This week’s podcast is my playbook for Extreme Personalization. And how generative AI can supercharge never-ending customer improvements.

You can listen to this podcast here, which has the slides and graphics mentioned. Also available at iTunes and Google Podcasts.

Here is the link to the TechMoat Consulting.

Here is the link to our Tech Tours.

Here is the playbook.

 

 

Here is more on 4 levels.

• Unlock the Secret to Customer Obsession: The Extreme Personalization Playbook (1 of 3) (Tech Strategy)
• Extreme Personalization Playbook Level 2: Build Your Repeat and Retain Machine (2 of 3) (Tech Strategy)

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Episode 231 – Extreme Personalization.1

Jeffrey Towson: [00:00:00] Welcome, welcome, everybody. My name is Jeff Towson, and this is the Tech Strategy Podcast from TechMoat Consulting, and the topic for today, Extreme Personalization, how generative AI can supercharge customer improvements. It’s kind of a long title, but it’s basically a book title. For those of you who are subscribers, I’ve sent you three pretty significant articles in the last week or two, basically outlining a playbook, which I’m calling Extreme Personalization, although I probably need a better term for it.

But it’s basically about how you can use digital tools to supercharge ongoing improvements for the customer experience, and personalization would be one level of that, but there’s actually kind of a lot more to it. Anyways, this is going to be a quick [00:01:00] rundown of the playbook, but I’ve written it up in pretty good detail, and I’ll be talking a lot about this over the next really year.

This is going to be kind of a major area of focus going forward, so that’ll be the topic for today. I’ll take you through the basics. Let’s see no real, no real housekeeping stuff. Standard disclaimer, nothing in this podcast or my writing or website is investment advice. The numbers and information for me and any guests may be incorrect.

The views and opinions expressed may no longer be relevant or accurate. Overall, investing is risky. This is not investment legal or tax advice. Do your own research. And with that, let’s get into the topic. Now, personalization has been a topic for a long time. The idea that if you want to improve the customer value, the value to the customer, whether utility, experience, satisfaction, enjoyment, all of it, personalizing is pretty important.

You know, [00:02:00] probably the biggest lever you can pull in terms of doing that, you know, going from a one size fits all product or store or experience to something, you know, personalized, maybe not to the individual level, but to smaller groups where people can. You know, I would love it if the Zara store had items that a guy like me would like, or me specifically, as opposed to, you know, the standard store format.

The truth is the women’s section of the Zara store, not that much value for me. So, the more you can personalize, the more you can really jump in terms of customer improvements. That’s been around for a long time. Now, this has all become a lot more interesting recently. Well, one, there’s a bigger problem, and two, there’s a bigger opportunity.

The problem is, in the age of endless supply, of endless opportunities, of endless brands, of endless products, of endless videos to watch, [00:03:00] there is so much supply in the world now. that the entire fight in many cases is now about how do you capture customers? How do you capture demand? How do you, how do you get acquisition of customers?

How do you engage them? How do you retain them? Because trying to have a unique source of supply is, it’s just getting harder and harder. So, the demand in business, I’m sorry, the fight in business is increasingly on the demand side. Okay, what’s the most powerful approach you can have on the demand side?

That is to continually add more value to your customers. One, you’ve got to have a good product. That’s a given. You’ve got to improve that all the time. That’s a given. You have to go beyond that now. You have to add additional things, experiences, ancillary products, compliments, personalization, anything you can do to keep making what you [00:04:00] offer customers better and better and better.

And that game, for a lot of categories, it never ends anymore. So that’s kind of the solution to the problem. Now fortunately, we have generative AI. Now AI was good. Generative AI really supercharges this as a strategy, which I call extreme personalization, which is how do you, how do you supercharge customer improvements using generative AI?

It’s a wide-open field. There’s tools emerging all over the place. There’s strategies all over the place. This playbook is my recommended approach to all of this. And it’s basically got four levels. It’s not that complicated. You can put it on one graphic, which I’ll put in the show notes, but this is sort of my one page [00:05:00] strategy for this whole idea.

And that’s what we’re going to go through. So, let me just sort of go through it step by step. Level number one, which I’ve talked about, I just call, you know, I call it the personalization marathon. For each level, it’s helpful if you have a sort of an image in your brain. You know, it makes it easier to remember.

So, level one, personalization marathon. You know, the image I use is just someone running and then there’s a pack of people running behind them, and You know, personalization, it’s pretty much the same idea. You need to increasingly personalize whatever you’re offering to your customers. And this marathon, this race, you’ve got to be ahead of your customer, your competitors.

And you keep running, year after year, so whatever you were doing last year for personalization, you’ve got to do better this year. Now. You can break personalization down into a couple categories. It can be [00:06:00] personalizing the core product. We sell sneakers, so we want to have a different type of sneaker for different types of demographics.

It could be customer demographic; it could be situational. sort of approach like, we want shoes for hiking and shoes versus climbing. Okay. It could be the same group of people, demographic, but different situations. We want different shoes for men or women. We want different shoes for kids. We want different shoes for events and holidays, funny sneakers that you wear on your birthday.

I don’t know. So, there’s a type of personalization there at the product level. But you can also move beyond that to things like experiences. Maybe the store should be different for one group for another. Maybe we should have promotions that are different for one group versus another. Now the ultimate form of personalization would be what they call a market of one, where you treat [00:07:00] every individual customer differently and in a way that’s more valuable to them.

Now this, you can’t obviously have shoes for everybody, although Generative AI Smart Manufacturing is increasingly letting you do apparel that is specific for one person. I can get in China or Hong Kong; I can get clothes that are specifically designed and fitted for me as a customer of one. So, we’re getting there, but for most categories you’re not going to personalize the products person by person.

What you can do person per person is a couple things. You can do marketing, communication. It turns out generative AI is very, very good at creating specific content for each customer. You know, writing text. It’s very good at that. So marketing, customer service, customer relationship management, that is getting [00:08:00] closer and closer to market of one.

The biggest lever here, probably, is technology. Deals and Promotions. You can offer deals specific to an individual person, specific to a demographic, specific to a situation. On a hot day, the 7 Eleven can send out little text messages to all their customers that are within 100 feet, come in for 50 percent off a smoothie.

Right? Deals and Promotions are within all of the personalization talk, Deals and promotions are probably the go to solution for most businesses. It really does work. Now, you can personalize the experience and other things, but, you know, that’s a big one. So, level one of the personalization playbook, the extreme personalization playbook, is [00:09:00] run a personalization marathon.

Just start doing this. Build it into your company. Build it into your products. Build it into, you actually have to do some organizational building here, where if you have a new idea for some type of personalization, you can’t spend three months developing it. You need to test it out in about five to ten days.

See if it works. If it works, deploy it. So, you have to do some internal organizational building to get good at this, such that You know, I call it a marathon in the sense that you have to run all the time and it never ends. But it’s also certain people can run faster than others. So, every year you want to be running faster.

You want to be able to come up with an idea, to personalize, to add value, and you need to conceptualize it, test it, and deploy it faster than your competitors. If they’re doing it in a month, we want to do it in two weeks. [00:10:00] That’s the pace of your running. Okay, so within all of that there’s a whole playbook within this how you do this, how you target certain opportunities, what are the triggers to deploy.

You don’t just blast it out on an email. Here’s the deal you have. No, some of these you’re going to keep in your pocket. And when your specific customers get in a specific situation, that’s a trigger. That’s when you would send out the deal. So, it’s hot today. The temperature’s at 33. My customers are within a hundred feet of a 7 Eleven.

That’s the trigger to send out that particular promotion. And we only send it to some people. in some situations, using certain channels only. So, there’s a whole playbook within this, but that’s the basic idea. And generative AI is making this whole, you know, level one much, much better. Okay, let’s move on to level [00:11:00] two.

You start with level one because it’s a way of adding value to customers and it should show up in a couple metrics. If you’re adding more value to customers, you should get more customers from your competitors in general. We want to see the customer number and we want to see the revenue go up. If you’re doing a personalization trial, case study, and you don’t see the revenue or the customer numbers or the customer satisfaction move within three to six months, it didn’t work.

So, level one, we’re looking for those three metrics to move. If they didn’t move, it didn’t work. It’s about adding customer value. Level two is a little different. Now when we personalize, we’re adding value to our customers and we keep adding. [00:12:00] That should get you more customers, it should get you more revenue, it should get you greater NPS scores.

It doesn’t necessarily get you more retention. If you’re selling really great shoes, it doesn’t mean people are going to buy more shoes. Not necessarily. If you’re, if you’re doing this playbook with cars, they may buy a new car, but it doesn’t mean they’re going to do repeat purchases and get more cars.

So, level one gets you revenue. customer satisfaction, and users, customers. Level two is about getting repeat purchases, engagement, and retention. We’ve already sold you a great product, you’re happy. We just want you to engage more. We want you to get repeat purchases. We want you to retain with us longer.

Now that’s a little bit different. Yes, level one, adding customer value can get that, but [00:13:00] not necessarily. So, we want to break that out as a separate playbook, and we call that level 2. level 2 is the build a repeat and retain machine. And that’s the phrase I use. You want to build within your business, within your products, a repeat and a retain machine.

Where the purpose of this machine is to increase repeat purchases, to increase engagement and to increase retention and that may be very different than what we talked about in level one. Now the symbol I like to use for this, the image, is a video slot machine and I, I sent out to subscribers, I sent you a whole pretty long article about if you’ve ever watched people play video slot machines in casinos, they will sit there at the screen and pull that lever.

Well, it’s not a lever anymore. It’s a button. They will pull that button. I’m sorry, pull the [00:14:00] lever, push the button about every three to four seconds playing another round of video slots. And the people who really love this, they will sit there for hours and hours and hours. You know, they will sit there and have people bring them food so that they don’t have to get up.

It’s almost, and at a certain point it becomes addiction. But The video slot machines are arguably the most powerful thing you will ever see in terms of a machine that gets repeat usage and retention. Now the other, the other machine you might put in this category is video games. Video games have a very powerful effect on people.

People will play video games and look up and it’s six hours later. I don’t know of too many things in life where you will start doing something and look up and it’s been 3 hours, 5 hours, 6 hours. Pretty much [00:15:00] only video slot machines, video poker, and then video games, which are, you know, kind of similar in many ways.

But, you don’t have the gambling aspect in video games. Video slot machines, they have the video screen that has a powerful effect on your brain and they have gambling behavior combined. Although you probably noticed that a lot of video games are starting to incorporate gaming behavior more and more.

They’re starting to look a lot more like gambling than they used to. So, the reason I use this image is you get immediately what I’m talking about. How can we get our customers to engage? like at a more powerful level, where they’re, they’re completely just playing over and over and over. They’re engaging.

We keep them forever. And to do that, we need to build a machine. Now a video slot machine is an example of a machine. Anyways, that’s why I call it the repeat and retain machine. We need to build that into our [00:16:00] business as much as we can. Now if you have a digital service, an app, a web page, it’s easier to do that because it’s very easy to build in gamification which, you know, most websites are doing this to some degree.

If you’re a hospital, okay, maybe it’s not as appropriate. If you’re a barber, okay, it’s going to get harder to get people to come in every day. Now, so based on the product type, you’re going to have More or less ability to do this, but the goal is the same. At the end of three to six months of doing initiatives in this area, we want to see our engagement number up, we want to see our repeat purchases increase, and we want to see our retention.

And all three of those things should increase the lifetime value of a customer. So, one of the rules of this playbook level 1, level 2, level 3, level [00:17:00] 4 In each level, the initiatives should pay for themselves. If we’re going to spend a certain amount of money doing a personalization initiative, we should see that in increased revenue and it should pay for itself.

If we’re going to do an initiative in repeat and retain, we should see it within repeat purchases and it should pay for itself. Because all of these strategies are long term. They’re things that you do for a long time. For Well, if they’re not paying for themselves, it’s very hard to maintain those expenditures.

If the initiatives you’re doing pay for themselves, okay, we’ll just keep doing this. If we have to spend 20, 000 to roll out an initiative but we made 35, 000 within three to six months, great, let’s do it again. You need that for this to work long term. Okay, now when you start to think about the repeat and retain machine, there are five questions I like to [00:18:00] ask.

I’ll run through these quickly, but they’re in the email I sent out. Number one, look, is there a video screen or direct digital connection with your customer? If there isn’t, there’s much less you can do. You really want to have some sort of engagement like that. Now if you have an app, that’s great. If you have a video screen, that’s great.

If not, maybe you just have an email connection with your customers. That’s fine. Maybe you have a device that is now smart. We sell washing machines, but now they’re smart washing machines, which means we have a digital connection with our customer, which we didn’t have before. Maybe we have a store, a supermarket.

Okay, let’s put video screens in the supermarket that we can start to connect with people. Yeah, it just turns out video screens and a direct digital connection makes everything easier. If we are Starbucks, let’s get people signed up for our rewards program and download the app on their [00:19:00] phone.

Something like that. That is also going to be important because, all of this, Generative AI is playing into all of this. And these video screens that we used to deal with that were very stupid, like a TV screen, are getting smarter and smarter and they’re really becoming an interface between you and a machine.

You and Generative AI. If there’s a digital avatar on my phone that is increasingly intelligent and that is now talking to me in real time that’s a lot more powerful. So, these video screens are really becoming sort of machine human interfaces. They’re getting really smart. You want to have one of those in your business.

Okay, that’s number one. Question two. Can you tap into gaming or rewards behavior? Now if you have gambling, okay, that’s pretty powerful. If not Can you do gamification within whatever connection you have with [00:20:00] customers? Maybe it’s digital, maybe it’s not. Maybe every time you come into the store, you get a star, and when you buy five things and you get five stars, you get a free purchase.

That’s all gamification. Loyalty programs are probably the most common and powerful of these. Loyalty programs are a big, big deal. Membership programs. Basically, if you can connect your most valuable customers. That’s great. Number three, question number three. Can you tap into areas that have a deeper emotional or psychological impact?

Now some products, no matter how much you try, you cannot get repeat purchases and you cannot get engagement. If you’re selling furniture, you Look, most people don’t want to have an ongoing relationship with their furniture store. They just don’t. Although there are actually things you can do there. And [00:21:00] most people don’t buy furniture every month.

There’s no way to get repeat purchases or engagement, really. You’re limited there. If you are limited in the number of interactions you can have with your customer. Okay. Then we have to focus on having the interactions we do have be more powerful. Look, we don’t interact too frequently, so we have to interact powerfully.

So, can you tap into areas with a deeper emotional or psychological impact? And I’ve written about quite a few of these over the last six months. Fan behavior, fandom, collecting behavior, collectibles, gambling behavior is one. Shared identity, tribal behavior, shared belief, ideology, religion, things like that.

Anytime you can tap into a more powerful vein within people’s minds [00:22:00] is valuable. Community. Community is very powerful. Content can be powerful. You know, when you see banks, like in Brazil, I’ve seen these local banks have cafes in them now. And you can just come and hang and have a cup of coffee. If you’re in Thailand, you go to the mobile store, True. AIS.

You know, True Mobile now has coffee shops where you can go and sit and have a cup of coffee. And then maybe get your mobile service upgraded. But, coffee and those things, they don’t relate to the product, but they’re trying to give you a reason to come in and hang out. That’s something you can do. So, community, sharing content, hanging out, local services, anything you can do to sort of move the numbers on engagement, repeat purchases, and retention.

Those are the three metrics for level two. [00:23:00] Little other things you can do, question number four, question number five is can you sort of add more thrilling experiences. Look, come to the shopping mall. This Friday at the shopping mall, this Saturday, this Sunday, we’re going to have a children’s zoo in the main area of the shopping mall.

Why do they do that? Well, because it’s kind of a new cool experience. If you continually hit your customers with surprising experiences, thrilling them, which I call wow experiences, they will show up more frequently just to see what you got. You know, I like to go to the mall every weekend in Southeast Asia because they always have cool stuff they’ve set up in the center of the mall, like children’s zoos or little markets or you know, but these sort of wow experiences can induce more frequent visits, hence more repeat purchases, [00:24:00] probably not retention, but you get two of the numbers.

That’s number four. Number five, I won’t talk about. That’s I’ve written in the show and spoke. I think you get the idea. level 2, you need to build a retain and, I’m sorry, a repeat and retain machine. The image that always comes to my mind is people sitting at video slot machines playing every three seconds.

But in pretty much every type of business you can do this. Maybe you get repeat purchases, maybe you can’t get the repeat but you can have the interactions be more powerful. Same idea. Okay, that’s level two. Now let’s move on with level three. This one I’ve talked about using different language before, but level three I call Beyond the Core.

Surround your customers with ever increasing value. And the idea here is, pretty much everything I’ve just said, level one, level two, is talking about your core [00:25:00] products and services. This is the business we’re in. This is our market. These are our customers. This is how, these are the problems we’re solving.

This is our solution. That’s our core. At a certain point, to keep adding value to your customers, you have to move beyond the core. We have to take a step into ancillary services, to complements. You know, we are in the hot dog business. We’ve been selling hot dogs forever. That’s our business. At a certain point, we want to start selling hot dog buns.

It’s not our core business, but it’s a complement to hot dogs. And we also want to sell mustard. So now we’re not just selling customers hot dogs, we’re selling them the hot dog, the buns, and the mustard. So, you want to move into complementary services or products. And at a certain point, you may move into unrelated services.

You know, Alibaba [00:26:00] is, for me, the symbol of level 3, beyond the core, move, you know, surround your customers with ever increasing value. The image I use in my head, which is not a great one, I need a better one, is basically a wagon wheel. That the center of a wagon wheel is the customer. And the spoke that goes to that person, the customer, is whatever our products and services are.

But we want to keep adding spokes. So that, you know, we have eight different types of value we offer to our customer. And some of them may not even be that related to the core product. But we want to keep expanding so that the value we are adding is always increasing. Because in our core products, eventually we’re going to run out of new stuff to do.

So, we keep adding. And Alibaba is a great example of this. This is pretty much their primary strategy; is we are always looking to add more value to our customers [00:27:00] so that we can get a greater share of wallet. That’s what Alibaba, on the customer side, the buyer side. The primary metric Alibaba uses is share of wallet.

We know how much you’re spending every week as a consumer in life. We want a bigger percentage of that. So, we used to sell you products. Shoes, sneakers. Now we sell you services. Booking a hotel room. Booking a flight. Now we have credit cards for you. They are always increasing the share of wallet on the customer side.

On the merchant side, which is their other side, they’re, they’re doing the same playbook. They are always adding new services to merchants that sell on their platform. We started by offering you logistics and delivery, then we offered you payment services, then we offered you credit, now we’re offering you things like marketing services, now we’re going to, they, they always keep expanding.

They [00:28:00] have a, they have a Sort of a never ending, I like this phrase, you’re surrounding your customers with ever increasing value. And you may have to move on to different types of problems to solve for them. So that’s kind of how I think about that one. And for most businesses, you can do some of this in house.

At a certain point, especially if you’re a smaller business, the best way to do this strategy is to partner up with other companies and do what we call a consumption ecosystem. And I’ve talked a lot about consumption ecosystems before, where we partner with the company that makes the hot dog buns and makes the mustard.

and I don’t know what else. Does milk and beer and party favors? Who knows? We’re not, we’re going to stay in hot dogs, but we’re going to partner up with complementary service companies and we’re going to sort of all work together. And [00:29:00] especially as businesses become more digital, you really do need to build an ecosystem on the consumer side, on the consumption side.

Business more and more is becoming a team sport. Now the hot dog analogy is not awesome, but, you know, let’s say you’re Expedia, and you started out by offering hotel reservations, which is their core business. That’s where they make their money. At a certain point, they offered flight reservations as well, because people who need hotels often need an airplane ticket.

And then they expanded into train tickets. Then they moved into car rentals. Then they moved into when you’re in Rio de Janeiro, on the trip we booked for you, here’s a local tour guide. So, they’ve offered local experiences. You can see that they’ve expanded from their core business, which is really hotel reservations and flights into all these ancillary services.

Now some of those they can [00:30:00] do in house themselves because they’re a digital company, but at a certain point they may partner up with local theme parks, local tour guides, and sort of do an ecosystem approach. They don’t want to do everything themselves and that’s kind of the natural progression. So, for most companies Let’s say an e commerce site that does beauty products.

At a certain point, they may decide we want to get into hair care products as well, but we don’t want to do it in house. We want to find a partner. They might want to do it in house, but they might want to do it by partnership. They may then move into skin care, hair care, fragrances. Now, I would advise them Fragrances is probably not a great category.

And if you do want to do it, you want to do an ecosystem approach. You don’t want to do that in house, but you can be digitally [00:31:00] connected so that from the customer perspective, it’s all one service. Anyways, that’s level three, which is basically beyond the core, surround your customers with ever increasing value.

That brings us to level four, which is the last one, which is Build a Moat. So, I’m not going to go through this too much, but I’ve written eight books on this subject. As you add ever increasing value to your customers, you get greater retention, you get greater Repeat purchases. You get more customers.

You’re making more money. You’ve got to build a moat around that because you’re going to get copied. So, as you’re doing all these great things for your customers, which is key. You know, that’s the key. You’ve also got to protect it so people can’t steal it, people can’t drive down your margins, people can’t whittle down your market share.

So, as you’re doing Level 1, Level 4 always has to be build a moat at the [00:32:00] same time. And, you know, I won’t go into that. Okay, that’s pretty much what I wanted to go through in terms of the playbook. And then the final point would be everything I just said. is getting more powerful with generative AI tools.

Everything I just talked about doing, you have dramatically more ability to do those things this year as opposed to two years ago. So, when you do the personalization marathon, you’ve got to start bringing in generative AI tools. to be better at your marketing, your content creation, your customer service, your internal productivity of your staff, you’ve got to start dialing in generative AI.

As you start building a repeat and retain machine, you’ve got to start bringing in these tools. Gamification, having a more powerful impact on your customers, repeat purchases, [00:33:00] loyalty programs, you’ve got to start bringing in those tools right now, because if you’re not doing it, your competitors could be.

And you can really do these things dramatically better now than just two years ago. Surround your customers with ever increasing value. That’s about digital connectivity. Same thing. So, the good news is, Gen AI tools are letting you do all of these things more powerfully, powerfully than ever before. The bad news is, your competitors can be moving in this direction right now, so you’ve absolutely got to do it.

That’s kind of my main message to companies this year is like, I don’t care how good you are at what you’re doing, there’s a good chance your flanks are now wide open. You got to cover your flanks ASAP. Okay, and I think that’s it for today. What time is it? Yep, I’m Not too long today. Plus, I’m a little [00:34:00] tired.

I just flew back from Mexico to California last night. So, I’m sort of resting and recuperating. It was a pretty good trip to Mexico. I had a good time. It was only about a week. Just doing some administrative stuff with residency and other things. And relaxing a little bit too. So now I’m back in California with the family, which is great.

Enjoying that, but yeah, it should be a pretty good month. Anyways, I hope this is helpful. If you want to know more about this my own business in consulting, we are focusing a lot on this playbook. Because I just think it’s the most attractive opportunity out there right now. I literally can’t think of a single business that shouldn’t be thinking about doing this sort of generative AI supercharged personalization.

It’s awesome. Like, my standard recommendation is to start looking at this right now. Because we’re just at the beginning of this. And it’s pretty awesome, actually. Anyways, that is it for [00:35:00] me for today. I hope everyone is doing well. And I will talk to you in a couple days. That’s it. Bye bye.

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I write, speak and consult about how to win (and not lose) in digital strategy and transformation.

I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.

My book series Moats and Marathons is one-of-a-kind framework for building and measuring competitive advantages in digital businesses.

This content (articles, podcasts, website info) is not investment, legal or tax advice. The information and opinions from me and any guests may be incorrect. The numbers and information may be wrong. The views expressed may no longer be relevant or accurate. This is not investment advice. Investing is risky. Do your own research.