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Personalization technologies can help enterprises cultivate customer loyalty by better targeting product offerings to individual customers, based on their preferences or buying habits.

To understand personalization technologies, one need only look at Amazon.com. The online bookseller is well known for tailoring its product promotions to customers based on their stated individual preferences or previous buying habits. Personalization enables Amazon.com to individualize its offerings, meaning customers who specify an interest in books about Italian cuisine aren't bombarded with indiscriminate promotional e-mails for tomes about skydiving, mineralogy or other topics that aren't relevant to them.

Sending customers only information that matches their needs or interests, as the Amazon example illustrates, helps enterprises reach the Promised Land of customer retention and loyalty. Differentiating the products you sell to individual customers boosts their ego, but also goes a long way to boosting your bottom line, analysts say.

In most marketing departments, the mission statement would be to find as many customers as possible for the company's products, says Don Peppers, a partner with management consulting firm Peppers & Rodgers of Norwalk, Conn. Personalization enables enterprises to change how they treat individual customers. "Fundamentally what I'm doing is reconfiguring a whole lot of different products and services. My mission statement gets transformed

into concentrating on one customer at a time, and selling that customer as many products as possible. So my gauge of success is no longer market share - what proportion of customers own my product - but customer share: what proportion of a particular customer's needs are my various products and services addressing."

Being able to anticipate and immediately address individual customers' needs deepens their loyalty and makes it less likely they will flee to your competition, says Walter Janowski, a Philadelphia-based research director with Gartner Group of Stamford, Conn. "As you know more about the customer, and as you're able to start interacting with him on a more relevant level, the tighter the bond he has with your company," says Janowski.

Evaluate system design carefully

Effective personalization systems depend on three main types of applications: data acquisition, data storage and data mining. Most companies don't build personalization systems from the ground up, preferring to buy off-the-shelf software products and customize them to integrate with existing platforms, says Sushmita Ramaswamy, an analyst with e-business consulting firm Silverline Technologies of Piscataway, N.J. "Companies need to realize that personalization is not a stand-alone product that you throw into your existing mix of applications and expect it to provide value," says Ramaswamy. "To design an effective personalization system, data has to be gathered from all the touch points the customer has with the organization."

The architecture of a personalization system, says Ramaswamy, consists of three subsystems: user administration, content profiling and rules management. These three subsystems respectively handle the identification of the customer, classifying the material that customer is interested in, and business rules determining how this information is used.

This raises the issue of customer privacy. When collecting personal information from a customer, it's important to have a clearly defined privacy policy that explains how the information will be used. "You also need to provide them with options to opt in or opt out, if for any reason the customer decides he doesn't want you to hold his information any longer," Ramaswamy says.

Personalize with people, too

Enterprises that implement personalization systems need to be sure customer service personnel are properly trained, both in the technology and the cultural reasons behind its use. "They need to understand how to use the technologies you choose, but also need to understand how that technology applies to the business process and the strategy that's driving it," says Janowski.

Gartner recommends its clients re-evaluate their compensation structure to reward employees not merely for moving product, but also for cross-selling, up-selling and customer satisfaction/retention. "It involves empowering your employees so they feel like they're part of the process. Where a lot of initiatives have failed is where the technique becomes, 'Well, management installed this software, so I guess we need to use it.' Get them involved in the planning process and understanding why personalization is important to your enterprise. Employees are the ones talking to your customers, and they know how customers are going to react to it."

Although technology is at the core of this revolution in customer interaction, Peppers cautions enterprises against relying too heavily on software and not enough on people. "The woods are full of CRM failures today. A lot of companies bought CRM and personalization technologies thinking they were going to get customer relationship management, not realizing that's something that can't be installed," says Peppers. "It has to be adopted as a business practice."

"There are a number of serious business issues at the enterprise level - issues of culture change, transition planning, change management, issues of business philosophy - that need to be addressed in a careful way, before you can get any mileage out of the technology."

Garry Kranz is a freelance business and technology writer based in Richmond, Va.

MORE ON THIS TOPIC:

Check out the searchEbusiness resources on personalization/customization.

Visit searchCRM for additional information on personalization.

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This was first published in January 2002