is an extreme form of product differentiation
In economics and marketing, product differentiation is the process of distinguishing a product or offering from others, to make it more attractive to a particular target market. This involves differentiating it from competitors' products as well as a firm's own product offerings...
. Whereas product differentiation tries to differentiate a product from competing ones, personalization tries to make a unique product offering
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
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. Drew Bartkiewicz and Bill Zujewski were two of the biggest industry advocates of the benefits and feasibility of One to One and later of personalization. Dr. Pehong Chen was the technologist who founded the software company, BroadVision, which enabled large companies to personalize their e-Business initiatives in the pursuit of One to One Marketing.
More recently, personalized marketing has become practical with 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
Point of sale or checkout is the location where a transaction occurs...
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.
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
Economies of scope are conceptually similar to economies of scale. Whereas 'economies of scale' for a firm primarily refers to reductions in average cost associated with increasing the scale of production for a single product type, 'economies of scope' refers to lowering average cost for a firm in...
rather than economies of scale
Economies of scale, in microeconomics, refers to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit...
. 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 fulfil its goals: identify, differentiate, interact and customize..
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.
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.
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.
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.
Examples of companies that have made use of these techniques in order to persuade their clients:
- Market America;
- Dell Computers;
- Smart Cars;
- Sonae Distribuição (Modelo Continente SGPS).
- Printable Technologies
- Mass customization
Mass customization, in marketing, manufacturing, call centres and management, is the use of flexible computer-aided manufacturing systems to produce custom output...
- Recommender system
- Management information system
A management information system provides information needed to manage organizations efficiently and effectively. Management information systems involve three primary resources: people, technology, and information. Management information systems are distinct from other information systems in that...
- Intelligent document
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- Relationship marketing
Relationship marketing was first defined as a form of marketing developed from direct response marketing campaigns which emphasizes customer retention and satisfaction, rather than a dominant focus on sales transactions....
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
- Internet marketing
Internet marketing, also known as digital marketing, web marketing, online marketing, search marketing or e-marketing, is referred to as the marketing of products or services over the Internet...
- Variable pricing
Most firms use a fixed price policy. That is, they examine the situation, determine an appropriate price, and leave the price fixed at that amount until the situation changes, at which point they go through the process again...
- Variable data printing
Variable-data printing is a form of digital printing, including on-demand printing, in which elements such as text, graphics and images may be changed from one printed piece to the next, without stopping or slowing down the printing process and using information from a database or external file...
- Real-time Marketing
Real-time marketing is marketing performed "on-the-fly" to determine an appropriate or optimal approach to a particular customer at a particular time and place...