Personalized Digital Marketing
Personalized Digital Marketing
The information is plenty in the digital economy. What lacks is consumer attention, and this has become a sought after commodity for the marketers (Davenport and Beck 2001). Consumer attention is driven by the relevancy of the contents. According to Davenport and Beck (2001), there are six types of consumer attention.
The big task for marketers is to influence attention that falls in the categories of front-of-mind, voluntary, and attractive. Marketers try to achieve this through the use of personalized digital marketing.
Personalized digital marketing tools helps in attracting and engaging consumers. For this, marketers use interactive digital tools such as emails, recommender systems, chatbots, and search engines (Parsons, Zeisser, and Waitman 1998).
Consumers are attracted to the content voluntarily. Having attracted the consumers, marketers should engage these consumers during their various stages of the purchase journey. Finally, the objective is to retain these consumers to maximize their lifetime value.
Digital personalized tools capture consumers’ precise actions (using clickstream data) that can be used to learn and relate to the consumers with relevant information at the right time.
Depending on the available resources, marketers can implement either segment level personalization or one-to-one personalization (an extreme and ideal form of personalization).
Personalization vs Customization
Both personalization and customization are one-to-one marketing, where firms’ marketing mix is tailored to the individual customer. However, there is a subtle difference between the two (Arora et al. 2008).
Personalization occurs when the firm decides what marketing mix is suitable for the individual. It is usually based on previously collected customer data.
Example: Amazon’s recommendation for personalized books. Netflix’s recommendation for movies.
Customization occurs when the customer proactively specifies one or more elements of his or her marketing mix.
Example: Dell allowing customers to customize their computers.
Successful implementation of one-to-one marketing requires:
- Collecting relevant data.
- Transforming the data into insights using data analysis.
- Operationalizing the results by close coordination with marketing, information technology, and production.
Theories of Personalization
Based on various theories from different fields, we can argue why firms prefer personalization. Some of these theories are:
Economic Theory:
Price discriminationis a strategy adopted by firms to maximize their profits. Under this strategy, firms charge different prices for the same product based on consumers’ willingness to pay (Varian 1989). In third-degree price discrimination where firms charge different prices for different consumer groups, personalization could be a useful tool to tailor marketing mix for the different consumer groups.Information Theory: Information is ample in the digital economy. However,
attentionis a scarce resource. Therefore, to grab consumer attention, firms need to personalize their marketing mix as per the individual consumer’s taste.Psychological Theory:
Information overloadmay lead to poor-quality choice or failure to purchase. Information overload often leads to cognitive lock. Therefore, firms may engage in personalization to provide relevant information, thereby reducing consumers’ information overload.Marketing Theory: In marketing,
heterogeneityis a concept that describes differences in consumers’ preferences, attitudes, and utilities. To addresscustomer heterogeneity, marketerssegmentthe market to cater to the individual segment’s needs. Personalization is one such tool to resolve differences among consumers and tailor marketing mix to individual consumers’ needs and preferences.
Email Marketing
In this online marketing environment, firms are continually looking for powerful and cost-effective tools to grow their customer base, engage with existing customers, and boost their sales. One such tool that firms are using in the digital marketplace is an email newsletter.
Email newsletters can be used by firms effectively to reach out to their customers and communicate with them actively and regularly. Email is also an asynchronous communication medium.
The importance of email can be highlighted as follows:
Reminders: In an online selling environment, an abandoned basket by consumers is a major problem. Email newsletters can be used effectively as reminders to these customers.
Information: Email newsletters can be used to convey consumers about new product offerings.
Educational Tool: Email newsletters can be used as an educational tool to educate consumers about product usage or upcoming upgrades.
Promotional Tool: Special promotional offers can be delivered to consumers using email newsletters.
Engagement Tool: Email newsletters can be used by firms to manage customer engagement.
Direct Marketing Tool: Emails newsletter can be used to sell directly to the consumers.
Viral Marketing Tool: Emails newsletters can be used as a useful viral marketing tool if recipients forward the email to other users.
Improved Marketing Efficiency: Given above, email marketing can have increased marketing success by improving brand image and building better customer relationships at a very inexpensive rate. It can also help multichannel firms to drive traffic to websites and measure its impact accurately.
Advantages of Email Marketing
Some of the advantages of email newsletters over traditional media are as follow:
- Low production cost
- Low distribution cost
- Ease of creation - media richness
- User convenience and intractability
- Traceability
- Personalization/Customization
Challenges of Email Marketing
Some of the challenges of measuring the success rate of email marketing are as follow (Kumar and Salo 2018):
- What are the different actions/responses/(dis)engagements through which consumers interact with an email campaign that affects its success and failure?
- How are these different consumer engagements related?
- What are the differential impacts of consumer engagements on sales generated through a particular email campaign by the involved consumers?
- How external covariates such as attributes of email campaigns, situational factors, and firms’ marketing mix affect these different consumer engagements and sales generated through a particular email campaign?
Email Marketing Strategies
Following are some of the vital email marketing strategies :
Customer-centric Benchmarking: Digital technologies are interactive, and the Internet facilitates real-time interaction. Consumers interact with digital media used by firms as advertising tools distinctively. To benchmark the performance of these digital tools, it is crucial to understand the nature of consumer interactions or responses from two perspectives. First, consumers’ responses to these digital tools provide the extent of their engagement, and there could be an underlying structure to these responses, understanding of which may give the firms appropriate relationship marketing strategies. Second, these responses are not only critical in relationship building but may also affect sales. Thus, it is essential to benchmark the usage of digital tools as advertising media in terms of consumer engagement.
Understanding the Characteristics of Digital Media: Different digital media have distinct characteristics. Furthermore, many of these characteristics can be customized to suit the preferences of users who are exposed to these media. Companies often introduce new product features to differentiate and gain competitive advantage. Similar strategies can be applied to consumers’ digital media consumption by introducing or modifying features of digital content. Digital media are used by consumers as a source of entertainment, engagement, interaction, shopping, and information search, among others. The commercial use of digital media by firms should keep in mind that these tools should simplify consumers’ purchases or decision-making process. Furthermore, different consumer responses are affected by these digital features differentially. Therefore, the design of digital content becomes critical for their effectiveness in engaging consumers.
Adaptation of Digital Media according to Business Needs: The Internet is ever-growing and ever-evolving. Thus, the digital communications used by the firm in this internet age provide new opportunities as well as challenges to small as well as large businesses. Businesses need to adopt and adapt to the new digital economy. For example, if consumers during weekends or holidays tend to disengage themselves from shopping, then the retailers should not send email messages during those periods. Similarly, the effects of scheduling mechanism for email messages may vary according to business types and business needs. Thus, digital advertising strategies are not only about adoption but also about adaptation to make content relevant to the consumers in this ever-changing digital marketing environment.
Integrated Approach to Digital Advertising Strategy: Firms are using a mix of traditional, new, and social media as a part of their integrated marketing communication strategy, and consumers also consume these different media within a short period simultaneously, a phenomenon termed as media multiplexing. Firms’ integrated marketing communication strategy, along with consumers’ media multiplexing behavior, makes it essential for firms to adopt a particular marketing communication tool within the framework of an integrated approach rather than making it an isolated marketing decision. Thus, integrating different communication tools in sync may reinforce media effects, thereby extending customer relationships with the firm and generating sales. Research suggests that reinforcing firms’ social media advertising (such as Facebook or Twitter links), online advertising, traditional advertising (such as catalogs and weekly specials), and new advertising (such as educational and sampling classes) through email marketing have positive effects on consumer engagements and sales.
Recommender System
A recommender system uses consumers’ past behavior (eg., purchase, social, cultural, political, viewing, listening, clicking, rating, liking, etc.) to recommend products or services for future consumption. According to Campana and Delmastro (2017), a typical recommendation system consists of a database system to collect consumers’ behavior and model to train and predict.
Types of Recommendor System
Adomavicius and Tuzhilin (2005) define three types of recommendation system:
Content-based: The user will be recommended items similar to the ones the user preferred in the past. Example: Netflix will recommend the next movie to watch based on what the user has watched in the past.
Collaborative: The user will be recommended items that people with similar tastes and preferences liked in the past. Example: Amazon will recommend books based on what other users have been reading.
Hybrid: These methods combine collaborative and content-based methods. Example: LinkedIn’s recommendation of ‘companies you may want to follow’.
Problem with Recommendation System
Many recommendation systems are intrusive as they require explicit feedback from the user. Often, these feedbacks requires user implicit user involvement. For example, before recommending anything to the user, Netflix asks a user to state their preference for the genre of movies that the user might like.
Therefore, the success of the recommender system depends on how much customers are trusting it, and how much they would like to provide feedback into the system.