PERSONALISATION

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PERSONALISATION
Chapter 7

• MARK 404 Week 8

Suprita Bharti
16 September 2002
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Personalisation Marketing

• Mass Marketing
• Many customers, few product versions
• Product differentiation
• Different versions for different target markets
• Distribution, shelf space, customer attention
• Personalisation
• Special form of product differentiation
• From Standard product to specialised solution for
  an individual

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Personalisation Marketing

• CHOICE ASSISTANCE
• Too many products Consumer confusion
• Online choice assistance determine individual
  tastes and needs, and provide recommendations
• Can create value and loyalty
• Example

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Personalisation Marketing

• CUSTOMISATION
• Individual information Flexible information
  Mass customisation
• Need accurate, timely, and relevant customer
  information
• Even stronger online by delivering unique,
  dynamic and personalised web sites in real time

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Personalisation Marketing

• RELATIONSHIP MARKETING
• Personalisation results in competitive advantage
  when it is used to form a relationship (Ongoing,
  long-term interactions)
• Basis for retaining loyal and committed customers

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Personalisation Marketing

• THE DNI FRAMEWORK
• Digital technology makes it possible
• Encyclopedic storage of information provides a
  rich base of material
• The Network makes it available
• Compatibility and standards make it easier to
  match individuals and needs
• Individuals make it valuable
• Centre of personalisation
• Focus on specific individual needs

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The Benefits of Personalisation

• DEMOCRACY OF GOODS
• Personalised service has been the privilege of
  the elite a sign of luxury and status
• Technology has the power to make this available
  to the masses open and low-cost access to
  products and services
• Automation and leverage of existing digital
  assets makes personalisation cheap and widely
  available to consumers

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The Benefits of Personalisation

• Turn experience goods into search goods
• SEARCH GOODS
• Predictable, easy to evaluate Eg.
  Levis/McDonalds
• EXPERIENCE GOODS
• Highly subjective, dependent on personal tastes,
  complex and difficult to understand and evaluate
• Eg. Education, Music

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The Benefits of Personalisation
Key is to make the intangible tangible
Personalisation allows for the augmentation of
the product and ways to achieve the potential
product
Eg. Online banking, package tracking
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The Benefits of Personalisation

• THE PERSONALISATION BALANCE
• Need to determine what kinds and scope of
  information consumers will value and use
• Costs vs. benefits
• Personalisation backlash
• Some customers are more equal than others
• Sometimes standardisation is fine

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Implementing Personalisation

• Can lead to competitive advantage
• Opportunity to learn more about
• Customers current desires
• Future trends
• New opportunities for product features and
  extensions

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Online Mass Customisation

• Two dimensions
• Representation
• How a product or service is portrayed to the
  customer
• Product attributes
• Product or service specifications change

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Types of Customisation
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Types of Customisation

• ADAPTIVE CUSTOMISATION
• No change in either product or representation
• Users can filter out most of the possibilities
  using pop-up menus, search functions and
  preference settings
• Example

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Types of Customisation

• COSMETIC CUSTOMISATION
• Different presentation of a standard product
• Prerequisite is Modularisation
• Division of a product into components
• Eg. Virtual hosting, personal greeting
• Example

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Types of Customisation

• TRANSPARENT CUSTOMISATION
• Change in product, but not in representation
• Most promising form of online personalisation
• Product is automatically changed to reflect
  observed user needs and behaviours
• User is not made aware of changes
• Eg. Smart ads use observable behavior to show
  different ads

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Types of Customisation

• COLLABORATIVE CUSTOMISATION
• Change in both product and representation
• Ultimate goal of internet marketers
• Dialogue with customers
• Articulate, identify and fulfil needs through
  customised products
• Eg. B2B extranets in product development

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Personalisation Methodologies

• Personalisation is not important when customer
  needs and product offerings are simple and uniform

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When Personalisation Pays

• I. Personalisation Not Beneficial
• Uniform needs
• Similar customer LTV
• Strategy mass marketing
• Eg. Commodities

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When Personalisation Pays

• II. Choice Assistance
• Highly differentiated customer needs but similar
  customer LTV
• Confusing assortment and variety
• Strategy Help customers find their best purchase
  choice

II
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When Personalisation Pays

• III. Preferred Customers
• Similar customer needs but wide range of customer
  LTV
• Little product variation
• Intensity of use varies (air travel, hotel stays)
• Strategy Customer identification, acquisition
  and retention

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When Personalisation Pays

• IV. One to One Marketing
• Variety of customer needs and wide range of
  customer LTV
• Strategy completely personalized products and
  services, as well as marketing efforts

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Personalisation Systems

• The value of personalisation increases as
  opportunities for differentiation and
  customisation increase

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Personalisation Systems

• Rule-Based Systems
• Observe behavior ? predict preferences
• Unobtrusive consumers dont have to answer
  questions or fill in extensive questionnaires
• Best when
• Product space isnt complicated
• Product / service attributes can be quantified

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Personalisation Systems

• CASE Systems
• 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
• Require user cooperation to get relevant user
  data to narrow choices

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Personalisation Systems

• Endorsement Systems
• Connects users with local preferred providers
• Best when
• Users product needs dont differ greatly
• Experience goods

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Personalisation 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
• Computer-assisted word of mouth

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Personalisation Flowchart
Collaborative Filtering
Q2
Q3
Q1
CASE
Q3
Q2
Endorsement
NO
NO
Q1 Do customer lifetime values vary
significantly? Q2 Do customer needs vary
significantly? Q3 Are product attributes
qualitative or complex?
Rules Based
Dont Personalize
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Personalisation Issues

• Two necessary ingredients
• Direct interaction between the firm and
  individual customers
• Software capable of delivering customisation
• Privacy Issues