Ecom - Lesson 9

Lesson 9 - Personalization

Included in this 9th week module are the following:
1. Weekly Study and Assessment Guide

2. Worksheets to be submitted to your teacher

LEARNING CONTENT
Introduction:
Personalization reflects the fundamental idea in marketing and customers want a product or
service that best matches their needs. The Web can serve as the matchmaker that discovers and
delivers personal information and individualized products (Hanson, 2000).

Lesson Proper:
PERSONALIZATION & MARKETING
 Marketing has the responsibility to reflect customers’ goals, needs and wants
 The result is that companies create product lines with many product and service variations in
order to meet the needs of various target markets
 Personalization is a special form of product differentiation
o A standard product is transformed into a specialized solution for an individual
Choice Assistance
 An explosion in the number of choices leads to customer confusion
 The Web is rapidly developing methods to help consumers choose wisely from the wide array of
available products
 Choice assistance can help the consumer discover his or her own tastes
Customization
 Mass customization has emerged by combining individual-level information and flexible
manufacturing
 By incorporating individual preferences, marketing more closely reflects the “voice of the
customer”
 Using specialized software, it is possible to deliver truly unique and dynamically personalized
Web sites in real time
 The Web is emerging as an essential piece of the customization puzzle
Relationship Marketing
 Choice assistance and customization lead to more powerful personalization
 Personalization becomes the basis for retaining loyal and committed customers
 When successful, customers are satisfied and profits are high
The Personalization Continuum

Choice Design
Mass
Differentiated Customized Relationship
Market
 On the left of the continuum, there’s no personalization

 Further to the right, products are customized for individual tastes
 On the far right, consumers collaborate with companies to create customized products,
which builds relationships

Personalization and the DNI Framework
 Digital technology makes it possible
o Encyclopedic storage of information provides a rich base of material
 The network makes it available
o Internet connections can tap into databases and data archives, get news
feeds, and provide time-sensitive information or accumulate information for
later use
 Individuals make it valuable
o Personalization provides value by focusing on specific individual needs

PERSONALIZATION & BENEFITS

The “Democracy of Goods”
 Technology has the power to make available to the masses what was previously available
only to the rich
 “Democracy of goods” refers to open and low-cost access to products and services
 Automation and leverage of existing digital assets makes personalized goods and services
cheap to provide and widely available to consumers

The Internet Benefits Consumers by Turning Experience Goods into Search Goods

 SEARCH GOODS are products and services that are easy for a consumer to evaluate
o Example – well-known branded products such as gasoline from Texaco

 EXPERIENCE GOODS tend to be difficult to understand and evaluate. They are too complex to
judge easily. They may be highly subjective, with personal taste being the most important
determinant of usefulness
o Example – health care services
 Consumers benefit from reduced uncertainty about experience goods
 An accurate personalization system that can match products to taste can eliminate
unpleasant consumption experiences

Personalization and the Total Product
Levitt’s rules for success through differentiation
 Any product can be customized
 Consumers use products to solve problems
 Do not ignore hard-to-measure features of the product such as fun or friendliness
 Make the intangible tangible. Provide signals that demonstrate quality and reliability

Use the Wells Fargo example to illustrate Levitt’s framework
Increasing amounts of differentiation

Personalization is a rich area for augmenting the product and finding ways to achieve the potential
product

THE PERSONALIZATION BALANCE
Providing Useful Information
 A key challenge is to determine the type and scope of information consumers will value
and use
 Customers judge information programs by their efficiency and the ratio of usage costs
with usage benefits
 Information programs that are linked to customers’ personal targets and objectives are
often successful

Personalization Backlash
 A natural result of personalization is treating customers differently
o More valuable customers will receive special/preferential treatment
 This can lead to a backlash among customers who don’t receive special treatment
 Preventing resentment may be easier online where preferred programs are less
visible

IMPLEMENTING PERSONALIZATION
 Personalization has powerful potential competitive advantages
o The first company to create an effective personalization approach in an
industry can capture many of the most profitable customers
 Personalization creates the opportunity to learn more about
o Customers’ current desires
o Future trends
o New opportunities for product features and extensions

TYPES OF CUSTOMIZATION
Adaptive Customization
 Offer the same basic product and representation to everyone
 Let users filter out most of the possibilities using pop-up menus, search functions and
preference settings
 Example:
At Spinner.com, users can select the music they want to hear using a pop-up menu

Cosmetic Customization
 Present a standard product differently to each customer
 Use of unique packaging, presentation, etc.
 Example:
New York Times uses cookies to store registration information and show the user’s name
at the top of the page
 Essential requirement is modularization – division of a product into components

Transparent Customization
 User needs and behaviors are observed
 The product is automatically changed to reflect individual tastes
 The user isn’t told or made aware of changes
 Example:
Smart ads – use observable behavior to show different ads

Collaborative Customization
 Conduct a dialogue with individual customers
 Help them articulate their needs
 Identify the precise offering that fulfills those needs
 Make customized products
 Example:
Using a password protected extranet to communicate with customers via real-time
sound and video sessions

CUSTOMIZATION / PERSONALIZATION
Q: When is one-to-one marketing worthwhile?

CUSTOMIZATION / PERSONALIZATION
Two Necessary Ingredients
 Direct interaction between the firm and individual customers / consumers
 Software capable of delivering customization

PERSONALIZATION SYSTEMS
Rule-Based System
 Observe behavior  predict preferences
o Unobtrusive: consumers don’t have to answer questions or fill in extensive
questionnaires
 Best when
o Product space isn’t complicated
o Product / service attributes can be quantified
 Example: American Airlines
 Require effective user models that are tied to observable online triggers
o A trigger is a user action that a model can use to decide what personalized
information to send

Case-Based System
 CASE (computer-assisted self-explication)
o The system queries users about preferences  matches user with the right
product / service
 Best when users only have to evaluate a small number of well-understood attributes and
features
o Example: Chipshot.com & Personalogic (Chapter 7 Online)
o Require user cooperation to get relevant user data

Endorsement System
 Connects users with local preferred providers
 Best when
o Users’ product needs don’t differ greatly
o It’s a challenge for consumers to judge quality and for vendors to explain the
value of available choices
 Examples: Autobytel.com

Collaborative Filtering
 Match users who share similar tastes
o Users share recommendations and preferences
 Best when
o Product space is complicated
o Preferences are subjective, qualitative and complex
 Example: Amazon.com instant recommendations
 Requires user cooperation to get relevant user data

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Lesson 9 - Personalization

1. Weekly Study and Assessment Guide

The Personalization Continuum

 On the left of the continuum, there’s no personalization

Increasing amounts of differentiation

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