Mark F Abraham is a senior partner at BCG, founder of the firm’s personalisation business, and co-author of Personalized: Customer Strategy in the Age of AI. In an interview with Forbes India, he explains why embedding personalisation throughout the customer journey is an imperative to build competitive advantage.
Q. How would you build a business case for personalisation?
Our research, benchmarking hundreds of companies based on our Personalisation Index, is clear: Personalisation leaders grow 10 points faster each year than laggards, and these companies are on track to capture a $2 trillion prize in incremental growth over the next five years.
But CFOs want to see detailed business cases supporting the significant investments that personalisation entails. This is why we advocate setting up a ‘personalisation P&L’, which measures the incremental revenue and margin generated by personalisation against the costs and investments required. The good news is that there are tried and true methods for measuring incremental growth from personalisation. One needs to set up the right universal control group where a small (rotating) subset of customers are held out of personalised experiences for a period of time.
With the personalisation P&L in hand, the organisation can track its progress against quarterly and annual milestones, enabling the CFO to unlock successive waves of investments as value is delivered.
Q. How can this boost brand value?
Digital natives such as Netflix have long talked about the value of personalisation. For example, Netflix claimed 7 years ago that the value of its recommendation engine exceeded $1 billion and more recently that 80 percent of its viewers followed the recommendations.
Today, brands across industries are seeing the value. Our Personalisation Index research shows that it is very rare for brands to achieve the highest customer satisfaction levels (ie NPS scores of 35 or above) without also being personalisation leaders. This is true not just for digital natives such as Netflix, Spotify and Amazon, but also brick and mortar companies such as Sephora, Starbucks, Cisco, Delta Airlines and JP Morgan Chase.
Also read: How AI can be a tool to increase customer loyalty
For example, Sephora US has been a personalisation leader in the beauty space, enabling its teams to run hundreds of experiments continuously and personalising key parts of the customer experience, such as beauty offers, behavioural triggers, and website search and recommendations. More recently, Sephora US has been working on cross-channel orchestration to create truly seamless and personalised customer journeys. It is no wonder that Sephora’s growth in the US [12 percent CAGR] has been outstripping that of the beauty category [mid-single digits growth] over the last four years as the company gained share from competitors and introduced ever more new consumers to the beauty brands it sells.
Q. Is personalisation an equal opportunity for all businesses, or better suited to certain industries and business types?
Historically, companies with less frequent transactions and more regulated industries have struggled with personalisation given the scarcity of data on their customers. It is no surprise that the insurance industry, with its infrequent customer engagement, rates the lowest on our Personalisation Index overall. However, we are seeing personalisation leaders emerging in nearly every industry today. For example, Voya Financial is one of the top providers of employee benefits and operates in a regulated industry with low engagement. They found helpful ways to engage their customers, launching their myVoyage tool that asks customers about their goals and helps them make smart choices given the information they provide. For example, the tool might aid them in deciding what debt to pay down as they build up savings. This enables Voya to better know their customers while helping them solve their pain points, creating a virtuous cycle of trust and ability to further tailor interactions.
Also read: AI in marketing: How customer-centric companies can benefit from data privacy regulations
Q. Do digital natives have an edge because of their adeptness with AI and Gen AI?
You don’t have to be a giant digital native company to leapfrog your competitors and take advantage of AI to drive growth with personalisation. For example, Sweetgreen is a salad chain in the US that was launched less than 20 years ago and has taken advantage of largely off-the-shelf technology to match and exceed the personalisation capabilities of both large established restaurant chains as well as digital natives of comparable size. For example, launching personalised challenges in their app and growing digital orders to account for a majority of sales, ahead of most other chains.
Q. You talk about the five promises of personalisation. Could you briefly explain each?
Whenever a brand personalises the experience, it implicitly makes five promises to its customers. The playbook for great personalisation entails delivering on these promises consistently.
Empower me: Use personalisation to help your customers solve a problem, thereby making their experiences better, faster, cheaper or more convenient.
Know me: Understand the data about the customer, at scale, needed to deliver the personalised experience.
Reach me: Leverage predictive AI to target the right customer at the right time, in the right channel.
Show me: Build a content library, augmented by GenAI, to be able to serve up a relevant experience for each customer.
Delight me: Embed the right ways of working and rapid test and learn capabilities in your team to make each interaction better than the last one.
Also read: Why adtech needs to focus on privacy-compliant personalisation
Q. How can businesses measure the impact of personalisation?
In addition to the personalisation P&L, it is important to measure overall customer satisfaction to ensure the effort is making a meaningful impact for customers. Just as importantly, companies should track the two key metrics that drive their personalisation advantage:
- Scale, ie the number of digital customer relationships and the level of engagement from these customers, and
- The speed with which the company can adapt and improve its personalised experiences.
Q. What is the C-suite’s role in driving transformation and enhancing customer experience across multiple touchpoints?
Personalisation is not a marketing initiative. It is an enterprise endeavour and one of the most cross-functional strategic priorities a company can undertake. Leaders understand that personalisation has become a new basis of competition and prioritise it as part of their company strategy. They align the entire C-suite against a clear vision of the customer experience they want to enable and the roadmap for the next three years.
Each leader plays an important role in implementing a successful personalisation strategy: The CEO in setting the mandate and providing the vision, CFO in managing the return on enterprise-level investment, head of strategy in championing the case for change, CMO and CDO in orchestrating personalisation, CIO/CTO in transforming the tech infrastructure, and the CHRO in designing the new operating model.
Q. How can leaders effectively address data privacy concerns and build trust?
Our research shows that consumers are much more willing to share their personal data in exchange for a personalised experience versus when it is not clear how providing it will enable a more tailored interaction [the rates go up from 30 to 90 percent]. But brands must build trust with customers and this includes both delivering on the promised experiences as well as maintaining transparency on what data companies are using and how they are using it. For example, Marriott established an internal data governance structure to manage decisions about customer data collection and provided a place for customers to easily view the data the company had about them in the Bonvoy loyalty app.
Also read: How companies are leveraging AI to personalise experiences
Q. What are the top trends shaping the future of personalisation?
There are three trends to watch:
- “Pull” vs “push” personalisation: Virtual assistants will bring together generative AI [to interpret customer requests] with predictive AI [to personalise recommendations to them]. This will enable customers to “pull” the personalisation they need in the moment. This will change the way we live our daily lives, for example in travel, cooking, access health care or financial planning.
- GenAI-enabled content personalisation: With GenAI, companies can create orders of magnitude, more content than ever before. They can adopt a Netflix approach, creating a content library with more content variations than they have customers, allowing them to individualise the relevant message for each customer. In this age, brands that realise that less is more will win, as they precisely target customers with only what is needed while customers in turn disengage from brands that inundate them with spam.
- The rise of ecosystems: New business models will emerge around personalisation as customers look for one-stop-shop solutions for their end-to-end needs in each area like beauty, travel, food, and so on. Brands will need to partner to provide these holistic solutions, shifting from just pushing their own products to truly thinking customer-first. Otherwise, they risk ceding their direct customer relationships to the large digital platforms and GenAI startups that will seek to disrupt their businesses and disintermediate their customer connections.