Tips & Tricks

What Is Personalized Marketing? A Look at How Personalized Marketing Works, Benefits, Best Practices, and More

Definition of Personalized Marketing

Personalized marketing is a marketing strategy that focuses on targeting marketing initiatives and messaging to an individual current or prospective customer. This is done with the aid of data analysis and digital technology. Personalized marketing is also known as one-to-one marketing and, as the name suggests, is completely customized to the needs of each individual consumer. Contrary to personalized marketing, mass marketing is designed to appeal to a broad demographic or audience. Personalized marketing is essentially the most focused form of targeted marketing.

How Personalized Marketing Works Personalized marketing

In order for personalized marketing to be successful, a company must be able to obtain as much personal information about a current or prospective customer as possible. Fortunately, there’s a vast sea of data on individual consumers today. This data is then analyzed and leveraged to provide customized, targeted offers, recommendations, and messaging designed to appeal to the individual based on their past behavior, interests, and other data.

Digital media is one of the best mediums for personalized marketing and is popular with advertisers. Information may be tracked through the use of cookies, beacons, or interactive feedback tools on a website, providing a wealth of data that enables advertisers to fine-tune the ads shown to individual users and viewers on channels ranging from websites to YouTube and even television.

There are four main steps to creating a personalized marketing strategy: identify, differentiate, interact, and customize.

  1. Identify: This is when data collection happens. Markers such as gender, age, and location are gathered.
  2. Differentiate: This is when the analysis happens, allowing companies to segment users into the specific niches they want to target.
  3. Interact: This is when the collected data is used to make contact with a prospective or current customer by reaching out to them in the medium and through the methods they are most likely to respond to.
  4. Customize: This is where the personalization happens, and it’s where a company can close the deal.

Examples of Personalized Marketing

Most people have made purchases on Amazon. While you may not have realized at the time that you were experiencing personalized marketing in action, you’ve probably noticed that the platform offers product recommendations that are in line with your interests and your past purchase history. Amazon gathers a plethora of data on its users, tracking the purchase and browsing history of every individual user to make product recommendations that are targeted to each individual’s interests and needs. Amazon also offers suggestions for similar products when a user is looking at a specific item. This content is unique to each user, and while it’s helpful for shoppers, it’s also a boon for Amazon and its vendors, boosting sales of similar products through smart, personalized recommendations.

Another common example of personalized marketing is the targeted emails you’ve probably received from your favorite stores, which are likely addressed with your name. This simple personalization strategy allows companies to connect with consumers on a personal level, creating a connection that leads to increased sales. These emails might even be sent at a specific time of day depending on your past engagement. It’s worth noting, however, that simply personalizing a recipient’s name is considered one of the most archaic and basic personalization methods given the advances in technology that enable marketers to go far above and beyond basic methodology to laser-focus marketing tactics on every individual prospect.

Benefits of Personalized Marketing

Benefits of personalized marketing

The big advantage of personalized marketing is that it allows a company to effectively target individual current and prospective customers, boosting the odds of engagement and conversions by appealing to the individual’s likes, needs, interests, and other preferences. This type of targeted advertising creates higher conversions and ultimately is an incredibly lucrative sales path. According to Experian, personalized marketing emails received 29% higher open rates and 41% higher click-through rates than those without personalization. Companies that use personalized marketing typically increase their total sales by approximately 19%.

Personalized marketing not only leads to increased sales, but also happier customers. When presented with advertising that is customized and appealing to them, customers feel more connected to a company, which translates  directly into dollars spent. Research shows that for approximately three-fourths of customers, email marketing that’s irrelevant to them is a frustration. What’s more, these same customers are less likely to engage with the brand, and these experiences directly influence their purchasing decisions.

Challenges of Personalized Marketing

Depending on the nature and size of a business, personalization can be cost-prohibitive for some organizations. If a grocery store were to target each consumer with a customized flyer based on their wants and needs, they would require some way to track previous purchase history and predict future purchases, not to mention the cost of designing and printing hundreds of thousands of unique flyers.

In this instance, it makes sense to use a mass market flyer. However, a grocery store loyalty program would be easy enough to set up with this sort of tracking system, and could effectively target individual shoppers with coupons and special promotions at a lower cost. If a customer buys bananas each week, a points system or coupon for bananas is likely to bring them back to the store that rewards their loyalty.

Best Practices for Personalized Marketing

To ensure the best results with your personalized marketing efforts, you’ll want to collect data from as may sources as possible. Social media is an excellent source of audience data on both a broad and individual level, as is direct email marketing. You’ll also need to ensure that any personal data collected is securely stored and cannot be accessed by unauthorized persons to protect your prospects’ and customers’ sensitive personal information.

Automating data collection and personalization technology whenever possible reduces overhead costs as well as the time investment in data collection and analysis. Freeing up sales and marketing staff to convert potential customers is a more valuable use of their time than working with a cold funnel.

Continually review data to spot what is and isn’t working, and allocate your resources accordingly in order to make the most of personalized marketing efforts and get the biggest ROI from your investments.

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Further Reading on Personalized Marketing: