It is clear and has been for years now: consumers want personalisation. They want to feel that their favorite brands know, understand and care about them as people. And time and time again, studies have shown that they’re even willing to pay more for the experience.
For their part, brands are at least willing to do it Attempt to provide that kind of service. They are investing in AI to quickly sort data. They are investing in customer data platforms to keep their data clean and tidy. The problem? Even after years of prioritizing personalization and the technology that supports it, there is still a gap between business and customer. Why?
Twilio recently released its annual State of Personalization report this week and it highlighted some very real problems in the race for personalized customer experience (CX). That means:
1. Customers don’t trust AI to take care of their data.
2. Increasingly strict privacy laws make data collection more difficult
3. Even as effective personalization becomes increasingly challenging, the expectations of the customers around it continue to grow.
Below are a few points from the Twilio Segment State of Personalization 2023 report and what they mean for personalization moving forward.
Personalization and (too much?) reliance on artificial intelligence
The inception of generative AI is rapidly moving AI into the center of nearly every business and marketing conversation. As far as personalization is concerned, we can expect that AI will continue to play a bigger role.
With so much data collected across so many channels, there is literally no way companies can use it to create meaningful customer experiences without the use of artificial intelligence. In fact, more than 9 out of 10 companies are already using AI-driven personalization to boost business growth, according to the Twilio report. That’s a robust number considering how relatively new functional AI is in the digital transformation space.
At the same time, nearly 60% of customers say they are uncomfortable using AI to create personalized experiences. This is likely indicative of the newness and overall mixed sentiment the market has for AI. I expect this to change over time as we realize that AI-driven experiences will surpass traditional CX interactions and as we become more comfortable with human/machine interactions.
Furthermore, the report also revealed that 49% of consumers don’t trust brands to keep their data safe or to use it responsibly. This is a clear call for increased investment in security, which is something we’re seeing despite an overall slowdown in corporate IT spending. Security will be a competitive ditch for many businesses and those that have been breached will always play defense given the trust damaged. Therefore, with so much modern marketing based on personal data, investing in the security of protecting customer data is more critical than ever.
One step forward, two steps back?
Despite intense attention and investment in AI and personalization, the State of Personalization report noted something ironic: More than a quarter of consumers noticed less targeted personalization in the last year. This can probably be attributed to increased data privacy regulations, Apple’s option to opt out of web and app tracking, etc. clients?
Twilio isn’t the only company expressing this concern. In CMSWires State of the Digital Customer Experience Report 2023, the consensus showed that despite a growing number of tools lowering the barrier to entry into the personalization game, the current expiration customization is still low. In fact, only 18% of brands surveyed in the CMSWire report said they are benefiting from personalization programs, down from 20% last year. This tracks the Twilio Segments report, which showed that half of companies find getting accurate data for personalization a challenge, even up from last year.
We cannot say that there are no advantages in customization. Obviously, customers want that. More than half, according to the Twilio report, say they would become repeat buyers after a personalized experience (7% over last year), and more than 60% of leaders said customer retention has improved thanks to their personalization programs. Even more, nearly 70% say they will increase their investments in personalization in the next year. As I said, there is a disconnect. But we know for a fact that personalization and AI aren’t going anywhere anytime soon.
The future of customization
What’s most interesting to me as a technologist is looking not only at the state of personalization now, but where it’s going to go in the future. Based on the Twilio report, I think his clear businesses will continue (and should) invest in technologies that promise some sort of payback in terms of streamlining the personalization process and accelerating the insights that come with it. What I see going on:
Customer data platforms become the new CRM: The amount of data being collected, especially first-party data, is on the rise, and businesses need to be able to handle it. A CDP is no longer a nice add-on to the martech stack, it’s a must have.
Security becomes more important than ever. Nearly 1 in 4 consumers say they are less comfortable with using their personal information for personalization than they were a year earlier. Companies need to show them that they can be trusted to protect their personal data so that consumers continue to provide the information they need to make better personalization possible.
Well, learn and evolve, just like AI does. According to the Twilio report, even now we are still deciding how to measure success with AI in relation to personalization. For example, 47% of companies say accurate data contributes to the success of their efforts, while 42% say success comes from saving time. Customer retention only reached the list at 44%. If we’re not sure what we’re trying to achieve from AI and personalization, it’s no wonder we’re seeing successes and failures. What I know for sure: AI will continue to proliferate at a remarkable rate, and savvy businesses and marketing leaders will invest to gain measurable advantage.
The good news regarding customization: The tools are coming quickly. The technology is almost there and will continue to improve. And yes, the customer demand is there. And eventually, as we get more comfortable with AI (and we must), I believe we will get there too.
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