Up Close and Personal: Personalized Marketing and The Power of Audience Analytics

By Samantha Beavers

Decades ago, ambitious marketers became captivated with the idea of “an audience of one.” By tailoring advertising and promotional materials to customer interests and preferences, companies supposed they could deliver more value to consumers while simultaneously driving revenue growth. It was a great concept with one glaring problem: most companies didn’t have the tools they needed to actually execute it.

Fast forward to today – marketers have discovered unique, creative ways of narrowing their outreach and offerings to suit individual needs. And they’re not slowing down. 

Why? Because consumers have come to expect it. And because, as marketers predicted, it pays off. According to McKinsey’s Next in Personalization Report 2021, 71% of consumers look for these personalized interactions from companies – and the companies that deliver them drive an average 10-15% revenue increase.

What made this once-distant dream a reality? What should marketers do to reap the benefits? And how can companies balance the demand for personalization with consumer concerns about privacy?

Bill Rand, professor of marketing and executive director of NC State’s Business Analytics Initiative, and Donnie Hale, teaching assistant professor in business analytics, offer some perspective. 

Zooming in

Since the beginning, companies have sought to cater their messages and products to particular audiences – but how they’ve done this has changed drastically over the years.

“Back in the old days when we mostly had mainstream media like cable news and radio to work with, marketers would examine the demographics of those that tuned in,” Rand says. “So, in that respect, there’s always been this emphasis on understanding the audience and communicating directly to them.”

Through the proliferation of channels and ever-surging volume of consumer data, however, companies are able to do this with even greater precision. Now, through sophisticated technologies and predictive analytics tools, companies have greater access to insights about their target audiences than ever before – which, of course, means better marketing. It’s no surprise, then, that the global audience analytics market is expected to reach $9.64 billion by 2026.

“Through advanced analytics, marketers are now able to develop very narrow pieces of content tailored to small subgroups of consumers and their particular needs and interests. It’s sort of the same thing marketers have always been doing – crafting messages with their audience’s characteristics and preferences in mind – but the difference is now it’s hyper-personalized,” Rand explains.  

Better delivery

Advanced analytics not only help companies deliver the right messages to the right audiences, but deliver messages to consumers at the right time – another key component of personalization.

“Even just a few years ago, if you purchased something on Amazon, you’d immediately get a bunch of emails asking if you wanted to buy that same thing on Amazon. And of course you didn’t need another 50 inch flatscreen TV – you just bought one,” Rand explains.

In that sense, the key isn’t just understanding what products a customer prefers, but what stage of the customer lifecycle they’re in. Up until recently, however, most companies didn’t have the tools needed to enable this.

“This requires companies to do analytics in real-time, taking in information at the point of contact and gaining insights to make better decisions and optimizations. Through today’s advanced algorithms and computing tools, companies now have the ability to optimize and adjust customer interactions almost instantaneously — which has really enabled personalization to start happening on a larger scale,” Hale explains.

Accelerating speed

While advanced analytics have paved the way for marketers to achieve greater customer personalization, Rand and Hale agree that it’s the massive shift to e-commerce during the pandemic that ultimately accelerated it.

“To truly serve an ‘audience of one,’ companies need to have the infrastructure to support it. And historically, they haven’t,” Hale explains. “Digital platforms, however, tend to simplify things. Compared to in-store interactions, it’s much easier to run analytics on these online interactions – and these platforms allow companies the flexibility to personalize at very little cost.”

The silver lining of the pandemic, then, was that it shifted a large number of consumers online. According to the McKinsey report, 75% of consumers tried a new shopping behavior during the pandemic. And for a lot of consumers, the added convenience of curbside pickups and delivery orders made online shopping standard practice – even if they were hesitant about it before.

“This massive shift has helped companies capture more customer data and bridge the gap between their online customer interactions and offline ones – which, quite frankly, can be pretty difficult,” Rand says.

Meeting demand

The surge in web and mobile purchases didn’t just allow companies to ramp up their personalization efforts, however. It also exposed customers to the value of them. Seeing e-commerce leaders cater to their interests, consumers began to expect this type of marketing from other companies, too. 

In fact, McKinsey’s data shows that 76% of customers get frustrated when companies don’t deliver these personalized interactions. Companies that don’t keep pace with their competitors, then, risk losing customers. 

“Customers live in a sophisticated world now, and they’ve grown used to the experience being catered for them at some level. So, they tend to have a negative reaction when companies interact with them in a way that doesn’t make any sense based on their previous purchases and interactions. This means, at the very least, companies should make their interactions intelligent enough to avoid pushing customers away,” Hale explains.

Creating value

When it comes to personalization, though, more isn’t always better. The key isn’t to personalize everything – but to personalize in a way that adds value and improves the customer experience. Certain kinds of personalized interactions will matter to a company’s customers; others won’t.

“If you create personalized interactions that don’t provide any value to the customer, but instead create complexity for your manufacturing process, increase costs and create potential inefficiencies, it’s not going to be worth it,” Hale explains. “So, know your customer. Think through what personalization truly matters to them and how you can support that within the infrastructure you’ve built.”

Creating value through personalization is also an important way to build customer loyalty – and because brand loyalty isn’t where it used to be, this is more important than ever.

“It used to be that customers were brand loyal because it was difficult for them to find out information about other products. In the last 20 years or so, though, we’ve seen a huge shift in purchase power. It’s become easier for customers to access information about options they haven’t explored, which has effectively decreased brand loyalty,” Rand explains. “Personalization is one way to potentially combat that. If your brand can provide customers with value that your competitor can’t – because they don’t know anything about them – you have a leg up on the competition.”

Starting small

Compared to digitally-native companies like Netflix, who exist to deliver a curated customer experience and have long depended on personalization, many smaller companies are just now getting access to these tools. And, while personalization may be intimidating, they don’t need to jump into the deep end to reap its benefits.

One simple way to start is calculating customer lifetime value (CLV). If companies can determine which individuals are likely to be high-CLV customers and which ones aren’t, they can focus their personalization efforts where they matter most.

“You don’t have to have the most sophisticated analytics tools in the world to identify high-value customers and ensure they have a more personalized customer experience,” Hale explains. “Simply understand what kinds of products they like to purchase and use that information to drive what other products you recommend. It’s not complex analytics – it’s common sense analytics. Use basic cuts of data to give them a positively curated experience.”

Leveling up

Other simple ways to deliver personalized interactions with customers include customized homepages and emails.

“I wouldn’t be surprised to see more tools developed to create these personalized website experiences. Amazon is a great example – when you log into Amazon, you have a different homepage than I do. It wouldn’t be difficult to provide a tool to smaller companies that allows them to do this same thing,” Rand says.

Additionally, businesses can leverage any number of email tools designed to deliver customized content to customers. These include tools that send out differentiated newsletters to different subgroups of customers, as well as tools that track products customers are viewing and gradually send them more of that content over time.
Beyond customized emails and homepages, businesses can also improve their personalization efforts by considering what increases a customer’s likelihood of purchase.

“One thing that often gets overlooked in personalization is the way the offer is presented. Some people prefer facts and figures, while others are more likely to connect with imagery. Some want to hear stories from their peers about why they made the purchase, while others are more compelled by expert witnesses. So it’s not just about making the right offer to the right people at the right time – it’s also about the way the offer is delivered,” Rand explains.

Building trust

Finally, any company ramping up their personalization efforts needs to account for increasing consumer concerns about privacy. In the end, customers want the best of both worlds: companies to know enough about them in order to deliver positive, personalized interactions and, at the same time, not knowing too much.

Just take the story about Target knowing a teen girl was pregnant before her father did. Or Amazon customer concerns that Alexa is listening to their private conversations, not just their additions to their Amazon shopping list. 

“There’s a fine line between intelligent interactions and creepy ones. Customers expect companies to curate an experience based on their preferences and tastes, but at the same time, they expect those companies to protect their privacy and not misuse their personal information,” Hale says.

Compared to larger companies, small and medium-sized companies are more likely to be shielded from potential legal repercussions – as most would utilize third-party vendors for these marketing efforts. No matter the company size, though, customer loyalty and trust is on the line – which can be even more costly than regulatory fines. So, what’s the art to delivering personalized experiences without putting customers off? Is there one?

“I think the simple answer is don’t shock your customers,” Rand says. “Instead, think about ways to pleasantly surprise them.”

Interested in a career in marketing analytics? Click here to learn more about the Master of Management, Marketing Analytics (MMA) program at NC State’s Poole College of Management.