The Loyalty Podcast
Newscast 8: The Personalization Episode
This week we devote our entire episode to one of the hottest topics in customer loyalty. In this featured segment, Rick Ferguson speaks to an all-star roster of experts to answer an existential question: If marketing personalization is so important, then why aren’t more companies better at it?
- Broadcast on:
- 22 Sep 2024
- Audio Format:
- other
Hi, this is Rick Ferguson here for Bridgetree. You know, I had the pleasure of meeting Jordan Wesley, VP of Sales and Marketing at Bridgetree at CRMC in Chicago earlier this year, and I kind of put him on the spot. I said, "Jordan, give me your elevator pitch for Bridgetree. Pretend I'm a prospect and you have 30 seconds to impress me." And Jordan said, "Rick, I could talk up our capabilities and customer acquisition, development and retention, but really in 30 seconds, I'll just ask you to go talk to our clients, because they'll speak to our capabilities better than I ever could." So I dug a little deeper and I learned that the average tenure of Bridgetree's top clients is over eight years. That's a tenure almost unheard of for marketing service providers. So if you're a marketer looking for someone to help you with strategy, MARTEC, data intelligence, insights, measurement, or omni-channel execution, not only within the loyalty lane, but throughout your marketing organization, then give Jordan a call. And for me, you too, will find a marketing partner that will deliver for you for the next eight years. This week on the Loyalty Newscast, we are devoting the entire episode to one of the hottest topics in customer loyalty. I'm Katie Topping, welcome to your Loyalty Newscast for the week of September the 23rd. So what is the burning issue everyone is talking about? Well, Rick Ferguson embarks on a personal journey about, that's right, personalization. Plus, we introduce our new sponsor, Bridgetree, and take our regular look at the data. So before Rick delves into debate, let's get in to give us this week's Loyalty Headlines. Thank you, Katie, as we stare down the barrel of the 2024 holiday season, one big question looms over it all, is a recession on the way. Depends on who you ask. First, the good news, the Fed finally enacted their long-awaited half-point interest rate cut, increasing the odds of a soft landing for the U.S. economy. Meanwhile, the latest reading from the University of Michigan tells us the consumer sentiment in the U.S. ticked up to a four-month high in September, thanks to inflation easing to pre-pandemic levels. But the New York Fed dropped less cheery news in their recent report. 9.1% of U.S. credit card balances are delinquent. And 8% of auto loans are in the same boat. Both of those numbers, highest delinquency rates we've seen in over a decade. In travel news, the U.S. Department of Transportation delivered an early holiday gift to Alaska Airlines with the approval of its merger with Hawaiian. The two airlines are slated to release details of the combined Loyalty Program next year. In the meantime, players will enjoy unlimited mileage transfer between the two programs. But in a scrooge-like move, the DOT also launched its long-awaited investigation into the Big Four airline loyalty programs. The airlines have been ordered to cough up records and submit detailed reports on how their reward programs operate. The DOT once answers by December 4th, and you can bet we'll be watching closely. The hotel industry has also been feeling the heat. After Labor Day strikes involving 10,000 hotel workers, the Union Unite here has launched a website at hoteldisloyalty.org to call out Marriott, Hilton, and Hyatt on reward program evaluation. The site claims, for example, that Marriott has slashed the value of their Bondoy Rewards points by a whopping 33% since 2020. In Europe, Expedia has officially rolled out its one-key loyalty program in the UK. The Turkish Airlines hit a milestone of 20 million members in its Miles and Smiles program. And in retail news, UK grocery chain Morrison's has expanded its Amazon partnership to allow shoppers to earn points for their online grocery holes. These were your loyalty headlines for this week. I'll see you here next time. In the meantime, I'll be busy figuring out just how many streaming subscriptions I can cut out if recession kicks in. Now, what you've been waiting for on this week's loyalty newscast, the first of a two-part feature where Rick chats to an all-star roster of personalization experts to answer this. If personalization is so important to building profitable customer relationships, then why aren't more companies better at it? Part one, the personalization conundrum. So the other day, I had an existential crisis about marketing personalization. And I can imagine what you're saying, the love of God Ferguson, step away from the computer, go take a walk in the woods, go visit a friend, do some volunteer work, there's more to life than marketing. My crisis was sparked by an email offer I received from a credit card provider who shall remain nameless. Now, historically 95% of this provider's emails go straight into the round file, but the subject line of this one grabbed me, a concert ticket presale offer for a rock band I love. At long last, a personalized email offer meant just for me. When I opened the email, however, my heart sank. The concert was at Madison Square Garden in New York City, and I live in Atlanta, Georgia. What began as an offer, Taylor made to increase my emotional connection to the brand, ended up as a disconnect that incrementally decreased my loyalty. Now, admittedly, this is a classic first-world problem, but the email so shook me that it set me on a vision quest to find an answer to the existential question that now beset me. Why, if we're all investing millions of dollars in AI-driven personalization software and platforms, are so few brands actually good at personalization? And do we all even agree about what personalization is? My quest set me on a journey across the loyalty landscape to speak with some of the brightest minds in loyalty. My first stop was Alison Ferguson, head of loyalty for American Honda Motor Corp. Alison has extensive experience leading loyalty initiatives for Honda, Accenture, and Merkel, among other companies. Alison also happens to be my wife, so it was relatively easy to get on her calendar. Ally, I need you to talk me out the ledge. Companies are all in on personalization, but the gap between what brands say they're delivering and how consumers perceive that delivery is often stark. So what are the challenges to personalization that you've seen companies struggle with? Ray, I'm here for you as always, and have been there also for brands who do struggle to define and more importantly, actualize personalization, including Honda, so we can step back from the ledge together. The good news, I think, is that brands have invested for gears to gather and store data about customers and in the Martec platforms to leverage that data. They've built CRM, analytics, and loyalty teams also to focus the organization on the customer. So I think that's a good foundation. At the same time, I'd agree that there aren't many companies doing it really well. I think the challenges are several as companies seek to action their data and change customer experience. A lot has to be focused on one-to-one relationships from marketing operating models to marketing calendars in order to shift to personalization. And I think that's probably the biggest challenge is changing the way that companies deliver marketing and experiences throughout the organization. Also, I think there's so much data. It's hard to know where to start. So, according to Allison, part of the problem is that companies have invested in personalization tools only to find out that there's too much data. Zero in first-party, structured and unstructured data that must be stored in CDPs and analyzed within an inch of its life. Even with those tools in place, marketers can find themselves overwhelmed. The next stop on my vision quest was the hollow confines of John M. Huntsman Hall at the Wharton School at the University of Pennsylvania and a conversation with Peter Fader, marketing professor at Wharton and author of several books on customer centricity. Fader describes himself as a personalization skeptic. I wanted to write into the conversation about personalization, and you have described yourself, and correct me if I'm wrong, but you have described yourself as somewhat of a personalization skeptic, and yet we see big brands are spending millions of dollars on personalization efforts. What are some of the most cogent criticisms that you might bring about going all in on digital personalization? It's the all-in part. So, the notion of personalization, good, great, but companies are going a little bit too far. They're thinking they can accomplish more than they really can. They're thinking that those dollars are going to go to good use, they're not aware of other things they could be doing with those dollars that might be even more effective, and so it's just spend, spend, spend, and pray, pray, pray, often not justified by the results. From talking to folks that have this responsibility within the organizations, in some cases, there's even confusion about what personalization is or how the organization is going to define it. Once you have a definition, then you typically have teams that are not always aligned, right? You have a team that might own the data required to the fuel personalization effort. You have a team that might own the IT platforms, another team owns the mobile channel, another team owns loyalty, so there tends to be like a lot of meetings and project roadmaps and budget fights, but at the end of the day, the efforts can remain somewhat scattershot or siloed, so how can organizations get their digital houses in order so we can all deliver that seamless personalized experience that consumers keep telling us that they want? The picture you paint is a very accurate one and a very grim one. It all comes down to alignment, and that really means two different things. One is going to be just organizational and functional alignment, basically getting all of those different functions to line up with each other. It's kind of obvious to say, but in the heat of the moment, just everyone's just running off in the wrong direction, and that takes us to the other part of alignment, which is accountability, that because people are just throwing money at it and just, again, hoping that good things happen, very little accountability on the personalization strategies as a whole and each of these different moving parts involve. If there was more accountability, we'd understand where the rubber meets the road, where are we getting good returns for the money, where are we not, and just be able to shift some of that spending around so that will be more effective and more aligned. One of my concerns about personalization overall, again, is that it's a black box. We're just throwing money at different kinds of campaigns and agencies and activities and just hoping to see something at the other end. There needs to be much more measurement. We need to be tagging and tracking customers. We need to be doing this in a long-run way to say, "What kinds of customers were involved in this personalization campaign? Were they valuable ones or kind of one-and-done ones? What kind of lasting impact did it have on the financial value of those customers? What can we learn from the characteristics of this campaign to let us double down on the parts that worked and to avoid the ones that didn't?" There's just a real lack of that kind of accountability which leads to this wild west scenario that you painted. So, where Allison Ferguson sees an embarrassment of riches, Peter Fader sees a lack of accountability. When I checked in with Ian Pringle, my partner here at loyalty wired and a veteran loyalty consultant, he identified a third challenge, the lack of a clear business case. Ian, thanks for stopping by. Welcome back to loyalty newscast. I'm having a bit of existential crisis about personalization and whether it's really all it's cracked up to be. Is it the marketing holy grail, can personalization build loyalty? All these questions are rattling around and I'm wondering about your take on it with your experience as a consultant with brands. What is your opinion on the state of personalization and our marketers doing it well? What could they be doing better? It's a really hot topic and I've had my fingers burned on it several times, right? So, I think everyone outside of loyalty thinks that personalization should be what everyone drives for, the one-to-one communications and having every person, every communication being relevant and targeted. I think the issue with that is that I've worked with brands where the finance director is often right and the finance marketing director is often wrong on this, right? Because throwing volume at the wall works. We've worked for some big brands where they're literally sending two emails out a week because it works and it works better than sending targeted communications out in many cases. You know, if you're someone like Domino's and you're sending emails out every Friday to millions of customers, they do that because it makes money and changing that's dangerous game because you can walk in there as a consultant and say, and say, you know, actually you want to reduce your volume, you want to make things more targeted, but the reality is is lower volume means lower response rates. The other issue of course for personalization is as a marketing director, all marketing directors love to see a bump in the road and if you get perfect personalization and targeting, your likelihood of getting a bump in the road is less and less. Do you know what I mean? Because as you get better at targeting all your customers and squeezing the lemon, then there is no opportunity for a bump in the road where you say, you have to hit the big button now, the marketing director, you suddenly need to get a 20% uplifting sales. Where'd you go? So when you need that bump, if you're already delivering that level of personalization, then the bump might not be there for you to achieve it, right? Be careful what you wish for because if you have a perfect marketing execution and marketing campaigns, where'd you go? And so at the midpoint of my vision quest, I had identified three key challenges to personalization effectiveness, too much data, a lack of accountability, and no clear business case. In part two of my quest, coming up in just a few minutes, we'll look at some possible solutions. But first, a word from our sponsor. In this episode of sponsor love, we welcome our new sponsor, Bridgetree. Jordan Wesley is the vice president of sales and marketing and gives us his take on personalization. Jordan claims getting personalization right requires more than just data and technology. It also requires you to ask your customers the right questions, in particular, golden questions. Hi, Jordan, and welcome to the loyalty newscast. Thanks, Rick, and thanks for having me on. As you know, we have copious research studies that all tell us the same thing. Customers want marketers to understand their needs. They want to be catered to personally. They want their preferences to be noted and acted upon. We've been talking about this stuff for a long time, and we have never kind of as a collective marketing industry really been able to deliver on that promise. But it seems like now there's an opportunity to do so. What in your view are some of the biggest obstacles today to brands delivering on that promise? For all intents and purposes, the data and the technology pieces is in a good place today. So today, the biggest obstacles that I hear most common are just simply internal ones. When I get brought in to talk about personalization, one of the first questions I'll ask is just how do you define personalization? You know, nine times out of ten, the answer that I'll get back is, well, we want our marketing communication to be relevant by delivering the right message at the right time across the right channel. And that's a sensible answer, right? It makes sense if I can get on board with that. But it's actually kind of a limiting and almost flawed definition. I'll follow up by asking, okay, well, how do you measure that? And that's usually where kind of comes together for the client of that moment, because they'll say, well, we measure based on conversion rate or sales, click through rates, whatever it is. And I'll say, okay, well, your last personalization engagement or communication, what were the conversion rates like? Most often, the conversion rates were single digits, five, eight percent. And so we'll have that moment of clarity. Well, if your definition is the right message at the right time across the right channel, well, you just told me that you're getting a wrong 95 to 92% of the time. And the last piece of this is kind of new emerging obstacle is actually an overreliance on data and technology. Now, that's not to say data and technology is not important, because of course it is, right? You have to have it to be able to execute personalization at scale and to do so efficiently. But I run into a lot of organizations that are so focused on driving product recommendations as their mechanism for personalization that they just want the tools that they put in place to automatically do it. And they've lost some of the fundamentals and really drifted away from what's key to success here. And that's listening to customers getting their data, applying critical analysis. You touched on the definition of personalization. That's one of the things they are consistently is that there really isn't a greed upon definition. And in some cases, not only is the definition a hard thing to get wrap your head around, but also who owns personalization within an organization can be a challenge too, right? How can a company like BridgeTree kind of help bridge that gap for organizations and help them maybe align upon a common definition and a common set of metrics to measure it? If an organization is struggling with definition or there's inconsistency or silos or islands, then getting on the same page is foundational. We basically just define personalization as a process for curating and delivering customized interactions that drive remarkable experiences. Remarkable is my favorite word in that definition because it basically implies you want it to be so special that consumers share that experience with their peers. So it really enables word of mouth, which is kind of one of the pillars in my opinion of loyalty marketing. So getting down to a definition that everybody understands is a critical step. When we listen to our customers, it puts personalization back in their hands to dictate exactly how we as brand marketers should be talking to our customers. So when we listen to our customers and we think critically about it, at that point, stakeholders on the client side should bring in their technology partners, bring in data science partners, bring in leadership together, cross-functional aligns. There's some opportunities to fill in, okay, how are we going to measure success? How do we get our executive team on board with us? One of my favorite things that you can put this in practice today is to be intentional about asking golden questions. Most marketers are familiar with the concept of like a golden record or single view of a customer. It's same with golden questions. It's being very intentional about literally asking customers the right questions to learn their preferences so that you can inform how they want to be marketed to on a personal level. It's really a process of periodic simple questions like, what name would you like us to call you? We found by doing that just at Bridgetree that it will increase success rates by three times, control groups that we've measured against. [Music] And now it's time for this week's Look at the Data, those numbers and statistics that highlight the ins and outs, the ups and downs of the global loyalty industry. We all know the importance of personalization. That's why we devoted this week's newscast to the topic. And the smart money backs it up. According to Brainy Insights, the global personalization market was valued in 19 billion dollars in 2023 and is expected to grow by nearly 15 percent annually to reach 75 billion by 2033. And when it comes to stats that demonstrate the value of personalization to the corporate bottom line, there is a veritable cornucopia of numbers to cite. We wanted to highlight the persistent gap between that investment and what consumers actually experience. Based on survey results from a host of sources including McKinsey, Adobe, e-marketer, statistic and more, here's a closer look at the personalization gap. While 92 percent of marketers believe their customers expect a personalized experience and 66 percent expect brands to understand their wants and needs, 66 percent of those same customers say that brands treat them like numbers and 52 percent say companies are generally impersonal. While 71 percent of customers expect companies to communicate with them in real time and 64 percent expect tailored engagement based on past interactions, only 32 percent of marketers say the majority of their content is personalized. 76 percent of consumers say receiving personalized communications is key in prompting their consideration of a brand and 78 percent said personalized content makes them more likely to repurchase. However, 36 percent of shoppers wish brands would do more to offer personalized experiences and only 11 percent say that brands using personalized experiences have made a positive impression on them. That's a look at the personalization gap in this week's data. Thanks for listening and we will see you again next time. Part two, the persistence of memory. At the midpoint of my personalization vision quest, I had a better understanding of why companies with robust resources still struggle to deliver personalization at scale. Are we forever doomed to this fate? After all, we've been talking about one-to-one marketing seemingly since the Eisenhower administration. Is there no way to successfully harness the powerful new tools at our disposal? Fortunately, the experts to whom I spoke painted a picture not of inevitable failure, but of opportunity. The solution to delivering personalization at scale lies not in the tools of personalization, but in the people who wield them. To Peter Fader, the first step is to center your personalization efforts in the sweet spot between the human and the digital. Right, so we've talked about alignment, some companies, and we may or may not know who they are, seem to be misaligned in favor of that all-in digital experience, the expense of the human connection. What advice would you give to the C-suite of some of those companies in terms of achieving that alignment? Well, again, I'm biased. I'm going to play to my own strength, which is you can't manage what you can't measure, that we really need to understand the value of customers, their sensitivity to different kinds of programs, just the overall dynamics about how customers evolve. I'm not even talking about the short-term customer journey, the path they follow to make this purchase, but the longer-term lifetime journey. You need to understand all of that stuff in order to come up with the right kinds of programs to know how much of your budget should be spent on, mentioned retention development, or acquisition. So companies are often acting somewhat naively, somewhat impetuously, just going after a lot of these shiny objects, and boy, oh boy, personalization is very, very shiny without really knowing how to use it or, again, how to evaluate it on the back end. It's about, in your view, not only high current value customers, which is where a lot of the focus on these programs are, but also the high potential customers, and using things like predictive analytics to try to identify those folks and get that increased spend out of them. Exactly, right, and the beautiful thing, it's the same analytics that are going to help us make these decisions or the analytics we can use on the back end to evaluate those decisions. So it's not like we need to run different kinds of analyses for one purpose or another. The same kinds of data and metrics analytics to make these decisions and evaluate them, it's going to be much easier to get buy-in, much easier to get people working together, much easier to go to the CFO and say, see, it's working. And what about privacy? Will the relentless drive to personalization in which our every movement, utterance, and decision both online and office tracked and analyzed just creep us all out? When I spoke to Matt Quint, director of the Center for Global Brand Leadership at Columbia Business School, he noted the importance of the loyalty program construct for delivering omnichannel personalization in an environment of trust. I think one of the challenges is that we don't always want a unified experience with every brand, right, because that implies that we're being tracked regularly by those brands. So there's also this changing world of privacy that's going on with more users and platforms, a la Apple, and it's automatic, choose to opt in tracking elements where the data stream is cut off. So that makes it more difficult to create a true omnichannel, connected digital physical experience. But for brands that we like a lot and really do have a sense of loyalty too, there we are part of a loyalty program and that is where you get the data interconnectivity, especially if it's a company that has a quality app with a good user experience and you're signed in that way. When I speak to loyalty marketers, delivering personalization within an environment, permission, and trust is exactly what they're trying to do. For Katherine Carl Musom, VP of Marketing for Canada's Air Miles Reward Program, the goal of personalization is to make life easier for their collectors. Yeah, I mean personalization is at the core of who we are and it has been for a long time. Personalization plays a key role in us being able to curate and serve up the right message that's going to drive behavior without overwhelming a collector. The nice thing about loyalty is we are truly speaking to all Canadians. The challenge as a marketer is we're speaking to all Canadians who are driven by different things, who require different offers to drive behavior. And so personalization and the technology and algorithms that we use on the back end mean that you're not going to see everything but you will be served up with the offers that are the most relevant to you. When personalization is done right, it's grounded in the consumer and making their life easier and making it feel like the program is relevant to them even though the program is truly relevant to all Canadians. And for Kevin McCarthy, VP of loyalty at Sinesta Hotels, personalization is about leveraging digital tools to make their travel past members feel seen and remembered both online and on site. For travel marketers delivering omni-channel personalization at scale has become table stakes. It's a big focus for us as is for others. We endeavor to talk to members about what we know about them as travel past members. So there's certainly things like how many points they have and what tiers they have. And as we also communicate things about here's properties you can redeem your points at, we tell the properties so that they're relevant for the points balanced that members have. And in our broader marketing efforts, even beyond travel past, we do take into consideration personalization based on where people have stayed, locations, and even browse behavior to make communications as relevant as possible. We are also leveraging new tools and very exciting. We're in the process of rolling out a new CRM platform to make the guest experience even more personalized based on past behaviors, preferences, what we learn about them. And that rollout is happening now. And we're seeing strong results getting positive feedback from our properties that have this. So it's just going to be an incredible tool to really personalize the experience for members when they're staying on property and even calling into the call center and truly wowing. But the expert who helped me best understand the way to scale personalization was, unsurprisingly, to both her clients and employers, my wife, Allison, who introduced me to the four R's of personalization. So the first R's recognize and what that means is knowing who I am. So this means that the customer has an identity and that could be through a loyalty program, a login ID, etc. And that we build a robust genome or now called identity graph around that customer and then deploying that data around the customer to touch points, including marketing and others. So you have to recognize who I am, first of all. And then second of all, you have to relate to me. And that means anticipating what I need from a context and relevance perspective. And I think this is more complex because my needs could change immediately. They could change without you knowing. And I think this is sort of the golden prize of knowing what someone needs at any given time and being able to relate to that need. The third R is to remember that individual. And that means, in my mind, a longitudinal understanding of the customer relationship. So remember is a durational kind of concept. And that may be perhaps what I've liked or not liked or offers I've responded to or haven't or places I've been and haven't or what have you depending on the company. And I think this again also challenging because it requires a patient analytic history of the customer that builds upon itself to become smarter over time. And I think that two R's in the middle are ones where companies haven't had a lot of great success but certainly strive to. And then the fourth R is somewhat of a product of the other three and that's recommend. And that is the most actionable R as well is to create value for me and deliver the best marketing content, product recommendation, whatever, based on the other three variables. So recognize, relate, remember and recommend are the four R's of personalization. To my journalists here, Allison's four R's of personalization are essentially a roadmap to develop personalization expertise over time. If you aren't sure where to start, start with recognizing me by using the most relevant zero and first party data at your disposal to begin decoding my customer genome, a corporate commitment to demonstrating that you value me as an individual. Then use your omni-channel tools to relate to me with personalized offers and experience delivery that understands where I am and what I need from you in that moment. The next stage leverage that data to remember me and my value to you in both the physical and digital worlds. And finally, leverage AI and machine learning to recommend the best products and services for me based on what you've learned. Call it the persistence of memory. It's the key to turning a disconnect like my poorly targeted concert email into a business case for personalization that will impact your bottom line and maybe even make my life a little better. For the last word on my successful vision quest, here's Allison Ferguson. This does imply that any company seeking to enable personalization needs a strategy, a roadmap, and a set of use cases against which to apply the vast amount of data out there. And again, I think all of your examples kind of ladder underneath this idea that we have data, we have technology, we have a journey, and we want to bring all those together to differentiate, say, my experience from your experience. And that brings us to the end of this episode of the loyalty newscast. If you have a new story and you'd like us to cover it, drop us a line, you can reach us at LinkedIn or at loyaltywired.com. I'm Katie Topping and on behalf of Rick Ferguson and Ian Pringle. Thank you for listening, until next time, do good work and stay in touch. [Music]