Customer Personalization

A comprehensive overview of customer personalization and why it's essential to businesses today.

What is Customer Personalization?

Personalization has become the cornerstone of acquisition, retention, and customer engagement strategies. Its goal is simple in theory: provide a unique, tailored experience to customers based on their interactions with your business. But actually implementing personalization – in a time when customer touchpoints and channels are growing exponentially – is much more complex.

Often, when businesses talk about personalization they’re referring to “one-to-few” strategies. This is when communications are tailored to a specific group or cohort of customers. For example, targeting “high spenders” for a loyalty program. One-to-one personalization has emerged as businesses' triple axel: more difficult to pull off, but sure to edge out the competition. This is when business interactions are customized to the individual.

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The Current State of Personalization 

For the past few years, Twilio Segment has surveyed thousands of businesses and consumers to answer questions like: What tactics are businesses using to personalize experiences? What difficulties do businesses face when it comes to its implementation? What impact does personalization have on consumer behavior? 

Now in its third year running, the State of Personalization Report has allowed us to identify both long-term and emerging trends, from the pandemic-induced explosion of digital touchpoints, to consumers’ omnichannel preferences, and the challenge of adhering to evolving privacy regulations. Here’s a preview of our findings: 

  • Personalization is directly tied to an increased return on investment (ROI). 

  • While omnichannel consumer behavior has become the norm, businesses are still struggling to create cohesive, cross-channel experiences. 

  • Understandably, consumers have placed a priority on their privacy, with businesses turning to first-party data to ensure compliance. 

Let’s dive into these themes in more detail below. 

Why personalization is the heart of modern customer engagement

Customers expect personalization

Personalization used to be framed as an added bonus to the customer experience. Now, it’s a requirement. The truth is, many customers won’t even engage with a brand that offers a one-size-fits-all interaction. 

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Today’s consumers have a multitude of options to choose from. Personalization is what cuts through the white noise and keeps their attention.

Personalization drives more revenue

From the thousands of business leaders we surveyed, 80% confirmed that consumers spend more when interactions are tailored to their interests (up to 34% more, on average).  

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It makes sense: personalization helps you tailor the customer experience so that it instantaneously resonates with that individual. It allows teams to send the right upsell or cross-sell at the right time and on the right channel. It ensures that businesses can learn from customer churn and proactively intervene when they see the warning signs with other users (e.g. low engagement rates, infrequent purchases). 

Not to mention, the customer data that fuels personalization can also fuel automation, allowing you to trigger interactions based on real-time customer behavior. 

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An example of how to automate customer interactions based on real-time behavior and actions, via Journeys

Creates stronger brand loyalty

There’s an often cited statistic that it’s anywhere from 5-25x more expensive to acquire a new customer vs. retaining a new one. It’s a popular data point for a reason: customer loyalty is the foundation for sustainable growth, generating more revenue (through higher order values), and strengthening referral rates. 

Customers respond positively to personalization. They’re more inclined to stick with a brand that understands their needs, and makes the user experience seamless. In fact, 1 out of 3 consumers surveyed said they would shop again with a brand they had a good experience with – even if there were cheaper or more convenient options available.

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The 3 challenges of providing customer personalization

Personalization should feel seamless to the customer. But on the back-end, it requires complex data orchestration. From being able to act on insights in real-time to breaking down stubborn data silos that have cropped up among teams, we’ve identified the three common challenges of implementing personalization. 

Keeping customer data secure & private

It goes without saying that data security and consumer privacy are fundamental to your business – from both a legal and ethical standpoint. Countless data breaches have put consumers on edge. Already, we’ve seen laws go into effect like the GDPR and CCPA, which reflect consumer’s desire to have more transparency around how their data is collected and handled. 

And even though the complete phaseout of third-party cookies continues to be extended, that deadline is still looming. And it doesn’t cancel out the fact that consumers have dubbed shady third-party data exchanges (which have often informed retargeting strategies) as “creepy.” 

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So, how do you keep data secure and private? There’s a lot to consider here. For one, if you’re an international business you have to be mindful of data residency laws (i.e. requiring data to be collected and stored inside the country consumers reside in). Secondly, having the ability to mask personally identifiable information is a must to ensure that people’s privacy is upheld. 

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In Twilio Segment, workspace owners are able to mask personally identifiable information to ensure consumer privacy. 

Maintaining personalization across channels

When we talk about businesses succeeding at personalization, we’re often talking about omnichannel personalization – or the ability to create a consistent, continuous experience as customers switch between channels. 

On average, marketing teams use eight different channels for their campaigns, and McKinsey found that consumers use 3-5 channels when moving toward a purchase or resolving a request. (The same McKinsey study also saw consumers switching between mobile/websites roughly six times when making a hotel reservation.)

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This is where unified customer or account-level profiles come in. Without having a real-time view of how customers or accounts are interacting with your business – whether it be via Marketing, Sales, or Customer Support – there’s little chance of providing an uninterrupted experience. 

Vacasa, a vacation-rental platform, is a perfect example of omnichannel personalization. On the day of check-in, guests receive an email with their entry codes. Right before they’re scheduled to arrive, guests will then get a text message, once again showing the entry code (so they don’t have to go searching for it in their email). In another SMS, guests are also asked to download Vacasa’s app to get convenient features like one-tap WiFi access. 

If you notice, each message Vacasa sends is slightly tailored to its channel, and is focused on customer convenience. That’s why they were able to triple their bookings

Vacasa

How Vacasa perfected omnichannel personalization to create a seamless check-in process. 

Organizing customer data to unlock it’s utility

40% of businesses say that getting accurate customer data for personalization is a challenge. There are a few reasons why acting on data is so difficult: data silos pop up between teams, duplicated entries skew analysis, or there’s a lag between collection and activation. 

Businesses can spend up to 20-30% of their time trying to clean the data they have – and mapping semi-structured data to a data warehouse or data lake is no simple task. 

Some businesses may opt to build their own data pipelines to transfer and consolidate data, others may want to automate this process. But whether you decide to build or buy, having this infrastructure in place is essential to make sense of the data you collect. 

The foundation of customer personalization is brand trust

More than half of consumers say that trustworthiness and transparency are the two most important attributes in a brand. Now more than ever, people are wary of how their data is being collected and used.

In fact, 65% of consumers say they worry that their data is being collected without their permission. 

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This conversation is directly linked to the types of data that businesses collect to fuel their campaigns and digital advertising strategies. For a long time, third-party data was seen as essential: that is, data that’s purchased from another entity. 

But while consumers are more skeptical about data collection, they aren’t completely against it – as long as the exchange is transparent. In fact, 63% of consumers say they’re fine with personalization as long as brands are using their own data, not data that was purchased. Or in other words, as long as businesses are using first-party data

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But as of this year, only 37% of businesses surveyed said they’re exclusively using first-party data, which means 63% of businesses are risking consumers’ trust (and business). 

So how do you make the switch to first-party data? We explain below. 

Organize, protect, and harness your first-party customer data with Twilio Segment

A customer data platform like Twilio Segment allows you to harness the power of first-party data at scale. It handles data collection, processing, aggregation and delivery – all necessary components for ensuring data accuracy (e.g. real-time delivery, deduplicating entries) and creating a holistic view of the customer (i.e. identity resolution and unified profiles). 

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With Twilio Segment, businesses are able to consolidate the first-party data that exists across their organization, and give every team member the ability to act on insights. 

Here’s how it all works. 

Frequently asked questions