'Segmentation, not long ago the Holy Grail of marketing, is becoming an anachronism,' wrote Stanford University professor and former Amazon chief scientist Andreas Weigend earlier this year. 'Most people don't want to be anonymous. Customers want to be treated as individuals and they are heading for platforms and companies that understand this.'
In an age of social sharing, when marketers are awash with more data than they once dreamed possible, web privacy is a red-hot issue - but so too is the potential of hyper-personalisation, where campaigns are focused on data related to consumers' social, search and browsing behaviour. The challenge for brands is two-fold: to hyper-personalise their communication with consumers, and to ensure they - and their social media agency, if they use one - get it right (see 'Five questions', below).
Bespoke marketingTraditionally, brands have segmented their markets using demographic or psychographic data to identify groups of people with shared values or interests. The opportunity now is to take things onto a more individual footing.
'With digital and social data, you can do targeting and personalisation in a much more informed way,'
says Nils Mork-Ulnes, head of analytics at digital agency Beyond, which is working on personalised web elements and campaigns for clients including Visa and MailOnline. 'Ultimately, the dream is one-to-one personalisation and targeting, being able to tailor the product to every individual's wants and needs.'
In marketing terms, this personalisation can mean behavioural targeting, as refined by Google over the years; the creative use of social graph data, as amassed by Facebook; the kind of collaborative filtering practised by Amazon and Netflix; or a combination of any of these. As with so much in the world of data, the right combinations are all out there to be found.
The examples are diverse, from a timely text to a website that 'sees you coming'. If they have one thing in common, it is usually to replicate in the diffuse digital environment the kind of effortless familiarity with which, say, local shopkeepers might once have treated their customers.
Tesco chief executive Philip Clarke (pictured) told the Global Summit of the Consumer Goods Forum as much in June, when he revealed that the retailer would be personalising its website using Clubcard data, merged with social networking and other data, to capture something of the friendly, personal service of a generation ago. 'Thanks to the quantities of data that digital technology produces, it has now become easier for retailers to meet an individual's needs,' he said. 'So today we're in a new era of retailing - the era of mass personalisation.'
However, marketers should be mindful of the damaging impact of botched attempts at chummy personalisation, because this is an area where it is all too easy for companies to get it wrong. Success very much depends on the brand and the context of its activity. What's more, past behaviour doesn't necessarily indicate a consumer's future behaviour.
Likewise, many apparently smart, personalised techniques have fallen foul of consumers in unpredictable ways. Last year, Urban Outfitters in the US experimented with simple gender personalisation on its website, showing women's clothes to women and men's clothes to men, only to find that the annoyance caused, particularly among women who also shopped for their husbands and boyfriends, outweighed the benefit.
Most agree that brands that appear to know too much about their consumers can be more off-putting than attractive, and the consensus is that a hard-to-define degree of trust must exist before any overt personalisation can meaningfully take place, whether in the form of a tailored email or a geo-targeted text. 'Where consumers have provided data, they do expect it to be used sensitively and with contextual relevance,' says Jane Hodson, managing partner at data consultancy M&C Saatchi Milk. 'Where they haven't, and we are drawing on observed behaviours, we need to be careful not to overlook personal preferences, personal channel utility, mood and context.'
The particular difficulties of behavioural targeting help to account for some of the buzz around social graph data. According to research published in June by Adobe and Econsultancy, only 6% of marketers currently use such data for personalisation. All the same, it is this technique that most intrigues many digital thinkers, given that 92% of us are said to trust the recommendations of people we know. This contrasts with the 29% to 47% of us who trust various types of ads, according to Nielsen.
One brand using social graph data to provide a more personal experience for customers is Dutch airline KLM. Its opt-in Meet & Seat feature allows travellers to view other passengers' Facebook or LinkedIn profiles and choose their seat based on that information. It follows on from the KLM Surprise campaign, for which the airline searched passengers' social media profiles and met them at the departure gate with a personalised gift.
'We see passengers using and enjoying the service,' explains the airline's e-development manager, Chris van Erp, who adds that users are evenly split between male and female and business and leisure travellers. 'Thousands of profiles have already been shared. We plan to integrate the service into online check-in,' he says.
KLM makes no secret of its desire to be 'the number-one social airline'. For example, a new service called Tripplanner recently went live, allowing travellers to book a flight with their friends via Facebook.
Meanwhile, American Express's Link, Like, Love dashboard delivers deals and content to cardholders based on their Facebook likes and those of their friends. Last Christmas, Walmart's social unit, @WalmartLabs, introduced Shopycat, a Facebook app that analyses the profiles of users' friends to suggest gift ideas. Then there's Pickie, a start-up iPad magazine based on brand mentions from users' friends and the people they follow online.
Geo-targeting is another trend giving inspiration to believers in hyper-personalisation. In the US, Groupon's SmartDeals technology tailors newsletters to subscribers' location and preferences, with apparently winning results. 'Personalisation, whether through geo-targeting or customer preferences, is all about increasing engagement through tailored communication,' states Groupon's UK managing director, Roy Blanga (pictured).
Localisation isn't everything, he notes, as people will still travel for the right offer, but it is certainly a powerful spur. 'In Chicago, SmartDeals has driven a 50% higher purchase rate than emails sent without personalisation,' says Blanga.
Given the state of alert surrounding privacy, there is little possibility of hyper-personalised services sneaking wholesale into our lives. Smart brands know that consent is everything, and that a personalised approach that strikes the wrong tone is a deadly sin.
What marketers need to calculate is the reward of doing it well, versus the risk of doing it wrong - and, moreover, the risk of not doing it at all.
FIVE QUESTIONS TO ASK WHEN HIRING A SOCIAL MEDIA AGENCY
1. How do you measure ROI?
There is no one-size-fits-all metric to quantify the impact of a social media conversation, but brands can benchmark their activity against definite business goals. 'A good social agency will have a point of view on it,' says Chris Buckley, director of social engagement at creative agency TMW. 'Probably, that point of view will be quite proprietary at the moment, but I would expect them to have begun to think around the problem of attribution and to be able to offer evidence of how they do it.'
2. Are you ready for the connected consumer?
Mobile phones have rapidly become the primary tools of social networking, and, with consumers increasingly using tablets and connected TVs to go online, a social media agency needs to be at ease across the board.
3. How quickly can you react?
Brands can't afford to be caught napping in social media, either when problems brew up or opportunities present themselves, so evidence of rapid reaction time is essential. A brand needs to know that its agency is adaptable to change. Ask whether it can be responsive in all its content creation - can it mirror community behaviours, jump on trends and themes as they emerge and join in with conversations?
4. Are you more than just a social agency?
Part of the mythology of social depends on the erroneous belief that it might soon shoulder the full burden of the world's marketing. Of course, it can't, which is why social agencies will need to prove they can integrate their specialist discipline with other, above- and below-the-line, activities. 'Pure-play agencies have popped up with great knowledge and experience, and they really drive the market forward, but when social becomes normalised, how will they handle the other things?' asks Buckley.
5. Do you realise social is about more than just marketing?
Those brands of any sophistication will already have found that there is a queue of departments keen to make a point via social media. If you are in product development or innovation, you are going to want to do social; if you are in customer relations or internal comms or employee engagement, you, too, are going to want to do social. How good is the agency at understanding that reality?
THE DATA CHALLENGE
- Even as hyper-personalisation becomes a possibility, the clouds of privacy legislation are gathering. On the internet, offline data protection rules still apply - as Google found when it was fined $22.5m in the US for tracking Safari users without their consent. Meanwhile, new laws currently doing laps of Brussels may soon enshrine a 'right to be forgotten' - social networks, for example, will have to comply with users' requests to wipe self-published information.
- The simplest rule of personalisation is 'where possible, make sure you ask - don't assume', says Jane Hodson, managing partner of M&C Saatchi Milk (pictured).
- So hyper-personalisation needs to put its cards on the table, and already there are signs that transparent operators do best. Henry Lawson, chief executive of nFluence, which owns daily deal aggregator dealBoard, says consumers need incentives to surrender data, and the whole process works far better if that data is anonymous. 'What we have found is that when people have something they feel ownership of, they are much more likely to respond,' he says.
- The company also operates as a data consultancy, and Lawson says there is a distinct hierarchy of trust between brands and consumers online. Utility companies, broadcasters and mobile phone operators are generally considered 'safe', he explains, while prolific data gatherers, such as Google, Facebook and Amazon, tend to set consumers' alarm bells ringing.
- Lawson adds: 'The press is getting interested, and when the press gets interested, so does the legislature.'