organization adopt personalization?
(2/3)
Two approaches of personalization exist

• Firm-controlled approach
• the company builds a detailed profile of the
  consumer.
• 2. Consumer-controlled approach
• the company strives to empower its consumers.

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When must an organization adopt personalization?
(3/3)
What are the 4 types of personalization?

• Collaborative customization new product, new
  product representation.
• Adaptive customization same product, same
  representation.
• Cosmetic customization same product, different
  representation.
• Transparent customization different product,
  same representation.

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Personalization Technology (1/5)
Personalization systems typically have 2 parts

• Data collection focuses on collecting and
  maintaining consumer
  data.
• Data analysis focuses on matching content with
  profiles.

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Personalization Technology (2/5)
Data collection
The goal of the data collection process
is
to build a customer profile.
?
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Personalization Technology (3/5)
The customer profile is based on 3 types of
information

• Explicit information also called declared
  information, refers to information that is
  explicitly provided by the consumer through
  registration forms, surveys, and so on.
• Implicit information the company gathers this
  sort of information using cookies and clickstream
  analysis as the user browses. The user does not
  explicitly provide this information.
• Legacy information also called offline
  information, is collected through an offline
  relationship with the consumer or from offline
  list sellers.

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Personalization Technology (4/5)
Several approaches to analyzing profile data to
serve content exist

• Rule-based systems allows companies to set rules
  that govern the personalization process.
• Simple Filtering relies on predefined groups, or
  classes, of visitors to determine what content is
  displayed or what service is provided.
• Content-based filtering works by matching the
  content to the user profile.

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Personalization Technology (5/5)
Several approaches to analyzing profile data to
serve content exist (continued)

• 4. Collaborative filtering matches customers
  with others with similar tastes.
• Computer-assisted self-explication (CASE) is
  designed to help consumers reduce a vast choice
  set to a smaller set that they can seriously
  consider.
• Instant personalization or profiling when a
  visitor comes to a web site, the site
  automatically recognizes who it is and
  personalizes information to suit him or her.

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Appropriate Level of Personalization (1/2)
Why isnt maximum personalization always the goal
in personalization?

• The mental transaction costs rise at an
  increasing rate.
• The potential benefit from personalization
  increases at a steady linear rate with the amount
  of personal information provided.

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Appropriate Level of Personalization (2/2)
Figure 8.3 Optimal Level of Personalization
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Personalization and branding (1/2)
Personalization appears to work best under the
following circumstances

• When a balance exists between relevance and
  information overload.
• When attaining profile accuracy balances with
  mental transaction costs of consumers.

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Personalization and branding (2/2)
Some argue against personalization. Why?

• Many personalization systems assume that people
  are no longer curious explorers.
• Many systems are bound to irritate because of
  their presumption of knowledge about the
  consumer.
• Many systems seek to summarize a human being by a
  string of numbers.
• Many systems lead to increased search costs.

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Thank you !