In Part 1, I argued that personalization is a subset of a bigger idea.

It is about building an organization that continually adds value to your customers.

It’s a marathon that never ends. And if you aren’t running it, you will fall behind your competitors who are.

And I’ve argued this is the solution to the most important challenge.

In an age of endless supply, how do you capture, engage, and retain demand?

There are now more videos than we could ever watch. More products than we could ever use. More experiences than we could ever have. And the competition just keeps coming.

So, the fight for most every business is increasingly on the demand side. It is a never ending, escalating arms race to acquire customers, to engage them, to sell them. And then to get them again.

I call my strategy for this the Extreme Personalization Playbook.

The Personalization Marathon is Stage 1. I discussed in Part 1 of this article series. This article is about Stage 2.

Stage 2: Build a Repeat and Retain Machine

Personalization is about creating a big increase in customer value. A personalized store is 10x better than a one-size-fits-all store. And a personalization marathon means you keep doing these types of increases in customer value.

And this can can have lots of benefits to the business.

1. Growth. In theory, if you have a superior offering for your customers, you should get more customers. And that means more revenue.
2. Higher customer satisfaction. Increasing customer value should mean higher NPS scores. And other metrics for customer satisfaction.
3. More engagement by customers.
4. More repeat purchases. Which means more revenue.
5. Greater retention.

That’s a common list of the ROIs for personalization.

However, it’s not quite right.

Personalization and increasing customer value definitely gets you 1 and 2 (more customers and revenue). These are the primary metrics and ROIs for Stage 1.

However, 3-5 (more engagement, more purchases, more retention) are more secondary effects of a better customer offering. Just because you have an improved product or experience, doesn’t mean your customers come back more often. Or engage more. Or do repeat purchases. A better social media app will likely get these things. But offering a better trip to the Bahamas doesn’t mean customers take that trip more.

Getting more engagement, repeat purchases and greater retention is actually a separate strategy. And that is what we focus on in Stage 2: Build a Repeat and Retain Machine. If a marathon is the image for personalization, video slot machines are the image for the Repeat and Retain Machine.

Video slot machines are fascinating. They are shockingly good at getting people to play over and over. They are the ultimate repeat and retain machines.

However, they were never historically this popular in casinos. When they had mechanical wheels, they were definitely popular. But secondary to poker and lots of other games.

But then they became video slot machines. They dropped the mechanical wheels and became based on video screens. They added semiconductors and became smarter and adaptive. That made a huge difference in their engagement.

They also got rid of coins and used uploaded money. They even removed the pull arm and added a button to start the game.

All of this was about increasing the impact and speed of playing the game.

And it worked amazingly well. You can now see players staring at these screen for hours, while hitting the play button about every 3-4 seconds. Players will sit there in this sort of trance like state for 10-15 hours. It’s spooky.

Video slot machines are now the first or second most popular game. Go into any casino and look at the sea of video slot machines.

And really look at the behavior of the customers. They stare at the video slot machine screen for hours. They press the play button every 3-4 seconds in a monotonous rhythm. The book Addiction by Design has great explanations for the power of video slot machines.

And they are a good analogy for what we want in a business.

Yes, we are running a personalization marathon. We must always be increasing our value to customers. Starting with personalization.

But we also want to build a Repeat and Retain Machine. We want to build a system that increases customer engagement, purchasing and retention.

If possible, we want something like a video slot machine that our customers use all the time. It’s an extreme example. But this is what I am looking for.

The only other consumer product that has this sort of impact is video games. It’s just a really powerful consumer experience. And players get sucked in and play for hours and hours. It is more similar to video poker, which is much more active than video slot machines. Gaming and video poker have active game play. In terms of engagement, they are more powerful. But not necessarily in repeat purchases and retention.

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Ok, so how do you do it? How do you start to build a machine to increase engagement, repeat purchases and retention?

I start by asking 5 questions:

1. Is there a video screen or other direct digital connection to the customer?
   • This is about the power of video screens. That’s the best. At the minimum, video screens are fun and engaging.
   • However, interactive video screens are becoming the primary human machine interface. This is becoming increasingly powerful as the machines become more intelligent. They are getting good at putting humans into various states, which we see in video games and video-based gambling.
2. Can you tap into Gaming and Rewards Behavior?
   • I’ve written about this. Gaming and rewards are powerful mechanisms. Video slots can create an almost mindless state, with players “in the zone” for hours. Video poker can create an engaged, focused state. But there are weaker and stronger versions of this.
   • Gamefication can vary between basic tools and the dark arts. Think digital addiction, sex and gambling.
   • Loyalty programs are an example of a widely accepted form. Here is how Bo Liu (Vice President of Alibaba Group and President of Tmall), talks about their 88VIP members (their loyalty program “We are pleased to see that 88VIP members, who have the greatest consumption power on our platform, served as a key growth driver for brands during the event.”
     • • “88VIP is China’s largest paid e-commerce membership program with over 42 million members by the end of June 2024. Program members are the most engaged power shoppers: on average, they visit the Taobao app 25 days out of a month and spend nine times that of non-members annually.”
3. Can you tap into other areas with deep emotional or psychological impact?
   • I’ve written about several articles about customer behaviors that have greater impact.
     • Fandom. This is great for retention.
     • Collectibles. This gets retention.
     • Shared Identity (Tribal) and Shared Belief. This gets retention. Community is powerful.
     • Gambling (an extreme form of gaming and rewards)

4. Can you provide Thrilling Products and/or “Wow” Experiences?
   • These both get frequency and attention. They get customers to check in on their own. And these can be done by every type of business.
     • Think Coupang providing endless “wow experiences” to its ecommerce users. There is lots of good thinking about experience management.
     • Think Xiaomi continually launching new products to thrill their customers, which gets them to walk into the store whenever they pass by.

5. Can you launch attention-focused products or services?
   • These are entirely new products / services that are about getting customers and keeping them engaged. They are not for generating margins.
   • These will be discussed in Stage 3.

There are basically two strategies.

• We go for increased frequency in our customer interactions.
• We go for greater impact in the interactions we have.

Ideally, you want both. Some businesses can get frequent daily engagement with their current products / services. That’s questions #1 and #2. That’s this.

But many cannot. So you focus more on having a bigger impact in the interactions you do have (that’s questions #3-4). Be surprising. Target the more deep psychological or emotional needs of customers. That’s this.

And sometimes, you want to launch entirely new products / services specifically to get attention and engagement. That’s question 5.

Let’s me talk about the first question. It’s pretty cool.

Is there a Video Screen or Other Direct Digital Connection to the Customer?

Whoever created the video screen really changed everything. It is just really mesmerizing for viewers. From the moment TV appeared, people were enamored. The family TV quickly became the center of most every home.

Whenever I think about passive video I think about people laying on the sofa staring at their TVs every single night.

Over time, passive television watching became interactive video screens. That’s computers. Smartphones. Simple video games. These interactive screens became the primary form of attention and entertainment. They become the the primary machine-human interface. We all stare at screens all day long.

And now video screens are becoming increasingly intelligent.

5.5G is currently being rolled out in China. And its biggest B2C use case is interactive screens everywhere. Think Minority Report. Tons of screens all over cities and buildings. All of which have the connectivity speed to instantly engage with us. This is how the digital world takes over the physical world.

Some less extreme examples of intelligent video screens.

• Video watching is now smart and adaptive. TikTok predicts what video we want to see next based on what we just watched. And it knows all about us.
• Computer games are real world, multiplayer and adaptive. These games are now constantly creating levels and challenges that match our ability. They match us with other players near our ability. The they are now adding intelligent NPCs that talk to you during game play. And so on.
• Video based gambling. As discussed.
• Social media is increasingly video based and intelligent. Think Instagram going to Reels. Think about how information flows are being shaped by intelligent social media platforms operating at scale. And it is just mass censorship (happening since 2016). It is increasingly mass behavior modification.

A comment on this last point because it freaks me out.

Somewhere around 2020, I realized looking at my smartphone screen wasn’t just me learning about the world. It wasn’t me exploring the internet.  It was letting the internet into my brain. It was giving others access to my brain. Maybe 3rd parties. Maybe mindless algorithms.

And I began to realize that are brains are easy to reprogram. Video screens have far more ability to influence and program me than I had previously believed. The algorithms could get me to believe something false. To not believe something true. To get angry. To be happy.

Our brains are also constantly being programmed and reprogrammed. Passively by incoming information. And video information is the most powerful version of this. I started to look at what information I was exposed to. Who was creating it. And what their interests were.

I also think a lot about the quote:

“You are programming or you are being programmed.”

I think this is true. I increasingly think about video screens like this.

And the machines are getting smarter and smarter. The machine-human interface is mostly happening in one direction.

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So whatever business you are in, you want to have video screens if possible. And you want to have a direct digital connection with customers. And in both cases, you want to them to become increasingly intelligent over time. That is the path to really powerful engagement and frequency.

Ok. This is an introduction to Stage 2.

Cheers, Jeff

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