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Personalized marketing (also called personalization, and sometimes called one-to-one marketing) is an extreme form of database marketing. Whereas product differentiation tries to differentiate a product from competing ones, personalization tries to make a unique product offering for each customer.
Personalized marketing had been most practical in interactive media such as the internet. A web site can track a customer's interests and make suggestions for the future. Many sites help customers make choices by organizing information and prioritizing it based on the individual's liking. In some cases, the product itself can be customized using a configuration system.
The business movement during Web 1.0 leveraged database technology for targeting products, ads, and services to specific users with particular profile attributes. The concept was supported by technologies such as BroadVision, ATG, and BEA. Amazon is a classic example of a company that performs "One to One Marketing" by offering users targeted offers and related products.
Personalization is the term that later followed as a way of describing this evolution in Internet marketing.
More recently, personalized marketing, also known as Individual marketing, has become practical for bricks and mortar retailers. The market size, an order of magnitude greater than that of the Internet, demanded a different technological approach now available and in use. Many retailers attract customers to the physical store by offering discounted items which are automatically selected to appeal to the individual recipient. The interactivity occurs through the offer redemptions recorded by the point of sale systems, which can then update each model of the individual shopper. Personalization can be more accurate when based solely upon individual purchasing records because of the simplified and repetitive nature of some bricks and mortar retail purchasing, for example grocery superstores.
Personalized Marketing, or as it is called marketing to the Segment of One, is also practiced by advanced telecommunication service providers. The implementation in this case is more sophisticated compared to Internet Marketing as there is a need in a dedicated solution that can integrate to various data sources within the network and has real-time fulfillment capabilities.
Don Peppers and Martha Rogers, in their book on the subject, The One to One Future, speak of managing customers rather than products, differentiating customers not just products, measuring share of customer not share of market, and developing economies of scope rather than economies of scale. They also describe personalized marketing as a four phase process: identifying potential customers; determining their needs and their lifetime value to the company; interacting with customers so as to learn about them; and customizing products, services, and communications to individual customers.
Some commentators (including Peppers and Rogers) use the term "one-to-one marketing" which has been misunderstood by some. Seldom is there just one individual on either side of the transaction. Buyer decision processes often involve several people, as do the marketer's efforts. However, the excellent metaphor refers to the objective of a single message source (store) "to" the single recipient (household), a technological analogy to a "mom and pop" store on a first-name basis with 10 million customers.
One-to-one marketing refers to marketing strategies applied directly to a specific consumer. Having a knowledge of the consumer's preferences enables suggesting specific products and promotions to each consumer. One-to-one marketing is based in four main steps in order to fulfill its goals: identify, differentiate, interact and customize.
Identify: In this stage the major concern is to get to know the customers of a company, to collect reliable data about their preferences and how their needs can best be satisfied.
Differentiate: To get to distinguish the customers in terms of their lifetime value to the company, to know them by their priorities in terms of their needs and segment them into more restricted groups.
Interact: In this phase it is needed to know by which communication channel and by what means contact with the client is best made. It is necessary to get the customer's attention by engaging with him in ways that are known as being the ones that he enjoys the most.
Customize: It is needed to personalize the product or service to the customer individually. The knowledge that a company has about a customer needs to be put into practice and the information held has to be taken into account in order to be able to give the client exactly what he wants.
- Mass customization
- Recommender system
- Management information system
- Intelligent document
- Relationship marketing
- Internet marketing
- Variable pricing
- Variable data printing
- Real-time Marketing