Understanding the Power of Personalization

Chapter 9. Understanding the Power of Personalization Across all aspects of commerce, from travel to dining to purchases of clothes, cars or even routine products, consumers have long valued and coveted the kind of personalized services that connote luxury and status. Through the advent of the DNI framework, marketers increasingly can differentiate a wide array of products and services to meet often highly individualized goals, needs and wants. The benefits to firms and businesses, as discussed in Chapter Nine, can be far reaching. In some instances, as in the example of the banking industry discussed at page 293, it can determine the very survival of a business.

The chapter notes Theodore Levitt’s classic observation that, “There are no commodities – any product can be customized and made special.” Invite students to explore that statement. What about basic food products such as potatoes, broccoli or chicken? How has the trend toward organic food labeling helped to individualize those products? What about packaging distinctions, such as skinned and boned chicken breasts or pre-chopped broccoli? What other ideas do students have to recognize the personalization possibilities in even the least glamorous product fields?

In examining personalization techniques, students should examine the distinction between a core product and augmented product. The textbook offers the example of a checking account and the steady pressure on the banking industry to provide not just basic checking services, but a compliment of services such as overdraft alerts or online bill paying that are rapidly becoming an expected part of the core product. For students, one close at hand example of that phenomenon is the college textbook. As students have balked at the rising price of textbooks, publishers have responded by expanding the core product offering to include review CDs, online tutorials and other supplemental materials.

A powerful result of personalization for businesses is the added cost it creates when a consumer is considering switching to another product or service. Offer students the example of one favorite item: the cell phone. Once a cell phone user has established service with a provider, he or she is able to personalize the phone by adding contact information, purchasing accessories such as a carrying case or ear piece or car chargers – all items that are likely to be cumbersome if not impossible to carry over to another cell phone carrier. Smart phones, which users can customize with email capabilities, favorite websites and other downloads, can prompt even greater customer loyalty to the service provider because of the complicated barrier of recreating the same personalized system with a new device and service plan. Cell phone users can now switch their phone numbers to different carriers, but does that go far enough to offset other switching costs? Recommended Exercise:  In the real world, one potential downside to personalized treatment for preferred customers is the resentment among customers who do not receive the same special treatment. Online, however, such reward programs are less visible. Identify three steps an airline could take to extend greater personalized services to fliers who fall short of the company’s top customer status and perks like first-class upgrades.