A woman personalizing a product while shopping online.
It’s clear—and it has been for years now: consumers want personalization. They want to feel like their favorite brands know them, understand them, and care about them as people. And time and time again, studies have shown they’re even willing to pay more for the experience.
For their part, brands are willing to at least try to provide that type of service. They’re investing in AI to sort through data quickly. They’re investing in customer data platforms to keep their data clean and sorted. The problem? Even after years of prioritizing personalization and the technology that supports it, there’s still a divide between company and customer. Why?
Twilio recently released its annual State of Personalization report this week, and it highlighted some very real issues in the race for personalized customer experience (CX). Namely:
1. Customers don’t trust AI to care for their data.
2. Increasingly strict privacy laws are making collecting data more difficult
3. Even as effective personalization becomes more challenging, customer expectations surrounding it continue to rise.
The following are a few takeaways from the Twilio Segment State of Personalization 2023 report and what they mean for personalization moving forward.
Personalization and (over?) reliance on AI
The onset of generative AI is rapidly moving AI to the center of almost every business and marketing conversation. As it pertains to personalization, we can expect that AI will continue to play a more important role.
With so much data being gathered on so many channels, there is literally no way businesses could siphon through it to create meaningful customer experiences without the use of AI. In fact, according to the Twilio report, more than 9 in 10 businesses are already using AI-driven personalization to increase growth in their business. That’s a robust number considering how comparatively new functional AI is in the digital transformation space.
At the same time, nearly 60 percent of customers say they aren’t comfortable with AI being used to create those customized experiences. This is likely indicative of the newness and the general mixed sentiment the market has for AI. I expect this to change over time as we come to realize that the experiences driven by AI will outperform traditional CX interactions and as we become more comfortable with Human/Machine interactions.
Also, the report also revealed that 49 percent of consumers don’t trust brands to keep their data secure or to use it responsibly. This is a clear call for greater investment in security, which is something we are seeing despite some overall slowdown in business spending on IT. Security will be a competitive moat for many companies, and those that have been breached will always be playing defense given the damaged trust. Therefore, with so much of modern marketing based on personal data, security investment in protecting customer data is more critical than ever before.
One step forward, two steps back?
Despite the intense focus and investment in AI and personalization, the State of Personalization report noted something ironic: more than a quarter of consumers have noticed less targeted personalization over the last year. This can likely be credited to increasing data privacy regulations, Apple’s option to opt-out of web and app tracking, etc. But the irony remains: how can we move so far ahead technologically while moving backward in our ability to really know and target our customers?
Twilio is not the only company voicing this concern. In CMSWire’s 2023 State of Digital Customer Experience Report, consensus showed that despite a growing number of tools that lower “barrier to entry” in the personalization game, the actual maturity of personalization is still low. In fact, just 18 percent of brands surveyed in the CMSWire report said they were deriving benefits from personalization programs, down from 20 percent last year. This tracks with Twilio Segment’s report, which showed that half of companies felt like getting accurate data for personalization is a challenge—also an increase over last year.
We can’t say there are no benefits to personalization. Obviously, customers want it. More than half, according to the Twilio report, say they would become repeat buyers after a personalized experience (7 percent over last year), and more than 60 percent of leaders said customer retention improved because of their personalization programs. Even more, almost 70 percent say they will increase their investments in personalization in the coming year. Like I said—there’s a disconnect. But we know for sure is that personalization and AI aren’t going anywhere, anytime soon.
The Future of Personalization
What’s most interesting to me as a technologist is looking not just at the state of personalization now, but where it’s going in the future. Based on the Twilio report, I think it’s clear businesses will (and must) continue to invest in technologies that promise some sort of return in terms of simplifying the personalization process and hastening insights derived from it. What I see moving forward:
● Customer data platforms become the new CRM: the amount of data being collected, especially first-party data, is growing, and businesses need to be able to manage it. A CDP is no longer a nice add-on to the martech stack, it’s a must-have.
● Security becomes more important than ever. Almost 1 in 4 consumers say they are less comfortable with their personal information being used for personalization compared to a year before. Businesses need to prove to them that they can be trusted to keep their personal data safe so that consumers will continue to provide the insights they need to make better personalization possible.
● We’ll learn and evolve, just as AI does. According to the Twilio report, even now, we are still deciding how to measure success with AI as it relates to personalization. For instance, 47 percent of businesses say accurate data makes their efforts successful while 42 percent say success is derived from time savings. Customer retention hit the list at just 44 percent. If we aren’t sure what we’re trying to get from AI and personalization, it’s no wonder we’re experiencing both hits and misses. What I know for sure: AI will continue to proliferate at a remarkable rate and the savviest companies and marketing leaders will be investing to gain a measurable advantage.
The good news as it pertains to personalization: the tools are coming along quickly. The technology is nearly there and will continue to improve. And yes, the customer demand is there. And ultimately, as we get more comfortable with AI (and we must), I do believe we’ll get “there,” as well.
