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I'm a partner in the advanced analytics group at Bain & Company, the global management consulting firm. My primary focus is on marketing analytics (bio). I've been writing here (views my own) about marketing, technology, e-business, and analytics since 2003 (blog name explained).

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October 05, 2009

Personalization Is A Process #MITXMT

Last week I went to a MITX panel in Cambridge titled, "Get Relevant:  The Next Generation of Website Personalization".  I asked a question: "In between broadcast-to-the-masses and one-to-one, where in your practical experience is the crossover point (in number of customer segments you define and design for) where returns from finer-grained personalization are exceeded by the complexity of supporting an expanding number of them?" 

I got three good answers:

  • Brett Zucker (CTO at Bridgeline Software) and Joe Henriques (Regional Director, Sitecore) manned up ;-) and each gave me a number for where they see many organizations today -- Brett said 6-10, and Joe put it at 10-20.  Gross average, but crudely useful nonetheless!
  • Andrew Hally (VP Product Marketing and Strategy at Unica) offered that it really depends on the industry, and on the mass-customizability of the product and other elements of the marketing mix. In the credit card biz, for example, you see firms executing against thousands of segments continuously redefined through real-time testing, because it's really easy to change terms and assess response.
  • Scott Brinker (Co-founder/CTO at ion Interactive) noted that there are several answers to the question, because the process changes with each order of magnitude of the number of segments you set up to support. Scott described how in his experience, the hardest jump to make is from a handful of segments, supported by a highly manual process for creating offers, to the next order of magnitude, which at minimum requires modularization of marketing mix elements so they can be re-combined easily.  Scott further noted that traditional, primary-research-based segmentation approaches are being replaced by emergent (my word, blame me) segmentations based on testing. 

(Gents, apologies if I misquoted you -- please let me know.)

There's another question embedded in all this, which is Personalization (segmentation) with respect to what?  In other words, you can usefully define different segments for different elements of the marketing mix.  Upscale leisure traveler and a business traveler may get the same luxury hotel room.  But, they may behave differently when it comes to price.  Price-sensitive travelers may have different preferences for using marketing channels to find the best price.  So, in theory, you could have a single segment for product (luxury buyer, for example), two for pricing ("service-focused vs. price-focused"), and yet another two for channel preferences (e.g., "online-dominant" vs. "offline-dominant").  This can make segmentation much more operationally relevant, but it then also puts a premium on coordinating the outputs of these segmentation efforts (for example, if someone's really price-sensitive, you may want to steer them toward lower-cost digital channels for conversion).

Finally, another take-away from all this is to match the technology to the degree and kind (e.g., implicit vs. explicit) of personalization you intend to design a process for.  There's no point in buying a "Hemi-size" personalization engine if you've got a "Yugo-size" gas tank for marketing mix execution.  On the other hand, when the technology for testing an order-of-magnitude jump in segments becomes affordable, maybe it's time to optimize for that capability and flex / redesign the execution capability?

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