September 12, 2017
There are three different levels to delivering personalized customer experiences: optimization, segmentation, and 1-to-1 personalization. Many of the ecommerce marketers we speak to are already using one or two of those approaches, but haven’t considering how they relate to one another--so we developed an image called the Monetate Personalization Pyramid to help visualize the relationships between these three layers. Here we’ll talk you through the Pyramid from the bottom up.
The base level of the pyramid is optimization. This describes the process of testing different approaches, analyzing the results to identify the top-performing design, and then implementing the winner. Almost all ecommerce marketers use some version of this method because it can deliver great insights and improved results. The disadvantage is that this cycle takes a long time: a test has to reach significance before the learnings can be analyzed and implemented, which creates a lag before the marketer can deliver the enhanced experience.
One level up is segmentation, in which the marketer breaks the audience down into smaller “segments” to target each one with specialized content. This allows the marketer to apply the principles of optimization, but with more precise messaging that takes advantage of obvious distinctions in audience groups. Brands often see big wins very quickly when implementing this approach because it improves the relevance of most customers’ experience. However, it tends to reach a plateau: after the first few groups have been identified, the size of each new segment (and thus the potential impact of delivering an improved experience for that group) decreases. Each one still requires a creative investment and the returns for this strategy eventually diminish after the maximum sustainable number of audience segments has been reached.
The top of the Pyramid is 1-to-1 personalization, which leverages Artificial Intelligence (AI) technology to deliver an individualized experience to each customer. Backed by the power of machine learning, brands can now offer each customer a personal experience based on all the data that is available up to the present moment. This means that they can continue to improve their experience incrementally as information about their preferences and behavior is gathered continuously. 1-to-1 employs some of the same principles as optimization and segmentation, but by offering a solution to their two greatest limitations--delayed results and inability to scale--it represents a fundamentally different approach. The unprecedented level of relevance for each customer translates into significant revenue boosts and improved customer loyalty, which is why 1-to-1 personalization has become the pinnacle to which many brands aspire.
Each of these three approaches has a specific and valuable purpose: testing and optimization enable learning and tailoring of messages over time; segmentation improves the relevance of a brand’s message by taking into account key distinctions in audience groups, and 1-to-1 personalization drives individualized experiences and results. All three approaches coincide in the Personalization Pyramid: though the visual allows us to better discuss the distinctions and relationships between each concept, the layers are not necessarily incremental steps. At Monetate we think of personalization as a journey--most brands are already applying some of these techniques, but even those that aren’t are likely equipped with many of the tools they need to get started whether or not they realize it. It’s never too late to begin the personalization journey and start reaping the tremendous business results that follow.