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Internet Marketing & e-Commerce Ward Hanson Kirthi Kalyanam Requests for permission to copy any part of the material should be addressed to: PERMISSIONS DEPARTMENT THOMSON BUSINESS and ECONOMICS 5109 Natorp Boulevard Mason, OH 45040 Phone: (800) 423-0563 © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Part Two: Chapter Nine Personalization “The rediscovery of the customer is a byproduct – perhaps the most important one – of the onset of the information revolution.” Blattberg and Glazer, The Marketing Information Revolution © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Benefits of Personalization • Product distinction: a standard product becomes a specialized solution © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Benefits of Personalization • Product distinction: a standard product becomes a specialized solution • Low cost access to luxury and status of personalized services © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Benefits of Personalization • Product distinction: a standard product becomes a specialized solution • Low cost access to luxury and status of personalized services • Hard to evaluate experience goods become predictable search goods © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Benefits of Personalization • Product distinction: a standard product becomes a specialized solution • Low cost access to luxury and status of personalized services • Hard to evaluate experience goods become predictable search goods • Survival through differentiation © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Benefits of Personalization • Product distinction: a standard product becomes a specialized solution • Low cost access to luxury and status of personalized services • Hard to evaluate experience goods become predictable search goods • Survival through differentiation • Increased customer loyalty © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The Personalization Balance • Competitive advantage comes when personalization is supported by focus on customer-relating capabilities (CRC) © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The Personalization Balance SOURCE: George Day and Christophe Van den Bulte, “Superiority in Customer Rlationship Management,” working paper, Wharton School, September 2002 © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The Personalization Balance • Personalization efforts can produce backlash: First Class envy • Excessive personalization wastes time • Sometimes, standardization is just fine © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Personalization Approaches • Mass Customization: blending standard products with individual information © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Personalization Approaches • Mass Customization: blending standard products with individual information • Choice Assistance: advice giving systems cut clutter of product choice © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Personalization Approaches • Mass Customization: blending standard products with individual information • Choice Assistance: advice giving systems cut clutter of product choice • Personalized Messaging: consumer needs and choices tracked across repeated interaction © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Many Opportunities for Personalization SOURCE: Adapted from Kai Riemer and Carsten Totz, “The Many Faces of Personalization,” in Tseng and Piller, The Customer Centric Enterprise, (New York/Berlin: Springer Verlag, 2003 © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Mass Customization • Customization of how a product is represented or of a product’s specific attributes through four approaches: – Collaborative – Cosmetic – Transparent – Adaptive © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Mass Customization • Collaborative Customization: Online reconfiguration of a product to match consumer preferences – Example: Choosing features for a new car © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Mass Customization • Cosmetic Customization: Packaging choices personalize standard products – Example: Choosing an iPod case SOURCE: Getty Images © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Mass Customization • Transparent Customization: Product features learn the user and adjust accordingly – Example: Google Scholar © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Mass Customization • Adaptive Customization: Product features naturally customize themselves or are individually configured – Example: Weather reports by zip code © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Choice Assistance • Determining if a recommendation system could enhance online marketing: – Do customer lifetime values vary greatly? – Do customer needs vary greatly? – Are key product attributes qualitative or complex? © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Choice Assistance A recommendation system flowchart © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Choice Assistance: Approaches • Rules-based: Combines information about customers with understanding of how products are used © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Choice Assistance: Approaches • Rules-based: Combines information about customers with understanding of how products are used • Computer-assisted self-explication (CASE): Advice generated from databases of consumer input © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Choice Assistance: Approaches • Rules-based: Combines information about customers with understanding of how products are used • Computer-assisted self-explication (CASE): Advice generated from databases of consumer input • Collaborative Filtering: For complex product choices, linking like-minded individuals for recommendations © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Choice Assistance: Approaches • Rules-based: Combines information about customers with understanding of how products are used • Computer-assisted self-explication (CASE): Advice generated from databases of consumer input • Collaborative Filtering: For complex product choices, linking like-minded individuals for recommendations • Endorsement: Virtual word-of-mouth referrals link users with preferred providers © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Personalized Messaging • Users must be authenticated through a fixed, valid address – Online through Web servers, browser cookies or registration systems – Email and Instant Messaging accounts – Cell phones and wireless PDAs © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Personalized Messaging •Valid Name and Database •Valid Name •User ID •Cookies •Log Analysis •Online Behavior •Visitor Statistics •Anonymous Increasing levels of knowledge about Web user © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Personalized Messaging • With an established address, online behavior patterns suggest best approach for personalized messaging © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Personalized Messaging • With an established address, online behavior patterns suggest best approach for personalized messaging • Distinct online events or inquiries can provide trigger moments for messaging – Example: A user searching for home value calculator could need real estate services © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation
