Why Too Much Personalization Can Be a Problem for Brands

Lessons from a Coffee Shop: Almond Milk Chai Latte, No Whip

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An independent coffee shop may seem an unlikely place to uncover digital transformation, but a friend of mine owns one, and talking with her, I realized that no one can escape it.

Credit: iStock/Eva Katalin Kondoros

The reason is that expectations have risen around personalization. Survey after survey reports that consumers, and especially younger ones, increasingly want to be treated as individuals. They've grown up with services like YouTube, Amazon and the Apple universe, in which nearly no two people have the same experience.

Interestingly enough, coffee shops have long been a place in the physical world where personalization reigns. In a good café today, you don't merely get a drink -- you express yourself. You can ask for an almond milk chai latte, and then specify the level of whip. Baristas deal up literally thousands of different beverages, including one they make only for you.

However, my coffee shop-owning friend revealed that personalization is also a problem for her. Her business is primarily about providing an experience. Her drinks sell at a premium, and to justify that premium, the shop strives to make sure that every customer has a great experience (they're famous for their freebies). Unfortunately, she has realized that the more personalized her shop gets, the greater the negative impact on other aspects of the visit.

For example, her shop has a small kitchen that turns out light food. Let's say a customer comes in at noon and orders a turkey salad sandwich -- and then asks that it be personalized with a fried egg and jalapeños. The order goes back to the kitchen where it slows things down, since eggs aren't on the lunch menu, and no one is ready to cook them. Now the customers behind the person have to wait longer, which negatively impacts their experience.

To get around this problem, she has three choices: Either deny the customer the requested personalization, degrade the experience of other customers, or raise prices high enough to justify hiring another cook. We can call this the personalization triangle.

Think of it as a variation of the old project management triangle. It says that you have three options in making a new product: good, fast and cheap -- and you can only pick two. You can be either good and fast, cheap and good, or fast and cheap -- but not all together. A similar dynamic is in play here. In the personalization triangle, you either individualize the experience, provide a good experience overall, or have low costs.

While some brands manage to do all three, most have to make choices. They may be personalized and deliver a great experience, but not make a lot of money. Or they could deliver a good overall user experience at a lower cost to you, but leave personalization behind.

Let's look at the problem through the lens of three different kinds of businesses: the first purely digital, the second hybrid online and offline, and the third purely brick and mortar. Digital businesses obviously have the greatest potential to balance all three. Many provide highly personalized experiences. Some have great service. And a few can also charge a good price. That said, most suffer because they have little pricing power. Amazon is both personalized and offers a good experience, but it makes next to nothing off of its transactions.

When a brand straddles online and offline, the problem becomes more acute. For example, a big box retailer may do a wonderful job at personalizing your experience online; however, it has little ability to do that in a physical store, where everyone has, by definition, the same experience. So while the cost is low and the overall experience is good, the personalization is lost. This results in disconnected branding and a confused message.

An online retailer moving into a physical space has even more difficult choices to make. Amazon has opened several stores that supposedly reflect the reading habits of locals. Still, it's almost impossible for Amazon to make money off such stores, given that its margins are so thin anyway. The stores can be somewhat personalized and offer a nice experience, but they are essentially showrooms, not functioning businesses on their own.

For a purely offline example, we can look at my friend's coffee shop. In her case, she might raise prices if her customers value an individualized experience over cost. Or if they're at their limit for what they'll pay (and let's face it, coffee has a huge markup), it's probably better to rein in the personalization.

Of course, no two brands navigate these tradeoffs the same way. The important first step is to recognize the problem and start working through it in the way that serves your customers best.

Still, it might be better for my friend and her customers if they did not insist on putting fried eggs and hot peppers on turkey salad. Sometimes our desire for personalization takes us places we really shouldn't go.

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