Customers are signaling that they want more personalized treatment from companies. In fact, a recent Accenture survey revealed that nearly 60 percent of respondents prefer real-time promotions and offers. That may seem like great news for marketers. But personalization strategies also come with risk.
Personalization creates more intimacy in the customer relationship, which can lead to more sales and loyalty. This promise of a tighter bond with customers has driven personalization to the top of marketers’ strategic agendas for 2016. However, this approach can threaten the most important aspect of the customer relationship: trust.
The Tug-of-War Over Data
For personalization to work, brands need to gather detailed information about customers. But when asked whether they are willing to give up that information in return for more targeted products and promotions, many customers balk. Of the Accenture survey respondents, for example, only 20 percent were willing to reveal their location, and just 14 percent would consider parting with their browsing history.
This personalization paradox, as it is known, has been around for decades. But it’s going to become a bigger issue as digital connectivity increases and the data that customers generate through their activities—whether it be jogging with a Fitbit or refilling a fridge connected to the Internet of Things—outline their lives in ever-finer digital detail.
Focus on Trust and Value
How can companies reduce customer fear, ignorance, and uncertainty about personalization and privacy? Research has found that customers are more likely to take advantage of personalization from companies they trust and that offer them real value in exchange for their information.
It’s important to emphasize trust in the customer relationship because it’s at a low ebb. For example, just 7 percent of customers say the offers they receive from companies are consistently relevant. And 27 percent have said they’ve stopped visiting a website or mobile app after receiving irrelevant information or product recommendations.
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In this kind of a climate, companies must demonstrate that they are worthy of customers’ trust before pushing too hard on personalization. Research has shown that there are two components of trust:
- Confidence. Customers must believe that the company can provide a quality product or service.
- Benevolence. Customers must believe that the company is willing to consider every customer’s self-interest above their own.
The benevolence aspect of trust is particularly important when it comes to personalization. In this regard, companies demonstrate benevolence by offering clear, understandable data collection and usage policies and by giving customers control over their information and how it is used. Customers are hungry for that control. A Pew Research Center survey found that 90 percent of those surveyed want to decide what information is collected about them.
Once trust is established, personalization has to offer real value. That value could come through useful services or discounts, for example. The key is to avoid stepping over the invisible line from cool to creepy, such as the time when Target sent coupons for diapers to an expectant teen before her father knew of the pregnancy.
Of course, the personalization paradox and online privacy are issues as big as the Internet. Customers will continue to fear for their privacy as long as data breaches continue and irrelevant and offensive offers continue to hit their inboxes. But focusing on trust is the beginning of a solution.
For more on customer strategies that balance security and service, see Deliver A Personal Customer Experience Without Losing Trust.
Christopher Koch is the editorial director of the SAP Center for Business Insight.