Feature
The Gist
- Low personalization maturity. Only 24% of CX practitioners feel their efforts are highly personalized, reflecting a significant gap in achieving advanced personalization.
- Key obstacles identified. Budget constraints, data privacy concerns and complexity in implementation are major barriers to enhancing personalization.
- AI as a potential solution. Increasing investment in AI could bridge the gap, with many seeing it as crucial for scaling personalized customer interactions.
Can it be that after decades of striving to create personalized customer experiences beyond the proverbial birthday email that only a quarter of brands rate their personalization efforts as highly personalized?
Yes, it's true, according to the results of a report launched today by Medallia and the Customer Experience Professionals Association shared exclusively with CMSWire.
Only 24% of CX practitioners rate their personalization efforts as highly personalized, almost identically mirroring previous research that found only 26% of consumers rate their last company interaction as highly personalized, according to the report. Called “2024 State of CX Personalization Report: Examining the challenges and opportunities for brands to deliver more personalized experiences,” the report includes responses from over 300 CX practitioners globally last December.
“Our research sees a mix of concerns or obstacles cited by CX practitioners, most notably budgetary, but also on implementation complexity, data privacy and security and customer comfort with a change to experiences delivered today,” Andrew Custage, head of research insights at Medallia, told CMSWire. “Some, but only a minority of customers, do express concerns too regarding more automated interactions, missing out on messaging they may have wished they had, and a lengthy collection process for a brand to know enough about their preferences to tailor future experiences.”
We Agree: Personalization Maturity Remains Low
Personalization remains a key focus for digital customer experience (DCX) teams aiming to create more tailored and relevant experiences for customers. This aligns with broader digital marketing trends emphasizing the importance of delivering content that resonates personally with users, according to findings in the CMSWire State of Digital Customer Experience 2024 report.
We also found the maturity level of personalization across organizations is generally low, with many still in the experimental or early stages of implementation. Despite the availability of tools designed to facilitate personalization, there's a gap between the potential of these tools and their actual application.
Only 20% of organizations say they “already derive benefits from personalization,” although this is an increase of 2% from last year. The percentage of those “conducting limited experiments” remains steady at 29%.
Related Article: Mastering Personalization in Digital Marketing Strategy
How Brands Are Advancing Personalization Despite Challenges
So where do CX practitioners feel capable when it comes to providing personalized customer experiences? Custage said there are “many parts to personalization,” and these are some areas where CX practitioners feel capable, according to the Medallia/CXPA report:
- Adding “humanizing” elements to communications (e.g., populating a person's name)
- Offering flexibility in payment options
- Allowing customizations for the actual product being sold
- Providing choices in communication type and channel
Conversely, here are areas CX practitioners feel not-so-great about:
- Orchestrating full experiences in personalized ways
- Having a brand personality (e.g., humor, slang, etc.) conveyed in communications
- Providing rewards and recognition based on unique customer attributes
- Serving targeted offers based on unique customer attributes
“Some, like offering choice in service type and channel, or in providing tailored content and recommendations, fall in the middle for self-assessment,” Custage added.
For overcoming obstacles to personalized customer experiences, he added it’s interesting to see that brands who are making personalization a priority are doing so for reasons that are the complete inverse of the reasons cited as obstacles by those moving slower.
“Justifying prioritization is most often driven by a strong business case/ROI analysis, a willingness to disrupt current customer experiences that aren't satisfactory enough today and vision and buy-in to commit to implementation,” he added. “Perhaps the biggest takeaway is that for those moving slower on improving their personalization capabilities, it may be worth recognizing what obstacles are truly universal and which are company-specific (and perhaps easier to remedy). The many brands moving quickly on personalization suggests not as many obstacles are universal.”
According to the CMSWire State of Digital Customer Experience 2024 report, several challenges impede the advancement of personalization, including siloed data, lack of integration across platforms and insufficient internal expertise. Overcoming these barriers often requires organizational changes and increased focus on data management and analysis skills.
Related Article: 9 Principles to Improve Your Customer Data Management
Personalized Customer Experiences: AI to the Rescue? Maybe
Artificial intelligence is earmarked as a crucial element for scaling personalization, according to the Medallia/CXPA report. How is AI currently utilized in personalization efforts and what are the outcomes?
Many organizations are moving from the early investigative stages of AI to clearer prioritization. Custage said he’s seen a 26% jump year-over-year in the amount of brands saying their investment in AI is "significant" or greater.
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“Overall,” he said, “the use cases already being pursued, or that will be pursued, are in speed and quality of data analysis, and generative AI for both customer-facing communications and employee-facing resources,” Custage said. “AI is a key technology in connecting all of these use cases, but also bringing in disparate data sources and ultimately taking action — automatically or human-assisted. Most often, organizations expect AI to help with time savings and cost reduction, followed by revenue growth from improved experiences measured by positive customer feedback.”
For organizations whose investment in AI has been significant in prior years — and therefore organizations that are more likely to have already started measuring outcomes — they're especially likely to cite measurement plans involving employee feedback, workforce redeployment into higher-value tasks and overall profitability improvement, according to Custage.
Related Article: Redefining Personalization in Marketing: How AI Is Changing the Game
Impact of DCX Tools, Customer Insights on Personalization
Organizations with more advanced and effective DCX tools are more likely to implement successful personalization strategies, according to CMSWire’s findings. This suggests that investment in high-quality DCX technology correlates strongly with the ability to personalize effectively.
Moreover, 34% of those with tools “working well” are already enjoying benefits from personalization, compared to just 8% with tools that are rated “needing work."
There is a clear connection between how well organizations understand their customers and their ability to personalize. Better customer insights, derived from data and analytics, enable more effective personalization, indicating that deep customer understanding is both a prerequisite and a result of successful personalization.
Organizations that understand their customers “well” were far more likely to derive benefits from personalization (53%) compared to those with a moderate (17%) or poor (6%) understanding.
Elevating Customer Experiences: Personalization, Trust, Innovation
What is it like on the frontlines of personalized customer experiences for some practitioners?
People increasingly expect their experiences to be personalized, have a clear benefit, and evoke feelings of confidence with periodic moments of delight, according to Kaaren Hanson, chief design officer at Chase Bank. Many digitally native consumers are Chase customers, she added, and they grew up with user experiences that put them at the center and will continue to expect that from their interactions.
“We also are seeing that trust continues to grow in importance, and people want to do more with apps they trust,” Hanson told CMSWire. “For us, it means consumers wanting to go beyond day-to-day transactions and have a trusted place where they can book travel or dining, redeem card rewards for experiences and bring all the ways they manage their money together. We are building experiences that take these trends into account, with the customer value remaining at the forefront.”
Hanson said she maintains a vigilant watch on emerging trends, prioritizing their potential benefits for customers above all else. Her aim is to enhance both the financial wellbeing and overall lives of clients by understanding each individual, demonstrating expertise and integrating thoughtful automation.
“When we do that, we’re able to recognize customer needs and get better over time,” Hanson said. “These innovations allow us to better serve our customers and meet their needs intuitively. Beyond wishing customers a happy birthday or greeting them by name, data and technology can be purposeful in providing valuable insights to consumers about how their money is doing and how they spend, save and invest it. We are also piloting generative AI in our contact centers. AI can be excellent at summarizing information for our agents.”
Future Prospects and Areas for Personalization Improvement
Looking forward, there is significant interest in enhancing personalization capabilities, with many organizations planning to invest more in relevant technologies and strategies. This includes leveraging AI and machine learning to analyze customer data more deeply and predict preferences more accurately, according to the CMSWire report.
These insights suggest that while personalization is recognized for its potential to significantly improve customer experience, many organizations still struggle with its practical implementation. Advancements in technology, especially AI, are likely to play a crucial role in overcoming current limitations and enhancing personalization efforts in the future.
Custage said best-in-class personalization involves effectively being able to understand your data from the micro to macro level, from individual to aggregate interactions across your business.
“In its best form, this means moving beyond what have historically been basic ways of classifying customers — for example, solely based on demographics or on prior transaction histories, which leaves out crucial customer information from digital, social, call, survey and so many other touchpoints with your business,” he said.
Advanced methods for forecasting an individual's reactions use a mix of historical and current data, including unique digital behavior analytics and comparative insights from external research, Custage added. This approach, he said. enhances the relevance of interactions by making informed choices about content, channel, timing and various other factors.
“The change from just one-to-many to also including one-to-one experiences, done at scale, particularly with the help of AI-powered analytics and automations,” Custage said, “goes hand-in-hand with moving beyond the old way of thinking about consumer segments.”
