Customer personalization

Customer personalization is a strategy deployed by marketers to send the right message to the right audience at the right time. 

What is customer personalization?

Customer personalization is a marketing strategy that uses customer data to offer highly tailored and individualized experiences with a brand throughout the customer journey. 

Brands collect information from every interaction with prospects and customers with the goal of understanding their wants and needs. Then, they can use that information to:

• Create ads that are targeted in messaging and by channel

• Send direct outreach through channels like email or SMS

• Recommend products a customer is likely to purchase

Customer personalization requires marketers to understand big-picture categories and customer personas within their audience as well as nuanced characteristics that can change buying behaviors. For instance, they might personalize and segment campaigns based on:

• Which products someone has viewed or favorited in the past

• How recently they made a purchase

• How often they engage with the brand’s content or campaigns

• Loyalty program membership

Brands can use a variety of customer segmentation models, including demographic data (like age or location) and behavioral data (like clicks or website cookies) to personalize and target their campaigns.

Personalization vs. customization

Personalization and customization are related but distinct concepts. A brand and its marketing team execute personalization by matching ads, offers, and messaging to individual customers’ needs. 

Customization allows the customer to adapt elements of their product usage or marketing experience for themselves. But the brand still needs to offer them those options. 

Customization options might include:

• A wide range of colors, sizes, or design options when ordering apparel

• Adjustments to pricing plans or subscription frequency

• The ability to change the user interface or color scheme of a software product

• Customers’ ability to choose which types of emails they receive and how frequently 

Why is customer personalization important?

A few years ago, brands that personalized their marketing campaigns stood out, and customers saw them as going above and beyond. Today, customer personalization is table stakes. Customers have a baseline expectation that brands pay attention to their preferences and will serve up content, campaigns, and recommendations just for them. 

Personalization goes far beyond addressing someone by name in an email campaign. It’s about sending content that reflects the brand’s knowledge of them as an individual, providing relevant offers or updates, and clearly showing customers what’s in it for them.

In 2021, McKinsey found that 71% of customers expect personalization, and 76% say they get frustrated when they don’t receive messaging that is personalized. Personalizing ads and campaigns across channels makes customers more likely to purchase. They also feel more loyal to the brand because they feel known and heard instead of feeling like a number. 

That’s why customer personalization is good for business and revenue. Other benefits of customer personalization include:

• Faster company growth - McKinsey found that companies that grow faster drive 40% more of their revenue through personalized tactics.

• Stronger customer loyalty - PwC’s Loyalty Executive Survey 2023 found that one in four executives believe that a personalized, just-for-them experience is the top reason customers keep buying from their brand.

• Improved customer experience and engagement - 64% of marketers report that personalization drives improved experiences and 55% cite increased visitor engagement, according to Statista.

• High ROI and lower acquisition costs - In 2015, Harvard Business Review found that personalization can lower customer acquisition costs by up to 50%. With more technology to help personalize campaigns today, this effect is even stronger now.

• Higher open rates - Klenty found personalized subject lines drove a 36% open rate versus a 17% open rate when not personalized.

Customer personalization examples

What does customer personalization look like in practice? Here are a few examples across different industries.

Retail and e-commerce

When someone first visits a retailer’s website, the brand might collect information like their browsing behavior and search terms, items in their shopping cart (whether they abandon or check out), and email address. 

Customer personalization in e-commerce after that initial website visit might look like:

• Email messages reminding them of items left in their cart

• Email campaigns promoting similar or complementary items to what they viewed

• Targeted ad campaigns across channels that use their browsing behavior to recommend similar items or items they viewed (but not items they already bought) and promote a relevant sale or discount

• A website popup or push notification the next time they visit the brand’s website offering a discount for the item types they viewed before

Sports

Sports fans typically engage with a team online by following or interacting on social media channels, signing up for emails or text messages, or buying tickets online.

Professional sports brands can personalize fans’ future experiences by:

• Building an audience based on previous ticket purchases at a certain time of year and sending an email or text campaign inviting them to purchase

• Identifying fans who have been to multiple games on a certain day of the week and promoting a multi-ticket package for games on that day

• Using Salesforce data to identify those who might purchase season tickets and sending them a personalized campaign

• Sending outreaches to win back churned season ticket holders who have recently visited the venue or bought tickets to a certain number of games 

• Inviting fans of an opposing team to a game when that team is in town

• Creating targeted campaigns for fans to invite them to purchase team merchandise

Finance

Finance is a highly regulated and sensitive industry, and personalization can make all the difference for attracting and retaining customers. Here are some ways to personalize marketing campaigns to potential and current customers: 

• Promote credit card offers to customers who only have checking accounts but make large purchases with their debit cards.

• Identify customers who recently made a deposit and send campaigns to help them make the most of their money, like with a high-yield savings account or financial advisor.

• Reach out to customers with savings accounts who make infrequent deposits with a savings goal campaign to increase deposits.

• Target existing customers within a certain distance of a new branch to let them know of the location’s services and hours.

• Send targeted campaigns with financial advice or support articles to customers who apply for a mortgage application or car loan.

• Personalize messages to customers based on what they search on the website and complementary offerings that customers in that stage of their financial journey typically choose.

The role of data in customer personalization

Customer personalization will always be out of reach without a solid foundation of customer data. It’s impossible to tailor a campaign to the individual without knowing anything about them or having the context and history of their buyer journey. 

Marketers don’t need just any data, either — they need reliable, accurate, and current data. This should be from a single, centralized source of truth like a data warehouse that enables flexibility and ongoing data-backed decisions. 

Historically, marketers struggled to access and activate customer data from the data cloud without the help of a data scientist or IT team. But now, with a tool like a composable customer data platform (CDP), marketers gain “self-service” access to activate data, create audiences, segment campaigns, and apply personalization for better targeting all around.

When marketers try to personalize campaigns without customer data, they create generic campaigns that customers don’t care about. But if they try to use outdated or inaccurate data for personalization efforts, they’re likely to send misplaced, poorly timed campaigns — the kind that can make a brand lose the right to contact an audience. 

For instance, when customers receive too many irrelevant, impersonal campaigns, they might unsubscribe from email updates or SMS marketing or hide ads from the brand on social media. And enough content or campaigns like that will make them think twice about buying from that brand ever again.

Trying to win someone back after a disappointing experience is an arduous uphill battle. So, the best course of action is for organizations to keep data clean and organized so campaigns can be properly personalized and well-executed.

Which teams are most involved with customer personalization?

It takes a village to personalize marketing campaigns and the customer experience. Here are the teams who should be involved in creating a personalized customer journey:

• Marketing teams - Marketers are responsible for creating and executing campaigns, so they ultimately oversee messaging personalization. From adjustments like including a first name field in an email or text to defining audiences to send a targeted campaign, marketers implement personalization in every touchpoint with customers.

• Data science and security teams - Without a tool like a composable CDP to help marketers activate their data from the data warehouse, marketing must rely heavily on the data team. Even with a tool to help them activate data, compliance and security teams are responsible for ensuring data stays clean and safe so marketers can use it for personalizing their campaigns.

• Sales teams - Especially in the B2B world, sales spends extended time with customers. So, sales teams not only benefit from personalized marketing campaigns (because they convert to demos and customers) but can also help define audiences and their needs to support campaigns.

• Customer service teams - Much like sales, customer service talks to customers about their needs, especially any issues with the product or service. The customer service team can help marketers avoid promoting products that are getting bad reviews. They can point to predictors of churn or red-flag behaviors from customers to help marketers create personalized campaigns designed to win back lapsed or at-risk customers.    

Challenges of customer personalization

While customer personalization is an important strategy for any brand, it comes with its fair share of obstacles. Here are some challenges to be aware of and some ways to combat them.

Third-party cookie deprecation

Marketers have long relied on third-party cookies as a data source for understanding their audiences and personalizing campaigns. By the end of 2024, however, Google Chrome is on track to disable third-party cookies for all users and other browsers are likely to follow soon after. This change means marketers will lose a key data source, making customer personalization more difficult. 

In response, marketers need to shift their strategy to collect data firsthand, more directly track user behaviors and preferences, and focus on zero and first party data sources.

Data analysis at scale

Customer personalization requires collecting and applying information about a customer. But across thousands or even millions of customers, activating data to personalize campaigns is a massive task even for large teams. That’s why 1:1 personalization has historically been out of reach. 

However, newer AI tools offer a potential solution to this challenge by processing large amounts of customer data to make personalization much easier on a large scale.

Data compliance and protection

As with any marketing effort involving sensitive customer data, data security and protection should be top concerns and priorities for marketers. When using data, there’s always a risk of too many people having access or data getting into the wrong hands. 

That’s why marketers who implement personalization should work closely with their data security teams to ensure they can balance access with protection and compliance. Organizations need a strong foundation of data governance to keep sensitive information safe while being able to use data to personalize campaigns.

Ethics, empathy, and transparency

Customers don’t want to receive irrelevant campaigns, and they expect brands to know them across channels. But brands walk a fine line. Personalization should avoid overstepping in its predictions of customer behavior, and make sure these predictions are based on facts and not biases. Target’s infamous instance of predicting pregnancy based on purchase behavior over a decade ago made the news for being too invasive. Customers shouldn’t feel like marketing campaigns are creepy or know too much, and they don’t want to wonder, “How did you know that?” 

Alongside personalizing campaigns, brands need to remain ethical and transparent about the data they’re collecting and how they’re using it. Customers need to learn how companies collect, use, and store their data, especially in light of regulations like the EU’s GDPR. But brands also need to lead with empathy by thinking about how a personalized campaign might make customers feel and gauging customer acceptance of campaigns to avoid a misstep. 

Tips for building an effective personalization strategy

The factors used to personalize a campaign vary based on the industry, buyer types (B2B or B2C), length of the buying cycle, preferred marketing channels, and more. Across all of those facets of customer personalization, here are a few fundamental best practices to consider for the best results. 

Use A/B testing to improve personalization

As with any campaign, use rigorous testing to learn what kind of messaging and offerings appeal to which subsets of the audience. Test different types of personalization, like abandoned cart emails or recommended add-on text messages, and positioning elements like discounts, loyalty program points, or limited-time messaging. 

Pay close attention to click rates and conversion rates to see what works best for audiences overall and individuals, which fuels better-tailored campaigns. 

Personalize based on the customer journey

Personalization changes over time — customer personalization should look different early on in someone’s buyer journey from how it looks after they’ve made several purchases. For one thing, brands gain more data about customers over time, which should change how they market to the buyer. Marketing strategies should also evolve based on how customer needs change. 

For example, pay attention to buying behaviors. Has a customer slowed their purchasing patterns, or are they especially interested in clearance items? Take these budget-conscious signals into consideration. Look out for behaviors that might signal churn or willingness to spend more money as time goes on, and personalize the message based on these factors.  

Take an omnichannel approach

A holistic personalization strategy considers every channel where customers encounter the brand. It collects information from their behavior anywhere and personalizes messaging everywhere. This is an omnichannel approach — one that creates a seamless, integrated approach to customer experience personalization. 

Create a consistent experience on every marketing channel by personalizing the message to the individual customer across channels. That way, the audience doesn’t just feel known on the website, but in each place they find the brand and messaging.

Gather customer insights from internal teams

Customer-facing teams like sales and customer service spend much of their time talking to or serving customers. So they’re likely to notice behavior patterns, customer preferences, and missed marketing opportunities for personalization. They know what leads to customer satisfaction and what leads to churn. Spend time talking to these teams or ask them for feedback on new ways to personalize campaigns. 

For instance, they might notice that customers who spend above a defined dollar amount buy certain products together or rarely buy another product. If they pass that information to marketing, use that information to shape the content of campaigns and personalize more effectively. 

Collect zero and first party data whenever possible

The days of data collection via third-party cookies are numbered. Brands must shift their focus to strategies focused on data that customers offer up freely. 

Zero party data (such as data from forms and surveys) and first party data (like product and browsing data) come directly and voluntarily from customers. These data types are more compliant and transparent, so they’ll be a more important part of marketers’ approach to customer personalization. Make a plan to proactively collect customer data and use it to fuel personalization. 

Leverage AI to execute personalization at scale

Between data analysis and application, plus the creativity needed for any marketing campaign, true personalization at scale without technology like AI isn’t just time-consuming — it’s virtually impossible. But AI excels at processing large amounts of data quickly, which means marketers can use it to review data to create audiences and journeys to power deeply personalized experiences. 

A tool like a natural language audience builder lets marketers describe the audience they’re trying to reach as they would to a colleague. Using data from their cloud, generative AI will determine the relevant data fields and identify individuals who meet the criteria to create the audience so they can personalize campaigns to that exact subset of customers.

What tools do I need for customer personalization?

Customer personalization requires a robust tech stack to support the data, analysis and processing, and campaign execution involved. An entire suite of tools works together to bring personalization to life. This list includes:

• Data warehouse - A robust, secure, and centralized source of truth for customer data. Some of the top options are Google BigQuery, Snowflake, and Amazon Redshift.

• Composable CDP - Marketers need a way to activate data and, ideally, self-serve without relying on data science or IT teams. A composable CDP (like GrowthLoop) sits on top of the data cloud and allows marketers to execute data-driven campaigns with ease.

• Destinations - Marketers already use destinations for their marketing — these are the places they send customer data to activate it. These include the channels they use to reach audiences (like Facebook Ads or TikTop Ads), their CRM (like HubSpot or Salesforce), or platforms for sending campaigns (like MailChimp or Klaviyo).

• AI tools - While not essential, AI transforms marketers’ ability to personalize campaigns by processing large amounts of data quickly and enabling customer personalization at scale like never before. AI tools for personalization include generative AI tools for content creation and natural language audience builders.