In a recent podcast, I talked about personalization. And this is a big lever within digital strategy. Going from “one size fits all” to more personalized services and experiences is a big increase in the value to customers.

However, …

This personalization is really a subset of a bigger idea.

Which is that you need to be continually adding value to your customers. It’s a marathon that never ends. If you aren’t running it, you will fall behind your competitors who are. That’s why I list Personalization and Never-Ending Customer Improvements as Digital Operating Basics #2.

And this is really a subset of the most important question:

In an age of endless supply, how do you win on the demand side of a digital business?

***

It’s the age of abundance. And that’s the key fight.

There are more videos than we could ever watch. More products than we could ever use. More experiences than we could ever have. Every business is increasing competing in a world that looks like this.

Photo by Andre Benz on Unsplash

And the competition just keeps coming.

In fact, automation, robotics, and AI are about to dramatically increase an already seemingly endless supply of goods and services.

So, the fight for most every business is on the demand side. It is an arms race to get customers. To sell them. To engage them. And to get them again.

If you don’t win this fight, all the other sources of strength don’t matter that much (usually).

So here is my simplest version of a winning digital strategy.

The Extreme Personalization Playbook

This is about building an organization and operating model that continually adds value to your customers.

This begins with personalizing your existing products and services.

That is level one. This is a basic operating requirement for most digital businesses. We call that running the personalization marathon. Which looks like this.

But then you raise the bar. You now want to also increase the engagement, purchases and retention of your customers. You can do this with experiences. And by building a Repeat and Retain Machine. That is Level 2.

This can be similar to video slot machines. Your customers look like this.

Or it can be done by “wowing” your customers, continually. You may not get daily engagement, but the impact of your interactions is more powerful. Your customers look like this.

And then you raise the bar again.

In Level 3, you want to expand to services. You want to move beyond the core and surround your customers with value. These are usually complementary.

That lets you capture more of the customer solution. And solve more of the customers’ problems. Plus, you can do lots of bundling (which is powerful). These services can be provided both in-house and by ecosystems. That’s Level 3. I view this as a wagon wheel. Where you move beyond the core and add surrounding services. I need a better visual for this. 🙂

Alibaba’s ecosystem is a good example of this. They have systematically added to their suite of services for merchants on their platform. Each white bubble is a service. They are building services across every part of a typical merchant’s profit and loss statement.

And finally, you build a moat, based on entry barriers and demand side competitive advantages.

That is level 4. To have a structural advantage in getting and retaining customer engagement and purchasing. Think Warren Buffet’s share of the consumer mind. And difficult to replicate capabilities and assets. Think powerful network effects and switching costs. And you can add to this supply side competitive advantages.

That leaves you in the best possible position in an age of increasing competitors, products, and services. But limited customer attention and time. You are the protected fortress that no competitors can breach, which looks like this.

***

This is a playbook for going beyond just being customer focused and innovative. It is about becoming an extremist in customer centricity – and building an operating system and structure that others cannot match. You can thrill your customers like no competitor can. And you have built big operating and competitive advantages.

Which makes you well positioned and prepared for the new GenAI tools that are going to change everything in terms of the customer experience.

Here’s the summary (which needs work).

 

Level 1: Running a Personalization Marathon

When people talk about personalization, they generally point to Netflix and Amazon. Where every customer’s experience is different. This is a great example of personalization.

Compare Amazon to a large physical bookstore like Barnes & Noble, which offers a “one size fits all” physical retail service. At the physical store, every customer has the same experience (lots of books, a café, etc.). And the only way to improve this offering is to make the store bigger, with more books available. That was an expensive but winning strategy using supply side scale.

It’s the same for Zara. In their retail stores, they offer a “one size fits all” experience and the same set of merchandise for all. And the only (non-digital) way to improve the customer experience is to increase the store size and therefore merchandise available (which is again expensive). Or by changing the merchandise offered more rapidly in response to customer buying behavior (fast fashion).

In contrast, Amazon can create a completely different customer experience for every customer (if they want). And it’s not just different books for different customers. But also offering different promotions. Having different store appearances. Using different styles of communication. And now showing different videos and advertisements.

This type of personalization is, obviously, a massive jump in the value to customers when compared to “one-size fits all” physical retail.

That’s the standard explanation for personalization. However, let me put in a couple of caveats here.

Most business cannot personalize to the individual customer, like Amazon and Netflix does.

Most businesses can customize their product mix, services and experiences for certain demographics, geographies, and customer types. And maybe to the individual customer in a few specific activities, such as promotions.

But personalization to the individual customer (a “market of one”) requires being fully digital business on the demand side. And it requires automation, with no human in the loop (due to the very high volume of changes needed). Automated individual personalization creates risks to your customer interactions. It is often a bad idea. Most businesses want to personalize to the smaller group level.

Personalization is a marathon.

This is not just a one-time customization. It’s an ongoing process. You want to gather data from customers, personalize certain aspects of their interactions, and test to see if it improved their experience. You gather data, experiment, implement and gather more data. It’s a process of experimentation, learning and adaptation. Which never ends. Hence, the personalization marathon. And yes, sometimes it can become an operating flywheel (more on that later).

You can be behind in the marathon and catch up. You can be out front, stumble and get passed. The personalization marathon never ends. And it really helps if you start running before your competitors.

So how do you start?

Or if you have already started but your competitors are ahead of you, how do you catch them?

It is pretty straight forward.

How to Start or Improve Your Personalization Marathon

First, you need to have a successful product. All strategy is secondary to product market fit. That is assumed for this discussion.

Once you have that, here are 5 steps.

Step 1: You map out the important touch points with your customers.

To keep it simple, you can start with the sales process. I recommend you use this standard graphic by McKinsey for a sales loop. Focus on those touchpoints first. The ROI should be more customers and more sales.

Step 2: You assess your digital core (DOB3) and your organization capabilities (DOB 6: people, culture, teams).

You can’t really do much personalization until you have some basic tech and people capabilities in place. You’re going to be investing in this area no matter what. Both in technology, data and in people.

Fortunately, personalization gets you a measurable return in revenue. So, you can see an actual ROI for money spent.

Step 3: You break your customers into 6 types. Based on current behavior.

Here are 6 types of customers (from BCG). From best to worst. The goal of personalization should be to improve the experience of each customer group. And to move customers up a level.

1. Brand advocates
2. Multicategory
3. Single-category regulars
4. Deal seekers
5. Disengaged
6. Lapsed

Step 4. You agree on 3-4 priority use cases.

The management team needs to work through use cases and are both impactful and doable. Out of this will come a list of 3-4 priority use cases for the next couple of months.

These use cases will guide you to focus on certain operating activities that have to change. And these are going to be different for different industries. For example, personalized marketing (communication, promotions) and customer service will be a focus in retail. But personalized content creation will mater more in fashion and beauty.

Each use case should have a clearly identified customer group, goal, and trigger.

Each use case should have an ROI. Think 3-6 months. Ideally you want both a financial ROI and / or a growth or engagement ROI. Personalization use cases should pay for themselves. That is important for a long-term commitment (i.e., marathon) in personalization.

And within this, promotions and deals that are personalized is often the best use case. It really does work. Ctrip is really good at this.

Step 5: You measure your internal process for launching personalization use cases.

At the beginning, the organization is going to be slow. The people and tech capabilities are still likely immature. And the workflows are slow.

But you want to measure how fast and effective the internal process is. And you want to drive this down over time. Long-term you want to get to 5-7 to think up and launch a use case. That is the speed at which you are running this marathon.

***

That’s a solid playbook for personalization. To get started. Or to improve what you are already doing.

Or you can just call us.

We can do a workshop with your management team and get you launched (or improved) in about 3 hours.

***

In Part 2, I’ll go into the Experiences and the Repeat and Retain Machine.

Cheers, Jeff

• Extreme Personalization Playbook Level 2: Build a Repeat and Retain Machine (2 of 3) (Tech Strategy)

—–—-

—––