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Author: Srinath Srinivasan | 05/18/16

Personalization: Can effectiveness be measured?

From retail, to travel, entertainment, finance and beyond, all modern businesses face a big challenge in their digital initiatives: personalization. A 1:1 personalized experiencefor consumers cuts across marketing strategies and tactics, from attracting new customers to digital and physical channels, to engaging with them post purchase, to maintaining a long-term relationship that makes them advocates and loyalists.

But even as personalization initiatives forge ahead, a question that keeps getting asked is, “How do I know if my personalization strategies are working?” Standard metrics—like traffic, average time on site, bounce rate, open rate, click rate—may not be enough to measure the effectiveness of personalization strategies. While these traditional metrics can help in evaluating specific tactics such as email marketing or web personalization, there’s a true need for a more holistic perspective to understand what’s working and what isn’t.

Stages of consumer interaction

Before we can start to measure effectiveness, we first need to understand the different stages of interaction as consumers move through the marketing funnel. With each touchpoint a consumer reaches there is incremental information being collected, and the digital exhaust they leave behind can help us understand them better and personalize their interactions.

Starting from being an “Anonymous” user who engages for the first time, to being “Recognized” when they come back, to being “Partially Identified” when they sign up for info such as newsletters, to being “Identified” when they sign up for products or services. Eventually they will reach a stage where they would be identified as a “Loyalist” based on a number of transactions or purchases done in a specified period of time.

Every step of this journey involves engaging with the brand through various tactics, starting from SEM and display marketing, to email, mobile and social marketing, or personalization of web and mobile experiences.

New metrics to measure personalization

With these stages of interaction mapped and understood, we can get an understanding of the big picture from a personalization standpoint. Measurement relies on 3 Vs that will help evaluate your strategy.

  1. Volume—the volume of users being attracted to your owned properties
  2. Velocity—a new metric called Customer Progression Velocity (CPV) helps you track the rate at which consumers are being moved from one stage of interaction to another
  3. Value—another new metric called the Customer Lifetime Value (CLV) is the average anticipated value of all your customers over the period of their association

Framework to Measure Personalization Effectiveness

A sound personalization strategy will ensure that all three Vs are high and moving upwards. If one or more have a declining trend, then it’s time to look at one or more of your tactics. For instance if your Volume is high but your CPV is low, it probably means your paid media marketing is targeting the ads to the right segment, but you’ll want to look at the content being personalized on your site or the offers being displayed in your marketing mailers.

As with any new metric, time and experience will help refine what best practices look like and what we can learn from certain warning signs. But those at the leading edge are starting to use these tactics and reap the rewards of fresh insights.

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