Study: This Business Is Getting Personal

Customized Marketing Raises Privacy Issues but 'Can Pay Major Dividends'

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SAN FRANCISCO ( -- Note to marketers: Customers "are desperate to have a relationship where they are nurtured, cared about and recognized." Of course, you have to be careful not to recognize them too much.

Privacy concerns aside, a new CMO Council study concludes that individualized content will be the next big thing as marketers move from traditional mass media into a new era of ads like those depicted in the film "Minority Report."

"Personalization is the whole theme of this marketing era," said Bob Thacker, senior VP-marketing and advertising at OfficeMax. "It's the end of mass communication as we know it."

In a presentation this spring, Hewlett-Packard Chief Marketing Officer Michael Mendenhall said personalization or customization is one of the biggest trends in the industry. "Customers want you to know them," he said.

Personal attention pays
The study of 700 CMOs, CEOs and top marketing executives found that "being just a little more personal in how you help, hunt, handle and hold onto customers across every channel of engagement can pay major dividends to global marketers. Messaging to the mass market in general is simply not going to cut through the clutter and deluge of direct mail, advertising, internet, e-mail and cold-calling overtures."

Despite that, 82.9% of respondents said they use no more than a moderate amount of personalization in their communications, and only 17.1% said they use personalization extensively. Some 18.3% said they spend more than 20% of their marketing budgets on personalized communications, while 35% said they spend less than 10%, and 24.9% said they aren't sure what percentage goes to personalization.

Most of those surveyed said there is a compelling need to get more personal to increase customer retention and loyalty, better use marketing dollars, heighten return on investment, and improve response and close rates. But projections for this year indicate that little more than half of the respondents -- 55.1% -- plan to spend 10% or more of their marketing budgets on personalized communication.

One reason may be its difficulty. The study cited these key challenges: inadequate systems and infrastructure; lack of customer data and insight; and cost and complexity. What seem to be working best are a number of traditional techniques: individualized e-mails and letters, targeted database marketing leveraging personal profiles and opt-in, permission-based marketing programs.

Not a recent trend
Marketers have been personalizing direct communications for a long time, going far beyond using the recipient's first name in a form letter's salutation. Now marketers such as Alaska Airlines have been testing systems that make offers for different products with different prices based on computer users' web-surfing paths. CBS recently announced it will send targeted mobile alerts to consumers based on their behavior.

Mobile-technology companies such as Dublin, Ireland-based Changing Worlds allow mobile-phone operators to build intelligence on consumers' mobile preferences and habits. The system, based on anonymous groupings of information (such as young male consumers), can fire out personalized text messages at certain times of day to groups with certain interests or help in content discovery, search and content recommendations.

Personalization also holds promise for taking the "junk" out of junk mail. "If we can drive relevancy into mail, we can take the junk out of it and end the talk of 'do not mail,'" said Scott Gerschwer, CMO and VP-global marketing, MegaSpirea, a company that specializes in mailing technologies.

Of course, there's the question of when getting personal gets too personal and violates privacy.

Responsive pricing
Beau Brendler, director, Consumer Reports' Web Watch, said marketers are using technology that ups the price of an item the second time a consumer looks at it on a website, hoping the browser is willing to pay top dollar. It also has been used to hike the price for someone in a more well-to-do neighborhood.

That's no different from charging students and seniors different admission prices to movies and doesn't violate any laws, he said. But, he added, "without too many stretches of the imagination, it's not out of the question to put together a rather personal profile which would shock people."

Consumers also may not like to be put into niches, said Joseph Turow, professor at the University of Pennsylvania's Annenberg School for Communication. "Do you want to be seen as a 50-year-old man, or do you want to decide your own categories? When marketers go too far, there is a [potential] for backlash."

Half of the marketing experts surveyed by the CMO Council said they have at least moderately significant concerns about privacy.
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