Personalization is now everywhere. Over the past few years, it has transformed from a marketing objective to a larger value system that guides how we produce and consume content. The advent of big data and artificial intelligence gives business and advertisers greater access to information about their customers’ behavior online, and in turn, helps them curate options based on their individual needs.
Amazon was one of the first companies to use customer data to make purchase suggestions based on a user’s browsing history. Now, most websites and social media platforms, including Facebook, Twitter, and Pinterest, use data to tailor content for specific users. Personalization has caught on because it’s highly effective, and useful not just for companies but for consumers as well.
Customers now want, and even expect, content that is tailored to them. A study conducted by Janrain, a company that tracks consumer identity, found that 74 percent of people report feeling frustrated with websites when content – such as offers, ads or promotions – has nothing to do with what they want. A 2015 study conducted by Gigya, another company specializing in customer identity management, found that “65 [percent] of email users were likely to unsubscribe from a brand’s emails if they weren’t relevant to their interests.” It’s common sense – why waste time with something that isn’t useful?
Personalized recommendations also tend to bump up revenues. The Harvard Business Review finds that personalization can raise sales by more than 10 percent, and McKinsey notes that 35 percent of purchases on Amazon and 75 percent views on Netflix come from personalized recommendations. Recommendations drive users deeper inside an e-commerce site and can significantly increase a seller’s conversion rate (the number of customer transactions, or purchases per visitor, to a particular store or website). A study of purchasing and browsing behavior conducted by MyBuys, a data provider that helps companies understand their consumers, showed that personalized recommendations on product pages increased conversion rates by an astonishing 411 percent. When those recommendations were on the homepage, conversion rates increased by 248 percent, but the most effective place for recommendations was the shopping cart, which led to a 915 percent increase in conversion rates. Recommendations also increase a company’s average order value.
Personalized advertising is also becoming more popular. Confident that the company has the ability to track and target users better than any other platform, Facebook will now be collecting information about all Internet users and selling personalized advertising on a broader scale in what appears to be an attempt to take over online advertising. The rising demand for social media ads, which can provide a level of specificity other advertising cannot, is clearly increasing, suggesting that brands are focusing more on personalization in their advertising. Consumers have come to expect personalized messages, and now it’s up to brands to deliver if they want to maximize the effectiveness of their advertising.
McKinsey predicts that companies will continue to dive further into the personal lives of consumers: “Social media could well make up 22 percent of marketing budgets in five years as retailers increase their spending to facilitate and influence peer connections about brands through paid ads and branded pages on social media platforms,” the consultants write. One goal of this social spending is to promote peer recommendations through social networks and user reviews, which have proven to be 10 times more effective than recommendations from salespeople. One thing is become quite clear: The personalization of content and recommendations is not going away. It’s too good for business.