UK Perspective: Is Personalization Practical?
A version of this article first appeared in eB-21
, published 10 times a year in Europe by TBC Research.Based in London and San Francisco, TBC Research helps senior business professionals make more informed technology decisions through its magazine, research, and events portfolio.
This time last year the clarion call of technology vendors was Web site personalization. Here was a defining technology tool that could move a company on to the next level of service. Imagine a Web page that greeted you by name and could almost psychically deduce that at that precise moment in time the one indispensable product you needed to feel like a rounded and well-balanced human being was a can opener with a red plastic handle.
This year, mention personalization to the same vendors and you get a lot of defensive mumbling and comments about the importance of having other technologies too. There remains a sound business logic to the concept of personalization. However, for the time being, it has been relegated to the technology equivalent of a B-list celebrity. A very sad fate indeed for one that fleetingly reached the dizzying apex of
stardom.
So, what happened? Perhaps reality bit? Take clothes manufacturer Levi strauss, for example. Levi embraced the new technologies wholeheartedly, not only ensuring its Web site pages greeted the visitor personally, but attempting to predict what clothes visitors would like according to their tastes in music and fashion. It introduced new items based on visitor interest and had further ambitions to let visitors cruise the site customising clothes at leisure according to style, material and colour.
Basic Errors
Unfortunately, in its head rush of enthusiasm and excitement, the blue jean corporation appeared to forget some basic fundamentals of its business. Number one: with its focus on the front-end Web site, it had ignored the back-end. It then found that in order to get a correct fit people were placing multiple orders, "just in case," and then returning the items with which they were not 100 percent happy. This resulted in huge expense for its logistics network and fouled up its returns processing capability which was vastly unprepared.
Number two: Levi's is a wholesaler and not a retailer, and its traditional retail partners became increasingly annoyed at being suddenly cut-out, with some reportedly threatening to boycott Levi's products. This was a big mistake for a company whose might came from the strength of its relationships with the likes of retail giants such as Macy's and JC Penney.
The harsh reality has certainly been compounded by the "dot bomb" phenomenon. The market now recognizes that dot com business models were unworkable and financial evaluation was naive. The fondly cherished belief that personalization technology was going to be the savior of these nascent fledglings was shredded to pieces. Robert Shaw, visiting professor of marketing at Cranfield School of Management, points out that the financial market's evaluation of dot coms was based on the potential of personalization. The markets assumed that because a dot com had a certain number of customers, a profile of those customers could be built using personalization technologies. By putting together a personalized profile of each customer they could then be cross-sold any number of relevant products for an entire lifetime. "A stupid assumption," according to Diana Woodburn, Shaw's co-director at consultancy Marketing Best Practise.
Colin Brash, a consultant with analyst company Ovum, says the situation has been
mirrored at the technology vendors. "Personalization still offers lots of promise but it has not really caught fire, so vendors no longer want to come out and say that they are personalization vendors. Rather, they are adapting to the market as it moves." This has become evident in the declining number of pure plays who offer "bolt on" personalization engines without the need for masses of systems integration. For the most part, with the notable exception of Net Perceptions, they have been consumed by other players who now offer personalization as one component in a broader suite of applications. And companies like BroadVision, Vignette and E.piphany - who last year were all pushing their personalization components - are now more modest in their claims.
One-to-one Gone?
The switch has also spiked the concept favored by many industry gurus of one-to-one marketing, which is built on the premise of personalization. After three years involvement with various companies' CRM strategies Merlin stone, IBM professor of relationship marketing, has come to the conclusion that one-to-one is unfeasible for most enterprises and the best they can hope for is a less fractured view of the customer. "Most companies can't get anywhere near [one-to-one] because it requires massive systems integration and because legacy databases are not designed for real-time interaction," says stone. "The fundamental premise of customer management is a good database and even if customers update it themselves [via a Web site] they can make mistakes."
American Airlines is often cited by One-to-One guru Martha Rogers as an example of the potential of the concept after it began making a claimed $4 million a month from a Web site which used simple personalization techniques. Ironically, e-commerce vendor BroadVision now claims it had to put the brakes on the airline's initial personalization plans because they were too ambitious and consequently unworkable. Ian Turner, managing director of BroadVision UK, says the company originally wanted to include a customer's family details, number of children, school holidays, holiday preferences, area codes, previous flights and so on. It would then target them, at the appropriate times, with relevant flight details. But Turner points out that it was going way beyond its original brief to sell last minute tickets. In its excitement, the airline had lost its focus and the vendor had to remind it of the difficulties involved. By drawing in its horns and keeping focused it has been able to meet its objectives.
Huw Williams, general manager of electronic channels at BT, is more optimistic but concedes that, with 20 million customers, it has no hope or ambition of achieving one-to-one and is concentrating instead on developing personalized segments. In line with many pundits, Williams still believes personalization is "absolutely essential for the future" but speaks of the massive challenges BT faced in integrating legacy systems to its Web site. It has no plans to integrate its billing systems, for example, because of the complexity of the task.
While some put it on the back burner, other enterprises continue to wrestle with the beast of Internet commerce and hope to harness its potential with personalization technologies. Sprawling giant Centrica, which not only provides gas to the UK but also counts the Automobile Association and Goldfish financial services among its brands, is planning to launch a Web site, using BroadVision technology, that will offer a diverse range of products from radiators to credit cards to DIY plus an online facility for registering complaints and service requests. Personalization is central to its strategy.
Then there is Tesco.com. After five years of developing an e-commerce operation, it is now moving tentatively towards introducing basic personalization features, such as the ability to remember previous shopping trips and make purchase suggestions based on this information.
Market Shake-up
Nick Siragher, consultant with the Hewson Group, poses some fundamental questions about the assumptions made about personalization. "Take up of Internet features is not as grand as people think it is. There is an expectation that a consumer cares about personalization. But is it really what the customer wants?" His comments cut to the core of the issue. Tesco.com has acknowledged that its "softy softly" approach to personalization is informed by the fact that it doesn't want to alienate its existing customers by ramping up its site with fancy personalization tools.
Widespread Internet use is unlikely to take off until broadband technologies are available to every household and digital television is more common than it is at present. In turn this means that in the consumer space personalization is unlikely to be the gateway to the "nirvana" of one-to-one marketing that some industry gurus have built a career around.