Description
Personalised merchandise has come a long way since direct marketing legend Lillian Vernon launched her monogramming business in the 1950s. Yet personalisation still has the potential to transform a company’s fortunes, much as it did back then, when simply applying the customer’s initials to handbags and belts turned Lillian Vernon’s modest mail order operation into a multimillion dollar business. Customisation goes part-way toward personalisation, but because it creates solutions based on templates, its offerings are basically standardised.
Personalisation Transforming the way business connects
A report from the Economist Intelligence Unit sponsored by Cisco Systems
Preface
Personalisation: Transforming the way business connects is an Economist Intelligence Unit white paper, sponsored by Cisco Systems. The Economist Intelligence Unit bears sole responsibility for thisreport. The Economist Intelligence Unit’s editorial team executed the survey, conducted the interviews and wrote the report. The findings and views expressed in this report do not necessarily reflect the views of the sponsor. David Jacoby was the author of the report and Rama Ramaswami was the editor. Richard Zoehrer was responsible for layout and design. Our research drew on two main initiatives. We conducted a global online survey in October and November 2006 of 328 executives from various industries. To supplement the results, we conducted in-depth interviews with executives from around the world about the level of customer engagement in their company. Our thanks are due to all survey respondents and interviewees for their time and insights. March 2007
Personalisation: Transforming the way business connects
Three themes for the interactions economy
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his white paper is one of three published in 2007 as part of a research programme that arose from the Economist Intelligence Unit’s March 2006 report for Cisco, entitled “Foresight 2020.” This report highlighted a number of important changes to the world economy over the next 15 years. The principal trends identified in the report—globalisation, demographics, atomisation, personalisation and knowledge management—will have a profound effect on the landscape of major industries and the working of the company. In order to build on “Foresight 2020,” we identified three themes that were then developed into separate research projects investigating personalisation, collaboration and innovation. Each is intended to stand on its own and to fit with the other two, describing from different vantage points the development of the interactions economy, in which customers, suppliers, workers, owners and others go beyond mere transactions to exchange information for mutual benefit. As companies adapt to the new forces moulding the interactions economy, they will find that personalisation, collaboration and innovation will present great challenges and opportunities. Personalisation goes beyond customisation, allowing the consumer to stamp a product or service with his or her own applications, preferences and configurations. Technology is particularly adept at enabling a high degree of personalisation, as in the case of the downloadable applications available on mobile phones or personal digital assistants. By offering a large variety of possible products, features and services, personalisation
has the power to increase sales and margins enough to transform business models. Collaboration will have a similarly profound effect on business. Broadly speaking, collaboration means to work together, and our research focuses specifically on formal collaborative arrangements at work that bridge traditional geographic, institutional, and functional boundaries. The emphasis on core competencies, the need for corporate agility and the rise of emerging markets have caused firms to focus on collaboration both within and among organisations. Collaboration among functional groups and organisations will help companies become more productive and innovative. Innovation—defined here as the application of knowledge in a novel way, primarily for economic benefit—is becoming increasingly important for companies and governments. Business executives regard it as a vital weapon in fending off their corporate competitors. Government policy makers see the need for an innovative environment if their economies are to grow. The three themes are linked in many different ways. Firms collaborate with customers in order to create innovative products that can be personalised. Process innovations can enhance collaboration in which carefully selected workers from around the world are brought together in teams to improve productivity. The development of the interactions economy is likely to strengthen the links among personalisation, collaboration and innovation and heighten their importance, with far-reaching implications for global business.
© The Economist Intelligence Unit 2007
Personalisation: Transforming the way business connects
Executive summary
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ersonalised merchandise has come a long way since direct marketing legend Lillian Vernon launched her monogramming business in the 1950s. Yet personalisation still has the potential to transform a company’s fortunes, much as it did back then, when simply applying the customer’s initials to handbags and belts turned Lillian Vernon’s modest mail order operation into a multimillion dollar business. According to a worldwide survey of 328 senior executives conducted in October and November 2006 by the Economist Intelligence Unit, in cooperation with Cisco Systems, personalisation—or tailoring a product or service to the needs of each individual customer—has enormous potential to increase a company’s revenues and enhance customer loyalty. Whereas a customised product is based on a few standard op-
Who are your company’s primary customers?
Mostly businesses 58% Mostly consumers 19% Equal mix of businesses and consumers 15% Governments/ Public sector 8%
About our survey
In October-November 2006 the Economist Intelligence Unit conducted an online survey of 328 senior global executives on their companies’ current and planned strategies for personalising products and services. Fifty-two percent of the respondents are C-level executives including 30% who are CEOs. Respondents are from companies selling services (50%) and products (38%), with the remainder from companies selling an equal mix of products and services. Twenty-eight percent of respondents are located in North America, 27% in Western Europe, 31% in Asia-Pacific and the remainder in Latin America, Eastern Europe, the Middle East and Africa. Fifty-eight percent of the respondents report their company annual revenues are less than US$500m; 28% report revenues of US$500m to US$10bn; and 15% report revenues of US$10bn or more. In addition to the survey, we conducted 22 interviews with senior executives based in Europe, the Americas and the Asia-Pacific region.
tions, a personalised item is unique to each user, who can configure the product to suit his or her preferences and usage patterns. Customisation goes part-way toward personalisation, but because it creates solutions based on templates, its offerings are basically standardised. Mass customisation, the serial manufacture of one-off products or services, is similarly based on a finite combination of features and services, however large the set may be. Customerisation1, commonly defined as the marketing of products that the user can configure to his or her own needs, allows customers to make the product useful to them uniquely and personally, but typically requires active participation and effort on their part. Personalisation, by contrast, goes beyond customisation, mass customisation and even customerisation. It allows the customer to stamp a product with his or her own applications, preferences and configurations. Technology is particularly adept at enabling a high degree of personalisation, as in the case of the downloadable applications available on mobile
1
The word “customerisation” was coined by Jerry Wind, a professor at the Wharton School of the University of Pennsylvania.
© The Economist Intelligence Unit 2007
Personalisation: Transforming the way business connects
phones or personal digital assistants (PDAs). There is no question that the positive effects of personalisation are significant. Two-thirds of our survey respondents report that personalisation has delivered higher or much higher revenues for their companies. Nearly a fourth believe that personalised products and services are likely to affect up to half of their firms’ revenue base. Increasingly, the traditional measures of success, cost-effectiveness and quality, are being supplanted by variety, personalisation, and speed of delivery or deployment. The following are the key findings of our research: l Personalised products and services are a major determinant of business success. l Products and services will be mostly or totally personalised in five years, up from 37% today. l Personalisation has a strong positive impact on revenue growth: 80% predict an impact in five years. l By offering a large variety of possible products, features and services, personalisation has the power to increase sales and margins enough to transform business models. Information technology will be a vital component of successful personalisation in the next three to five years. Small businesses that personalise products manually will be increasingly limited by the scale they can achieve without technology in the face of global rivals. Larger businesses will use a number of applications to personalise their products and services, including mobile telephony, video conferencing, collaborative workspace applications, business intelligence applications, unified voice/video technologies, automatic upgrades and uploads, telephone and e-mail. Personalisation will greatly increase the need for people and interpersonal skills. People will be essential to listen to individual customers, ask scripted questions designed to elicit customer-specific formu-
las, design complex custom solutions and facilitate their implementation. Certain markets will adopt personalisation strategies more quickly than others. For example, Europe will personalise products faster than Asia because of the former’s heritage of cultural, linguistic and regulatory differences. The US will adopt technologically based personalisation solutions because these are the quickest and most efficient way to serve a market of its size. Small businesses and companies with innovative cultures will take to personalisation more rapidly than large ones because of their tolerance for, and encouragement of, organic growth. Affecting businesses and consumers worldwide, personalisation is an important trend that will influence corporate valuations, mergers and acquisitions, and business strategies. It will bond consumers and producers of products and services. It will have broader social implications for enhanced productivity and innovation by providing more appropriate tools than were available during the era of mass production. The ripest opportunities for personalisation are ones where the cost is low, the benefit is obvious and the customer understands what personal information is being used to produce the personalised result. A low cost of implementation for the company and its customers will ensure deep market penetration. An easy-to-use solution will ensure rapid adoption. And full disclosure of any private information that is used to personalise the product or service will make customers more loyal. The personalisation trend begs several important questions. Which technologies will best enable the spread of personalised products and services? Once people have access to all of these features through on-demand personalised solutions, will they still need pure services? And how much more efficient and innovative will the world be when everybody has tools that fit their needs more appropriately?
© The Economist Intelligence Unit 2007
Personalisation: Transforming the way business connects
Introduction
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n the science-fiction thriller Minority Report, a jolly salesperson appears on a large flat-screen monitor just inside a Gap clothing store, greeting customers as they walk in. “Good afternoon, Mr. Yakamoto,” she says excitedly. “How did you like that three-pack of tank tops you bought last time you were in?” This scene is one of many that use familiar brands to portray a futuristic vision of wholly interactive and personalised advertising. Although the film is set in the year 2054, its depiction of an intensely personal relationship between companies and their customers may become reality much sooner than we think. In fact, in January 2007 the luxury automaker BMW began a pilot interactive advertising campaign in four US cities, using billboards activated by radio frequency identification. Select owners of the firm’s Mini Cooper cars received an RFID keyfob that contained an encoded custom message based on information they had provided previously. When they cruised near overhanging Mini billboards, the latter would light up to display a personal message. Personalisation, or tailoring products and services to the needs of individual customers, is becoming a major determinant of success, according to a survey of 328 senior global executives conducted in November 2006 by the Economist Intelligence Unit, in co-operation with Cisco. Over half of companies’ products and services will be mostly or totally personalised in five years, up from 37% today, according to the survey respondents. Furthermore, personalisation has a strong positive impact on revenue growth: 66% of respondents say it has a major impact today, but 80% predict such an impact in five years. Cost is less of a differentiator in increasingly saturated markets that offer abundant low-cost options.
© The Economist Intelligence Unit 2007
What does your company sell?
Only products 15% Only services 34% Mostly products 23% Mostly services 16% Equal mix of products and services 12%
How would you characterise your company’s culture?
Innovative (creative, intuitive, quality-oriented 37% Traditional (conservative, bureaucratically controlled) 21% Critical (negative, pessimistic) 2% Personal (individual- and values-oriented) 14% Impersonal (formal, strictly business) 2% Transactional (routine, rigid) 5% Interactive (flexible, empowering) 7% Collaborative (teamwork, consensus-oriented) 12% Don’t know 1%
“Providers have grown so large that customers feel they are being dealt with in a huge supermarket,” says one executive. “They are saying that they want something more customised than that.” Jimmy Wales, founder of the online encyclopedia Wikipedia, agrees: “They want more control over what they are
Personalisation: Transforming the way business connects
getting. They were willing to accept one-size-fits-all because of price, but given the choice they’d rather have a personalised solution.” By offering the customer the ability to tailor products and services to his or her own specifications, personalisation has the power to increase sales and margins enough to transform business models. Over half of our respondents expect personalisation to affect 2%–25% of their companies’ revenue base, while 23% say it would affect 25%–50%. Furthermore, personalisation increases margins, stickiness and loyalty, and customers are willing to pay extra for the interaction experience. Sixty-four percent of respondents assert that personalisation of their products or services has resulted in somewhat higher or much higher revenues. In a global business environment, it is almost impossible to operate without personalising merchandise to some extent. For instance, the chocolate equipment maker Lloveras, based in Spain, makes 90% of its sales to 52 countries, a task that requires extensive flexibility and cultural sensitivity to different customer environments. Legal and regulatory frameworks (such as those of the European Union) can also require that products be configured differently for different markets. In Japan, competition among links in the supply chain often results in a struggle for differentiation, with a consequently higher level of personalisation, more detailed product and process specifications, and more quality checks. Japanese companies and organisations have their own individually tailored quality inspection systems that are not necessarily related to international standards, and that often go above and beyond them, according to Per Knudsen, managing consultant for Global Expansion Network, a consulting firm that helps companies enter the Japanese market. And in China, domestic resource costs affect personalisation: In trucking, for example, the more expensive asset is the truck, not the driver as in the
How important are the following factors to your company’s current revenue growth?
(Percent of respondents)
Cost 42% Quality 56% Quantity/variety of products available to consumer 19% 27% Speed of delivery 30% Product/service innovation 36% Customisation of products/services 28% Customer loyalty 45% Customer satisfaction 26% 35% 39% 27% 32% 14% 2% 2% 11% 21% 22% 22% 34% 62%
1 Very important 2 3
28%
18%
9% 3%
7%
4 7% 3%
11% 4% 11% 7%
14% 5% 2% 27% 8% 2% 1
4
5 Not important
West, so Volvo China creates personalised solutions that save clients money by minimising the number of vehicles employed. Personalisation is legendary in the services industry. The Ritz-Carlton hotel chain runs a Leadership Institute for its internal and external clientele. The USbased retailers Nordstrom and Neiman-Marcus have a similar rapport with their upscale customers. Atherton Trust, a private wealth management company in the US, caters to its clients’ every need, including making vacation plans and even taking control of funeral arrangements for the family member of a wealthy patron. CEO Kraig Kast describes Atherton’s approach as “a 360-degree relationship” with the customer. In the future, however, the traditional face-to-face customer service model will not be scaleable enough to win in a fiercely competitive business world. Video rental stores, for instance, “will close by the thousands,” predicts Steve Swasey, director of corporate communications at the online movie distributor Netflix. “That traffic will move online. Blockbuster is transitioning to compete with Netflix.” The challenge for companies, then, is to provide an emotional and interactive experience for the customer at a lower cost than one-on-one customer service would entail.
© The Economist Intelligence Unit 2007 7
Personalisation: Transforming the way business connects
Delivering a personalised experience
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o deliver a personalised experience, companies must be prepared to offer customers an almost infinite number of features and options. In addition, they must: l recognise the customer individually during every interaction; l collect information on the customer’s product usage and buying preferences; and l use the information gathered to make the next transaction an even better experience for the customer. The terms “personalisation” and “customisation” are sometimes used interchangeably, but they mean
In five years’ time, how important do you expect these factors will be to your company’s current revenue growth? (Percent of respondents)
Cost 46% Quality 65% Quantity/variety of products available to consumer 31% Speed of delivery 44% Product/service innovation 49% Customisation of products/services 39% Customer loyalty 55% Customer satisfaction 73%
1 Very important 2 3
25%
18% 23% 21% 35% 30% 37% 28%
8% 3%
8% 3% 2% 8% 5%
4 14% 4% 3%
35%
13% 5% 2% 13% 9% 6% 4% 6% 2%
18% 5% 2%2%
4
5 Not important
considerably different things. Personalised products and services are markedly different from their customised counterparts. A customised product or service is based on templates and offers a finite combination of features and services. Many products and services can be customised before they are bought. In contrast, personalised products and services adjust
© The Economist Intelligence Unit 2007
to an infinite range of customer needs after purchase, without needing to be custom-ordered. Personalised solutions, therefore, become an important part of customers’ lives and create a tighter bond of customer loyalty than customised solutions do. “It’s the whole persona—for example, the customer might want to get every ‘Batman’ product as soon as it comes out,” explains Doug McMellan, head of business development for Forum Nokia, a division of mobile phone provider Nokia that provides resources for mobile applications developers. “A lot of people get giddy about what they can do on their phone,” Mr McMellan says. “Personalisation used to be a custom color case, then a custom ringtone, then the caller’s picture instead of a caller-ID phone number, then the sound file of [the user’s] children, and now it is moving toward new enabling technologies that allow developers to download content from anywhere.” Wikipedia’s Mr Wales shares this enthusiasm: “[Web surfers] can’t believe they got a page that says ‘Edit this page. And then they notice there is a community they want to join. It turns the passive act of reading into an interactive experience—you chose the subject, followed the links, and got carried away.” Location-based services such as Global Positioning System (GPS) and radio frequency identification (RFID) tags promise to extend the personalisation revolution. Nokia has announced several GPS applications (eg, Travelogs) that enable the user’s friends and family to track his or her movements through a Web site. Another application helps consumers find places to eat based on GPS navigation, with their phone identifying where to go to find a restaurant and how to get there from their current location. “The connection of me, my location and my phone can generate a new social dynamic,” explains Mr McMellan.
Personalisation: Transforming the way business connects
Personalisation usually involves extending a common transaction into a personalised interaction. To do so successfully, the following tactics are most useful: Recognise the customer individually during every interaction. Two points of customer interaction are critical to establishing competitive advantage: (1) customer enquiry and the initial sale, and (2) service delivery and follow-up support. More than a third of our respondents say that customer enquiry and the initial sale present the strongest opportunity to establish competitive advantage. Forty percent find that their best chance to gain a competitive edge lies in service delivery and follow-up support interactions. Referrals by third parties also present a critical opportunity, according to 32% of participants. At the Ritz hotels, recognising the customer individually means addressing the customer by his or her name. At the electronic address book service provider Plaxo, it means connecting with friends and colleagues by name. At the online businesses Amazon, Google, or Yahoo, it means being greeted by name and seeing new information in a preferred style or format. For more complex sales, the introduction is more subtle: “Personal networks are the most important channel, and cold calls don’t work,” explains Cesare Guidorzi, marketing director in Italy for the global engineering and electronics firm Siemens. Mr Guidorzi relies on personal appointments with chief information officers to sell his wares. Collect information on the customer’s product usage and buying preferences. Having information on customers’ future needs or plans increases the chances of a subsequent interaction, say 45% of survey respondents. Fifty-nine percent obtain this information through their front-line salespeople; 46% use customer surveys. Companies use a variety of methods to collect customer data. Plaxo’s “Click to Connect” feature
Currently, to what degree does your company offer each customer the ability to configure products or services in a unique way?
The product is standard and we offer no customisable features 23% The buyer can order some features and value-added services 40% The buyer can customise most aspects of the product 26% The buyer has total freedom to shape the product to his/her specifications 11%
identifies Plaxo members and lets the customer add him or her to the electronic address book. Its affinity statistics rank order contacts in the customer’s address book by frequency of contact, by referring to e-mail history. At UPS, the transportation conglomerate, strategic account managers meet personally with customers to gather information. For Lloveras, the Spanish chocolate equipment maker, data collection involves signing up a new client to purchase one standard machine and developing more tailored products after the sale is complete (the machine that usually gets sold first is a universal refining machine, which gets rid of the most acidic components of the chocolate). The strategy works: 46% of Lloveras’s sales are to repeat customers. Use the information collected to make the next transaction a better experience for the customer. UPS uses its Package Flow Technology to enable drivers to be more informed when they greet their customers. In one case, the company delivered regularly to a disabled elderly woman, and the regular driver knew that he should wait for her to open the door and hand her the package. When a substitute driver took over, and was about to deliver the package, a message appeared on his device that said “Knock and wait.”
© The Economist Intelligence Unit 2007
Personalisation: Transforming the way business connects
An approach to personalisation
A
lthough personalised products run the gamut from conventional to quirky, companies find that personalisation strategies fall into one of three broad categories: l pure technology, which includes the features found in personal electronic gadgets; l pure service, or technical personalisation of existing products, mostly in a business-to-business environment; or l hybrid solutions, which combine technology with face-to-face interaction. Pure technology. Technology is the primary engine behind the growth of personalisation, playing a key role in many firms’ personalisation strategies. This has led to a systematisation of existing products and
the rise of new products and services for both businesses and consumers. Technology-based personalisation is characteristic of many electronics such as Apple’s iPod—for which the downloaded content is the personalisation—or personal computers, which are by their nature configurable to the user’s settings and preferences. Plaxo, the electronic address book company, has become a social networking tool by basing its business model on technology. It memorises the contact information of all the contacts in the customer’s address book, automatically updates that information, and facilitates user interaction with contacts through user photos, birthday reminders, e-cards, and invitations to join the network. Plaxo integrates with common address books such as
Case Study: UPS speeds towards personalised logistics
Y
ears ago, transportation was hardly likely to be personalised. The train left, the truck drove and
nationwide survey of companies. According to the 200 Annual RQSM, a survey by Harris Interactive that measures the reputations of the US’s most visible companies, UPS ranks No. 1 for people’s “trust in the company to do the right thing in the event of a product/ service problem, excellent customer service, and sincerity of corporate communications among US companies.” To achieve that desirable rapport with customers, UPS deploys both technology-based services and people-intensive solutions. In both cases, it leverages technology and financial tools to deliver results. For lower-volume shippers, a Solution Finder on UPS’s home page offers guidance on
the service and degree of “touch” appropriate for their role, industry, problem and type of shipment. For example, customers shipping internationally need to know whether the consignee is on a prohibited list, customs filing requirements, and how to calculate landed cost, including duties, shipping and taxes. “If you’re doing this without technology, you’re either guessing or you’re not including all the relevant costs,” says Mr Colletta. Higher-volume shippers are assigned account representatives that work across the UPS Supply Chain Solutions group to engineer the ideal solution. For example, if the customer needs to reduce SG&A cost, UPS might find a solution that involves less
the ship sailed whether your cargo was on it or not. But today UPS, the US-based global transportation giant, offers personalised services across the entire supply chain. Companies of any size or within any market segment can find the logistics solution that best fits their needs. UPS bases its operations on one-to-one relationships with its customers, according to Jordan Colletta, the company’s vice president of customer technology marketing. This strategy has apparently paid off: UPS tops the list for trustworthiness in a
10
© The Economist Intelligence Unit 2007
Personalisation: Transforming the way business connects
Microsoft Outlook and AOL Instant Messaging. WebEx, a US videoconferencing application, is another example of personalisation through technology. It serves businesses through a customisable Web site that can look like an extension of the business and that indicates the user’s scheduled meetings; supports large-scale Webinars that can open with a video for effect; and integrates with a back-end virtual office that has shared calendars, contacts, documents and task management, all of which can be personalised by each user. Joe Schwartz, director of marketing, describes WebEx as enabling a “Web touch” and contrasts this with many “high touch,” expensive selling models that are sold through a direct field sales force. At the other end of the scale are what Mr Schwartz calls “no touch” companies, such as Google Adwords, that interface with the customer exclusively via a Web site. “Web touch” is in between the two, and this is where Mr Schwartz sees the largest market opportunity. He envisions WebEx eventually integrating with other ap-
In five years, to what degree do you expect your company will offer each customer the ability to configure products or services in a unique way?
The product will be standard and we will offer no customisable features 11% The buyer will be able to order some features and value-added services 36% The buyer will be able to customise most aspects of the product 33% The buyer will have total freedom to shape the product to his/her specifications 20%
plications so that, for example, Webinars have built-in lead qualification features and the results of Webinars automatically feed into a customer relationship management package. DSTS, a Portuguese on-demand printing services company, uses a mix of proprietary technology and
shipping activity. The account manager consults a solution developer before meeting with the client, and can view the solution through a CRM application before talking to the client. For heavy-volume customers, UPS handles everything in a totally personalised way so that the customers can focus on their core competence. Often these solutions get embedded in the customers’ third-party applications. For example, the US-based Internet solutions provider Peachtree Solutions interfaces directly with UPS. UPS customers trust “Big Brown” because the company knows their needs individually. As in any relationship, intimacy and trust are interrelated: Customers will not share
enough information to allow personalisation until they trust the provider, but they will not trust the provider until it demonstrates an intimate knowledge of their operations. “Customers must trust you to share their secrets with you,” says Mr Colletta. UPS has become expert at the dance of building trust and intimacy. The company builds loyalty with individual customers through personalisation, according to Mr Colletta. It identifies customers’ preferences as “high-touch” or “low-touch.” “Some customers are high-tech, savvy, digest information quickly and they want to just go,” says Mr Colletta. “Others would rather call you or get the one answer they need, then leave.” UPS
systematically uses its magic to sense and respond to customers’ needs. The company operates on an “ears, hands and brain” principle: The ears understand the customer, the hands quantify the problem and design a solution, and the brain integrates and tests technologies that embed the solution. Such coordination puts UPS in the enviable position of being able to use customer information to improve each subsequent interaction. Ironically, customers would not identify personalisation as their reason for selecting the company, according to Mr Colletta. While the personalisation is invisible, its results address customers’ needs more precisely, which keeps customers coming back. n
© The Economist Intelligence Unit 2007
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Personalisation: Transforming the way business connects
What impact do you believe personalisation currently has on your company’s growth?
Strong positive impact 25% Positive impact 41% No impact 28% Negative impact 5% Strong negative impact 1%
algorithms to crunch raw data from the customer to produce personalised documents such as water bills in any colour, with customer-targeted inserts. Customers can add their own colors and icons. The online encyclopaedia Wikipedia also uses a technology-based model. Wikipedia allows any user anywhere in the world to add or delete content from its body of knowledge, making it both personalised and accessible to anybody at any time. Most Web surfers doing a Google search will run across content from Wikipedia. A not-for-profit business, Wikipedia is not an example of the high sales or margins that can be reaped from personalisation, but rather an example of how personalised technology models can flourish once they become popular. Pure service. Service businesses, especially in the financial services, IT services and consulting industries, tailor their products and processes to individuals and individual clients. When they can continue to customise the product even after the client is won, they are personalising their services. AmpTec, a German biotech company, customises its research process for many clients. A recent customisation for Novartis helped attract at least ten new customers, according to AmpTec’s president,
12 © The Economist Intelligence Unit 2007
Dr Guido Krupp. “Each client requires different support, so you have to customise everything,” adds Knudsen of Global Expansion Network. IT services and systems integration companies solution-sell by mixing software with services. At IBM France, the hardware and software are largely standard, but many of the services are custom. Systems integration services are split, with some being “off the shelf” and some personalised. In Italy, Siemens has highly structured processes that use a customer survey to design a personalised solution. Even product firms can personalise their offering through a pure service approach, although this is less common. Volvo Trucks uses its “Go Gold” solutionselling strategy to sell distribution solutions, not trucks. Sometimes its customers only need a quarter to a fifth of the trucks they think they do, according to Gary Wu, Volvo’s strategic alliance manager in China, where Volvo has helped Coca-Cola reduce 42 distribution centres to 11 and decrease its vehicle requirements from 150 to 40 trucks—a boon in a country where trucks are viewed as more expensive assets than drivers. Mr Wu estimates that 80% of Volvo China’s sales come from its pure service approach. As a result of the Go Gold program, Volvo China has risen from sixth place to third place in truck sales, doubled unit volume in two years and increased its margins. Hybrid model. A third delivery model connects personalised technology and face-to-face interaction, combining the customer service impact of face-to-face customer communication with the scale benefits of technology. In the early 2000s, brick-and-mortar companies edged out many Internet start-ups because they were able to “touch” the customer. Similarly, in 2010, the companies that can integrate back-end technology while still having human beings face the customer may lead the next generation of successes. The movie distributor Netflix allows users to select
Personalisation: Transforming the way business connects
movies online, then delivers them via the US Postal Service. Its hybrid model combines databases and Internet functionality with 41 distribution centres that use manual labour to insert disks in sleeves and deliver the movies to households. On the customer-facing end, the company is highly personalised: “Netflix has 6.3 million websites for 6.3 million members,” says Steve Swasey, director of corporate communications. The company automatically tracks purchase history, and more than 60% of users rate the movies they rent based on a five-star rating scale. Netflix automatically correlates ratings to make movie recommendations. It is able to measure the effectiveness of its personalisation tactics by monitoring daily yardsticks such as how many and which users logged on, searched, joined or cancelled. Similarly, UPS offers a Web-based front end and application tools, combined with face-to-face interaction by drivers and account managers. For
small shippers and first-time customers, it offers a surprisingly detailed Solution Finder on its Web site that allows shippers to determine landed cost, duties, shipping costs and taxes. On the back end, UPS drivers provide well-trained and deliberate human interactions. Jordan Colletta, vice president of customer technology marketing, describes these disparate parts of the organisation as “the ears, hands and brain” of the entity that provides personalised on-demand service with a unique customer interaction every time. Nokia does not personalise its own mobile phones, but provides the tools for others to do so. As the adage goes, it sells the shovels to the gold-diggers instead of panning for gold itself. As such, it supports both Web-centric applications like Adobe and Macromedia and their delivery through a hardware product. The customer actually “touches” the content by holding the device.
Case Study: Plaxo enables technological networking
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laxo, a US-based online business, uses technology to link people to their colleagues and friends
extent of personalisation by tracking customer behaviour in the first month of usage, based on the number of hits on the landing page (the page the recipient gets to when he or she accepts an invitation) and conversion rates. Recently, the company teamed up with Jajah, an Internet calling service, to provide customers with a feature called “Click to Call” that enables them to click on a name in their Plaxo address book and call that person directly. Also available is a mobile product that allows customers to access their address book on their cell phones. Thanks to Plaxo’s intensely personalised interface, users benefit from the system without having to do anything differently from before. “Nobody has to do anything
special as in other social networking sites like Myspace, Facebook, or Friendster,” says John McCrea, Plaxo’s vice president of marketing. “[Plaxo] has embedded the DNA of the system into the tools you already use.” Members are electronically identified and their personal details added to the user’s address book; when users invite friends or colleagues to join Plaxo, the invitee is sent to a Web page that sports a picture of the person sending the invitation. Eventually, Mr McCrea believes, Plaxo will grow into a large consumer Internet company like Google, Yahoo! or eBay through viral growth generated by requests for contact information updates, birthday reminders, dynamic signatures and invitations to join the network. n 1
through their electronic address books. Relying on only 0 employees, the company helps 1 million users keep their e-mail addresses and contact information updated automatically. Address books can be accessed through AOL and synchronised with popular software such as Microsoft Outlook. As information changes, Plaxo populates the correct information into each affiliated member’s address book. Plaxo warehouses its data in an Oracle system and analyses usage statistics in detail, providing users information about their networking activity. It even “measures” the
© The Economist Intelligence Unit 2007
Personalisation: Transforming the way business connects
Making it happen: Combining technology and the human touch
E
ffective personalisation involves combining upto-date technology with human interactions. Our research indicates that: l the technologies used in personalisation will become increasingly sophisticated and include unified media, mobile telephony, business intelligence applications, and collaborative workplace applications; and l people will be essential to provide the communication, listening and customer support skills that enhance the customer experience. Enabling technologies. The prime catalyst of the personalisation revolution is information technology; therefore, it should be no surprise that leveraging IT to pursue a personalisation strategy is a key success factor. Corporate leaders need to build a robust IT network with infrastructure that can collect and de-
liver information in real time at no incremental cost. Ahmad el Nashar, business development manager at Egyptian shipping company Barwil-Unitor, explains: “The ability of firms to personalise will be based on strong IT systems—hardware, software, PDAs [personal digital assistants], and sharing between these systems.” Per Knudsen, managing consultant for Global Expansion Network, agrees: “Technology plays a role in customisation. Technology [even] plays a big role in irrigation methods needed for growing fruit.” Mobile telephony is the most striking technology trend. Respondents rank personal digital assistants (PDAs) as the most important technological application to improve personalisation over the next five years. Eighty-two percent of our survey respondents say PDAs will play a role in their personalisation strategy; 56% are using them today, and 28% will deploy
Case Study: Flexibility and speed pay off for Sampo Bankas
S
ampo Bankas, the fourth largest bank in Lithuania, differentiates itself by personalising its products. The bank
banks are selling the same products. There are two differentiators: flexibility and speed,” says Norbertas Zioba, the bank’s business development director and a board member. By flexibility, he means personalised solutions that suit the individual customer’s needs. By speed, he means the time taken to approve a customer’s mortgage. Sampo’s impressive growth—for the past three years it has been the fastest-growing bank in Lithuania—results largely from its personalisation strategies, which it has masterfully applied with a mix of common
sense and the use of appropriate technology. For example, in fast-growing Lithuania, people often want to buy an apartment in a house that is not built yet. Competing banks would not approve a loan unless it was backed by hard assets, but Sampo finds other ways to achieve its customers’ objectives. It accepts co-signatories, gets an employer to guarantee the loan or even works with the contractors to deposit cash into the applicant’s bank account against a letter of credit. “[Personalised] solutions are always the best solution for individual
sells mortgages and loans, as well as some private banking services, to businesses and consumers. It reaches most of its customers through electronic banking, advertising, and through its branch network when customers come in to apply for a loan or make a transaction. Sampo has no franchise or dominant market position, no proprietary technology and no magic training program. “Almost all
1
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Personalisation: Transforming the way business connects
them over the next five years. Plaxo, along with its partner Zingy, is supplying Plaxo Mobile Plus through wireless service providers. The Lithuanian bank Sampo Bankas offers SMS Banking so its customers with GSM phones can find out their account balances and make transfers while on the run. Seventy-five percent of the Lithuanian population uses GSM phones, and 15% use SMS Banking, according to Norbertas Zioba, business development director at Sampo Bankas. Collaborative workplace applications such as instant messaging and file-sharing will also create important personalisation opportunities: 77% of our respondents say they will use them over the next five years, up sharply from today’s 48%. More than 300 million people worldwide regularly use instant messaging, sending nearly 12 billion instant messages per day. Video conferencing will play a major role in personalisation strategies, according to 75% of our survey respondents. Forty-one percent currently use video conferencing, and 34% expect to deploy it over the next five years—a number that could be much
How have advanced technologies (such as VoIP, streaming video or Podcasts) affected your company’s interactions with customers in these areas?
Average time to facilitate communication 15% 26% Number of interactions initiated 30% 7% Agility to respond to customer requests 26% 12% Frequency of miscommunication 3% 14% Customer satisfaction 28% 11% Customer loyalty 24% 7% Ability to personalise products and services 21% 9%
1 Strong positive impact 2 3 No impact
45% 1%1% 49% 2% 48% 3% 59% 8% 3% 47% 2% 1% 53% 2% 1% 55% 2% 4
5 Strong negative impact 6 Don’t know
12% 12% 11%
4 13%
11% 13% 13%
larger, given the mature nature of the technology, were it not for its substitution by easy-to-use and nearly ubiquitous instant messaging and file-sharing. Business intelligence applications will be a major factor in personalisation. For 72% of respondents, these applications will support their personalisation strategies by capturing targeted customer information. Moreover, respondents intend to deploy
customers,” says Mr Zioba. “The question is how to optimise costs while doing this.” Sampo accomplishes this through its branches, as well as with technologies such as customer relationship management (CRM) programs, mobile telephony and e-banking. The branches, however, are the most critical, because they enable Sampo to give customers its full attention. By shifting from transactions (currency exchange, loan repayment) to interactions (up-selling from mortgage to life insurance, credit cards, car lease), the branches have greatly increased sales of new
products to existing customers. “Customised solutions are always the best solution for individual customers,” says Mr Zioba. “The question is how to optimise costs while doing this.” For Sampo, the answer lay in developing a set of “pre-customised” solutions to choose from. It now personalises 0% of its solutions by picking options from this menu. In addition, Sampo trains agents to interact with customers. “You must ask two questions of any customer who comes to make a payment to you,” says Mr Zioba. It’s a
compulsory system, just like at McDonalds— ‘Would you like to try this new product?’” Mr Zioba also advises asking open-ended questions, even if the answer is a simple “Yes/No” option. Asking about customers’ credit cards or retirement planning gets customers to talk about their true needs to the salesperson. “It improves the relationship between customer and salesperson. The customer has shared a lot of information about career, family and retirement, and the customer knows that the more open he or she is, the more business value there will be.” n
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Personalisation: Transforming the way business connects
business intelligence applications over the next five years more than any other technology: 39% say they will install it at some point over that period. Plaxo warehouses its data in an Oracle application and compiles daily statistics on customer attrition and cannibalisation. It even has a liquid-emitting diode sign in its corporate office showing how many users
Which traits/skills do you think are most important for your employees to possess in order to deliver a meaningful customer interaction?
Creativity 4% Communication skills 43% Humour 1% Discipline 4% Insight into customer needs 39% Product knowledge 9%
joined in the last hour and the last 24 hours, and how much revenue was booked in the last hour. Unified voice, video and data networking is the technology that will experience the greatest increase in adoption over the coming five years, according to survey respondents. Thirty-seven percent expect deployments in this area over the next five years—a more significant roll-out plan than any other technology mentioned here except business intelligence applications. This is a sharp increase from today’s levels: “Unified media is currently deployed in only 15 percent of North American and 14 percent of European enterprises,” reports a study by the technology consulting firm Forrester Research. Regardless of the technology, the availability of content and automatic updates will help companies make a seamless connection with users. Applications
1 © The Economist Intelligence Unit 2007
similar to story development software will enable the personalisation of audio and video content, and automatic updating will reduce the burden of personalisation on the user. Popular Telephony’s global operations manager, Edmund Read, describes the ideal form of personalisation as one that “automatically suggests (and provides!) the best usage options and productivity promoting tools based on constant analysis of usage by a company, a department or a single employee.” For instance, Microsoft Office learns frequently used keystrokes and menu commands and displays them as they reach usage thresholds. Our survey indicates that telephone and e-mail are by far the primary means of achieving personalised customer experiences. Half of the respondents find e-mail one of the three most helpful technologies, and nearly as many (47%) say that the telephone is among the three most useful. “Nothing surpasses the value of a personal phone call,” says Atherton Trust’s Mr Kast. Focus groups also rank high because of their strong element of human contact. Interestingly, very few respondents say that technologies such as Web chat, streaming video, Webcasts, and Podcasts are helpful in improving the customer relationship. Only 3%–7% of respondents rate those technologies among the three most useful activities, although they acknowledge that these technologies strongly increase their agility to respond to customers (38%), compress the time to facilitate communication (41%), and increase personalisation of their products or services (30%). But these technologies’ early stage of adoption limits their effectiveness for the time being, according to interviewees.
Personalisation: Transforming the way business connects
The people behind the data
T
echnology and data integration, however, are not sufficient. People are essential to personalisation as well. Says Joe Schwartz, WebEx’s senior director of Marketing, “You can’t just link up databases and expect the business relationship to thrive. You have to link up the databases and then allow people in your business ecosystem to collaborate. That’s the way the next generation is going to grow.” People are critical antennae for sensing and responding to customer input. In fact, 43% of respondents say that their employees need to possess communications skills more than any other attribute in order to deliver a meaningful customer interaction. The most important “people” skill may well be simply listening to customers. Sampo Bankas finds that its branches are vital for this type of communication. “The best time to clarify the customer’s wants and needs is when he or she is in front of you,” explains Mr Zioba of Sampo Bankas. “That way, the customer is not answering e-mail or playing computer games while you are talking to him. It’s the most expensive channel, but it gives the best return.” People are also critical for building the trust and relationship to close a sale. At Singapore’s GFIA, “people are the key constraint,” says Mr Douglas. “You have to grow slowly—hire one analyst every six months and bring them up the curve. You have to train them.” Mr Douglas explains that effective training requires travelling, talking to people, conference calls, e-mails and constant communication. FoundOcean’s president, who adds trade shows and conferences/presentations to the list, describes the process as “shoe leather and air miles.” IBM puts all its new salespeople through eight months of training where they learn to listen to customers. Siemens Italy’s Mr Guidorzi says that sharing dinner
with customers creates an open, relaxed and informal atmosphere. “They think they have more negotiating weapons if they don’t tell you anything, but you need information to personalise.” Jordi Torres, sales and marketing manager at the chocolate company Lloveras, adds that “the personal relationship is essential in this world. If you know that the customer likes hockey or football, you can talk with them and show sincere interest in their life, hear their problems, apply a bit of emotional intelligence in the relationship. That is 50% of the sale. The rest is the technical solution and the price.”
How does your company capture buying preferences and behaviours?
Point-of-sale data
34%
Surveys
46%
Front-line salespeople
59%
Website interactions
20%
Service calls
24%
Other
8%
Do privacy concerns hamper relationships with your company’s customers?
Often 11% Sometimes 43% Rarely 46%
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Personalisation: Transforming the way business connects
Customer service support increases dramatically with personalised products and services, and people play a key role here as well. As Popular Telephony’s Mr Read explains: “Once a customer is interested in customising, the amount of personal contact with the sales force increases.” As part of his company’s personalised after-sales program, the feature and options development teams receive briefings about every personal follow-up and use the feedback to guide the development of improvements and new features. The greater the complexity of a custom solution, the greater the number of people involved throughout the organisation. Our survey responses show that implementing a personalisation strategy touches nearly every functional area of the enterprise, including operations, sales, marketing, customer service and information technology. Integrated solution providers like UPS excel at sharing information and analysis internally and presenting it to the customer in a unified and personalised way. People are also critical for relating to different
Which of the following applications of technology does your company have now, or expect to deploy in five years, to deliver more personalised customer experiences?
Virtual data storage 31% 22% 30% Unified voice, video and data networking 37% 18% 29% Voice-over Internet protocol (VoIP) 32% 36% 21% Click-to-talk 8% 33% 39% Web chat 33% 27% 30% Instant messaging 25% 24% 43% Personal digital assistants (PDAs) or other mobile devices 13% 26% 56% Video conferencing 34% 41% 20% Video messaging 16% 30% 36% Collaborative workplace applications (eg, instant messaging, file sharing) 17% 29% 48% Business intelligence applications 34% 39% 14%
1 Have now 2 Expect to deploy within 5 years 3 Do not expect to deploy within 5 years
In your opinion, what obstacles stand in the way of your company’s implementing a personalisation strategy?
Lack of management buy-in
24%
Fragmented staff structures
24%
Lack of customer information
23%
Decentralised customer information
22%
Inadequate IT infrastructure
29%
Inadequate budgets
28%
Overall company culture
27%
Competing agendas
25%
None of the above
15%
17% 16% 11%
4 20%
10% 7% 5% 5% 18% 6% 13%
cultures. This is especially true in Europe, with its disparate cultural heritages. “Face-to-face interaction is very important in Italy,” explains Daniela Papetti, marketing manager for Cabur, the Italian electrical supplies manufacturer. “Even Sweden and Denmark, which are next to each other, are still very different,” points out Mr Knudsen of Global Expansion Network. The most common methods for training people involve face-to-face communication. The leading techniques are on-the-job training (69%), peer mentoring (45%) and training by a supervisor (44%). Some companies use innovative methods to instill creativity in customer-facing personnel: simulated customer meetings, scripted customer interactions, interactive video training with “set-piece” scenarios, customised classroom training, online training, and story-telling to relate to customers’ emotions. Direct face-to-face communication may become less prevalent, however, as teleconferencing and videoconferencing technologies allow individuals to establish informational and emotional connections remotely at far less cost.
4 Don’t know
1
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Personalisation: Transforming the way business connects
Key success factors
D
espite all its benefits, personalisation is not a panacea for corporate ills. Indeed, it could come at some risk of decreasing sales or customer loyalty if done the wrong way. Companies should ensure that three prerequisites are in place before developing personalised products or services: l The cost of personalisation should be reasonable for both the company and its customers. l Configuring the product should require little or no incremental effort on the customer’s part. l Disclosure of private information used to personalise the product should be transparent to the customer. Low cost of implementation When companies offer sophisticated, tailored solutions before the market adopts the conveying technology, or before enough customers demand such products to make them profitable, they risk alienating customers and losing money. Dr Krupp of AmpTec says that given the heavy investment required to personalise a product, it is sometimes better to wait for the market to grow so that the initial spending can be amortised across a larger number of customers. Popular Telephony’s Mr Read finds that small businesses are more likely to buy totally customisable solutions than are large companies. “Usage logs also show us that most small and medium-sized businesses take customisation personally. No two systems are the same, and a variety of features allows them to test each until they find the most efficient for their business processes.” In contrast, he says, “large businesses are still practicing the traditional cycle. They buy a customised system, deploy it and wait until they grow or the technology expires before
‘upgrading.’ In our case, large businesses prefer to customise the system first and then control upgrading on a per-feature basis. We expect this behaviour to change when the simplicity of total customisation becomes clear.” Large companies may pass up customised or personalised products in favour of a proven solution. FoundOcean, the manufacturer of concrete oil rig drilling platforms, is actually trying to deliver a more
What information exchanged during a customer interaction do you think would most increase the chance of a subsequent interaction for your company?
Personal information 12% Information about new products/services 10% Information about a customer’s lifestyle 5% Information about customer’s buying preferences 13% Information relating to a customer’s future needs 33% The company’s business plans for products/services 12% The company’s innovation cycle 4% Opportunities to offer feedback 6% Rewards and incentives 2% Don’t know 3%
standard product because its large oil company clients are highly conservative. Due to the magnitude of their investment in oilfields, they aim to reduce risk wherever possible. Therefore, FoundOcean’s customers prefer to buy established solutions. Ease of use Consumers and businesses can be turned off by personalised solutions that require too much
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Personalisation: Transforming the way business connects
time and trouble to configure. The wrong process or technology can actually alienate the user. Consumers hate VCRs that need extensive programming or lengthy log-in procedures to arrive at a customized Web site. Businesses are put off by systems integration that is so painful as to reduce the perceived benefit from personalisation.
What impact do you believe personalisation will have on your company’s growth in the next five years?
Strong positive impact 42% Positive impact 38% No impact 15% Negative impact 3% Strong negative impact 1%
l Atherton Trust had its new customers select between many options when first joining the company, an approach it thought would result in the identification of the portfolio that would best match their needs. However, Atherton’s customers preferred fewer choices, so the company simplified its offering, forming three major product groups. l UPS offered its smaller customers a Web-based “technological point solution” and its larger customers personal interaction with an account executive, according to Mr Colletta, the company’s vice president of customer technology marketing. However, some smaller customers wanted the attention that comes with a dedicated account representative, and some larger customers preferred to do business over the Web than with a person. UPS customers’ personalisation preferences are sometimes driven by business size, but at other times by situational, demographic or psychographic factors. While UPS has segmented its customers in many ways, it still struggles to identify the right extent of personalisation for a new account. Disclosure Some customers are willing, even anxious, to reveal information to vendors in exchange for a personalised solution, while others are dead set against it. The objectors view personalisation as a violation of their privacy if they need to allow prying eyes to track their movements. Mr Kast of Atherton Trust explains that some of his firm’s wealthy clients want to receive personalised communications every 20 minutes, while others prefer absolute privacy until they call. As with cookies, e-mail, and RFID, what is a convenience to some may be a nuisance to others. As a result, the scalability of personalised solutions will rely on a relationship of trust with the customer.
Personalised solutions can require extra effort of individuals or businesses that would prefer to be presented with a product rather than to have to make choices or configure an item. Thus, ease of use can determine the success of a personalisation strategy. Three very different companies learned similar lessons about placing too much of the burden of personalisation on the customer: l Popular Telephony had pre-configured its peerto-peer (P2P) network administration consoles so that customers could design their own interfaces by pointing and clicking with their mice. However, its customers preferred to manage their own configuration, so the company adjusted course by leaving the product as an empty palette. Customers could then completely configure call routing, messaging logic and numbering plans to suit their individual needs.
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Personalisation: Transforming the way business connects
Conclusion
T
echnology will help companies that have been personalising in a manual way to scale their operations and become more competitive globally. Although today’s applications are focused predominantly on e-mail and the telephone, many other technologies—such as wireless telephony and integrated voice and data platforms—will rapidly become important vehicles for delivering personalised solutions. “The Internet is a once-in-a-lifetime change agent,” explains John McCrea, vice president of marketing for Plaxo. “We’re still in the early phases of seeing the transformative effects of this global network, which will change everything about the way business is done.” In the next five years, companies will personalise their products and services through labour-intensive solution-selling, labour-light technological personalisation, or an integrated, customer-driven range of human and technology interfaces. As businesses move to develop their personalisation capabilities, the economy will derive significant benefit: first, from the direct increase in company revenues attributable to the ability to secure more customers and sell them higher-margin products, and second, from increases in productivity and innovation that will occur as companies and individuals use tools that are better suited for them. Although technology is critical to personalisation, however, it will not replace human beings. If anything, people will become more interconnected as technology provides infinitely more opportunities for them to help deliver and personalise solutions for maximum personal benefit. New developments such as telepresence technology, which give users the experience of actually being present at activities (eg, conferences, meetings, or entertainment/education-
al events) that are remote from their own physical location, will facilitate collaboration and deliver the live, face-to-face interaction that is vital to establishing an emotional connection. The human touch will be needed at multiple stages of interaction, from the initial sale through customer service and renewal or product/service upgrade. “More and more participation from people online will make people want to build things, grow things, and affirm their own values, yielding a deeper kind of satisfaction,” explains Wikipedia’s Mr Wales. Companies, however, must approach personalisation with some degree of caution. They can risk failure by placing too much burden on an unwilling user, by doing it too early or too late for it to be economically viable, by relying on technologies that customers have not adopted yet, or by invading customers’ privacy. Other important questions remain. Which technologies will be the best vehicles for personalising products and services? Once people have access to on-demand personalised solutions that embed expertise, will knowledge work like tax accounting and consulting disappear? And how much more efficient and innovative will the world be when people have tools that fit their needs more appropriately? Based on these ideas and implications, there appears to be more than enough opportunity for another generation of IT pioneers.
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Appendix Personalisation: Transforming the way business connects
Appendix: Survey results
In October-November 2006 the Economist Intelligence Unit conducted an online survey of 328 senior global executives on their companies’ current and planned strategies for personalising products and services. Our sincere thanks go to all those who took part in the survey. Please note that not all answers add up to 100%, because of rounding or because respondents were able to provide multiple answers to some questions.
In which region are you personally located?
Asia-Pacific 30% Latin America 8% North America 28% Eastern Europe 6% Western Europe 26% Middle East and Africa 2%
What is your primary industry?
Aerospace/defence
2%
Agriculture an agribusiness
1%
Automotive
2%
Chemicals
2%
Construction and real estate
4%
Consumer goods
6%
Education
3%
Energy and natural resources
4%
Entertainment, media and publishing
2%
Financial services
What are your organisation’s global annual revenues in US dollars?
$500m or less 57% $500m to $1bn 9% $1bn to $5bn 13% $5bn to $10bn 6% $10bn or more 15%
19%
Government/public sector
4%
Healthcare, pharmaceuticals and biotechnology
12%
IT and technology
11%
Logistics and distribution
3%
Manufacturing
7%
Professional services
8%
Retailing
2%
Telecommunications
3%
Transportation, travel and tourism
4%
22
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Appendix Personalisation: Transforming the way business connects
Which of the following best describes your title?
Who are your company’s primary customers?
Mostly businesses 58% Mostly consumers 19% Equal mix of businesses and consumers 15% Governments/ Public sector 8%
Board member 4% CEO/president/ managing director 30% CFO/treasurer/comptroller 5% CIO/technology director 3% Other C-level executive 9% SVP/VP/director 14% Head of business unit 7% Head of department 6% Manager 14% Other 8%
What does your company sell?
Only products 15%
What are your main functional roles?
Customer service
16%
Only services 34% Mostly products 23% Mostly services 16%
Finance
21%
General management
38%
Equal mix of products and services 12%
Human resources
5%
Information and research
9%
IT
11%
Legal
3%
Marketing and sales
46%
How would you characterise your company’s culture?
Innovative (creative, intuitive, quality-oriented 37% Traditional (conservative, bureaucratically controlled) 21% Critical (negative, pessimistic) 2%
Operations and production
8%
Procurement
3%
Risk
9%
R&D
6%
Personal (individual- and values-oriented) 14% Impersonal (formal, strictly business) 2%
42%
Supply-chain management
2%
Strategy and business management Other
2%
Transactional (routine, rigid) 5% Interactive (flexible, empowering) 7% Collaborative (teamwork, consensus-oriented) 12% Don’t know 1%
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Appendix Personalisation: Transforming the way business connects
How important are the following factors to your company’s current revenue growth?
(Percent of respondents)
Currently, to what degree does your company offer each customer the ability to configure products or services in a unique way?
The product is standard and we offer no customisable features 23% The buyer can order some features and value-added services 40% The buyer can customise most aspects of the product 26% The buyer has total freedom to shape the product to his/her specifications 11%
Cost 42% Quality 56% Quantity/variety of products available to consumer 19% 27% Speed of delivery 30% Product/service innovation 36% Customisation of products/services 28% Customer loyalty 45% Customer satisfaction 26% 35% 39% 27% 32% 14% 2% 2% 11% 21% 22% 22% 34% 62%
1 Very important 2 3
28%
18%
9% 3%
7%
4 7% 3%
11% 4% 11% 7%
14% 5% 2% 27% 8% 2% 1
4
5 Not important
In five years’ time, how important do you expect these factors will be to your company’s current revenue growth? (Percent of respondents)
Cost 46% Quality 65% Quantity/variety of products available to consumer 31% Speed of delivery 44% Product/service innovation 49% Customisation of products/services 39% Customer loyalty 55% Customer satisfaction 73%
1 Very important 2 3
In five years, to what degree do you expect your company will offer each customer the ability to configure products or services in a unique way?
8% 3% The product will be standard and we will offer no customisable features 11% The buyer will be able to order some features and value-added services 36% The buyer will be able to customise most aspects of the product 33% The buyer will have total freedom to shape the product to his/her specifications 20%
25%
18% 23% 21% 35% 30% 37% 28%
8% 3% 2% 8% 5%
4 14% 4% 3%
35%
13% 5% 2% 13% 9% 6% 4% 6% 2%
18% 5% 2%2%
4
5 Not important
2
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Appendix Personalisation: Transforming the way business connects
What impact do you believe personalisation currently has on your company’s growth?
Strong positive impact 25% Positive impact 41% No impact 28% Negative impact 5% Strong negative impact 1%
Which of the following factors most influences the purchasing decisions of your company’s customers?
Brand 16% Quality 30% Necessity 18% Convenience 5% Price 18% Customer service 12% Don’t know 1%
What impact do you believe personalisation will have on your company’s growth in the next five years?
Strong positive impact 42% Positive impact 38% No impact 15% Negative impact 3% Strong negative impact 1%
To what extent do the following customer interaction offer your company an opportunity to establish competitive advantage?
Customer enquiry 34% Initial sale 37% Order change 8% Product shipping 9% Service delivery Follow-up support 32% 16% 6% 4% 1 40% Repeat purchases (add-ons or bolt-ons) 37% 9% 8% 3% 28% 15% On-site sales visit 13% 2% 29% 9% 20% 27% Needs analysis 18% 10% 7% 3% 28% 35% Contract negotiations 16% 33% 11% 2% 24% 13% Online/offline information about product or service 17% 33% 28% 8% 2% 12% Referrals to product or service by third party 32% 9% 5% 1 18% 35%
1 Strongly support unity 2 3
36% 36% 33% 18% 39% 16% 29% 13% 14%
17% 16%
8% 4% 1 6% 2%2% 16% 29% 6%
4 7%
24% 21%
10%
6% 2%
4
5 Little or no opportunity
6 Don’t know
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Appendix Personalisation: Transforming the way business connects
What information exchanged during a customer interaction do you think would most increase the chance of a subsequent interaction for your company?
Personal information 12% Information about new products/services 10% Information about a customer’s lifestyle 5% Information about customer’s buying preferences 13% Information relating to a customer’s future needs 33% The company’s business plans for products/services 12% The company’s innovation cycle 4% Opportunities to offer feedback 6% Rewards and incentives 2% Don’t know 3%
Which of the following best enables your company to personalise its products and services?
Telephone
35%
E-mail
41%
Fax
3%
Postal mail
7%
Events/trade shows
18%
Direct sales
31%
Direct personal contact
63%
Focus groups
16%
Web chat
2%
Voice-over Internet protocol (VoIP)
4%
Streaming video
2%
Podcasts
1%
Webcasts
Which of the following technologies/activities do you see as most helpful in improving the relationship your company has with its customers?
Telephone
47%
6%
Not applicable—we do not have personalised products or services
8%
Other
2%
E-mail
51%
Fax
4%
How have advanced technologies (such as VoIP, streaming video or Podcasts) affected your company’s interactions with customers in these areas?
8%
Postal mail Events/trade shows
26%
Direct sales
27%
Direct personal contact
68%
Focus groups
13%
Web chat
3%
Voice-over Internet protocol (VoIP)
5%
Streaming video
3%
Average time to facilitate communication 15% 26% Number of interactions initiated 30% 7% Agility to respond to customer requests 26% 12% Frequency of miscommunication 3% 14% Customer satisfaction 28% 11% Customer loyalty 24% 7% Ability to personalise products and services 21% 9%
1 Strong positive impact 2 3 No impact
45% 1%1% 49% 2% 48% 3% 59% 8% 3% 47% 2% 1% 53% 2% 1% 55% 2% 4
5 Strong negative impact 6 Don’t know
12% 12% 11%
4 13%
11% 13% 13%
Podcasts
2%
Webcasts
8%
Other
5%
2
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Appendix Personalisation: Transforming the way business connects
To what extent has your company’s overall revenue growth changed as a direct result of delivering personalised products and services?
Growth is much higher 17% Growth is somewhat higher 47% No change in growth 14% Growth is somewhat lower 2% Not applicable 16% Don’t know 4%
What metrics does your company have in place for monitoring the customer experience?
Customer satisfaction surveys
61%
Repeat purchase accounting
30%
Exit interviews
16%
E-mail follow-up
27%
Video or voice monitoring
4%
Return/cancellation rates
23%
Service calls/letters as percentages of shipments
13%
Outbound telephone surveys
14%
In-package customer surveys
5%
Secret shoppers
7%
Not applicable
How does your company train its personnel to interact with customers?
Written operating procedures
34%
13%
Don’t know
2%
Other
5% 69%
On-the-job training On-site classroom
27%
Training by supervisor
44%
Peer mentoring
45%
Which traits/skills do you think are most important for your employees to possess in order to deliver a meaningful customer interaction?
Creativity 4%
Self-guided learning
27%
Not applicable
10%
Communication skills 43% Humour 1% Discipline 4% Insight into customer needs 39% Product knowledge 9%
Don’t know
1%
Other
2%
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Appendix Personalisation: Transforming the way business connects
How does your company capture buying preferences and behaviours?
Point-of-sale data
34%
Which of your company’s business processes do you think requires the most reengineering to deliver a personalised customer experience?
Sales 21%
Surveys
46%
Front-line salespeople
59%
Customer service 18% Marketing 19% IT 14% Finance 6% Operations 22%
Website interactions
20%
Service calls
24%
Other
8%
Do privacy concerns hamper relationships with your company’s customers?
Often 11% Sometimes 43% Rarely 46%
In your opinion, what percentage of your company’s revenue base would be affected by more personalised customer interactions?
0% 3% Up to 25% 56% 25 to 50% 23% 50 to 75% 10% 75 to 100% 8%
2
© The Economist Intelligence Unit 2007
Appendix Personalisation: Transforming the way business connects
Which of the following applications of technology does your company have now, or expect to deploy in five years, to deliver more personalised customer experiences?
Virtual data storage 31% 22% 30% Unified voice, video and data networking 37% 18% 29% Voice-over Internet protocol (VoIP) 32% 36% 21% Click-to-talk 8% 33% 39% Web chat 33% 27% 30% Instant messaging 25% 24% 43% Personal digital assistants (PDAs) or other mobile devices 13% 26% 56% Video conferencing 34% 41% 20% Video messaging 16% 30% 36% Collaborative workplace applications (eg, instant messaging, file sharing) 17% 29% 48% Business intelligence applications 34% 39% 14%
1 Have now 2 Expect to deploy within 5 years 3 Do not expect to deploy within 5 years
17% 16% 11%
4 20%
10% 7% 5% 5% 18% 6% 13%
4 Don’t know
In your opinion, what obstacles stand in the way of your company’s implementing a personalisation strategy?
Lack of management buy-in
24%
Fragmented staff structures
24%
Lack of customer information
23%
Decentralised customer information
22%
Inadequate IT infrastructure
29%
Inadequate budgets
28%
Overall company culture
27%
Competing agendas
25%
None of the above
15%
While every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper.
© The Economist Intelligence Unit 2007
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LONDON 26 Red Lion Square London WC1R 4HQ United Kingdom Tel: (44.20) 7576 8000 Fax: (44.20) 7576 8476 E-mail: [email protected]
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doc_957581878.pdf
Personalised merchandise has come a long way since direct marketing legend Lillian Vernon launched her monogramming business in the 1950s. Yet personalisation still has the potential to transform a company’s fortunes, much as it did back then, when simply applying the customer’s initials to handbags and belts turned Lillian Vernon’s modest mail order operation into a multimillion dollar business. Customisation goes part-way toward personalisation, but because it creates solutions based on templates, its offerings are basically standardised.
Personalisation Transforming the way business connects
A report from the Economist Intelligence Unit sponsored by Cisco Systems
Preface
Personalisation: Transforming the way business connects is an Economist Intelligence Unit white paper, sponsored by Cisco Systems. The Economist Intelligence Unit bears sole responsibility for thisreport. The Economist Intelligence Unit’s editorial team executed the survey, conducted the interviews and wrote the report. The findings and views expressed in this report do not necessarily reflect the views of the sponsor. David Jacoby was the author of the report and Rama Ramaswami was the editor. Richard Zoehrer was responsible for layout and design. Our research drew on two main initiatives. We conducted a global online survey in October and November 2006 of 328 executives from various industries. To supplement the results, we conducted in-depth interviews with executives from around the world about the level of customer engagement in their company. Our thanks are due to all survey respondents and interviewees for their time and insights. March 2007
Personalisation: Transforming the way business connects
Three themes for the interactions economy
T
his white paper is one of three published in 2007 as part of a research programme that arose from the Economist Intelligence Unit’s March 2006 report for Cisco, entitled “Foresight 2020.” This report highlighted a number of important changes to the world economy over the next 15 years. The principal trends identified in the report—globalisation, demographics, atomisation, personalisation and knowledge management—will have a profound effect on the landscape of major industries and the working of the company. In order to build on “Foresight 2020,” we identified three themes that were then developed into separate research projects investigating personalisation, collaboration and innovation. Each is intended to stand on its own and to fit with the other two, describing from different vantage points the development of the interactions economy, in which customers, suppliers, workers, owners and others go beyond mere transactions to exchange information for mutual benefit. As companies adapt to the new forces moulding the interactions economy, they will find that personalisation, collaboration and innovation will present great challenges and opportunities. Personalisation goes beyond customisation, allowing the consumer to stamp a product or service with his or her own applications, preferences and configurations. Technology is particularly adept at enabling a high degree of personalisation, as in the case of the downloadable applications available on mobile phones or personal digital assistants. By offering a large variety of possible products, features and services, personalisation
has the power to increase sales and margins enough to transform business models. Collaboration will have a similarly profound effect on business. Broadly speaking, collaboration means to work together, and our research focuses specifically on formal collaborative arrangements at work that bridge traditional geographic, institutional, and functional boundaries. The emphasis on core competencies, the need for corporate agility and the rise of emerging markets have caused firms to focus on collaboration both within and among organisations. Collaboration among functional groups and organisations will help companies become more productive and innovative. Innovation—defined here as the application of knowledge in a novel way, primarily for economic benefit—is becoming increasingly important for companies and governments. Business executives regard it as a vital weapon in fending off their corporate competitors. Government policy makers see the need for an innovative environment if their economies are to grow. The three themes are linked in many different ways. Firms collaborate with customers in order to create innovative products that can be personalised. Process innovations can enhance collaboration in which carefully selected workers from around the world are brought together in teams to improve productivity. The development of the interactions economy is likely to strengthen the links among personalisation, collaboration and innovation and heighten their importance, with far-reaching implications for global business.
© The Economist Intelligence Unit 2007
Personalisation: Transforming the way business connects
Executive summary
P
ersonalised merchandise has come a long way since direct marketing legend Lillian Vernon launched her monogramming business in the 1950s. Yet personalisation still has the potential to transform a company’s fortunes, much as it did back then, when simply applying the customer’s initials to handbags and belts turned Lillian Vernon’s modest mail order operation into a multimillion dollar business. According to a worldwide survey of 328 senior executives conducted in October and November 2006 by the Economist Intelligence Unit, in cooperation with Cisco Systems, personalisation—or tailoring a product or service to the needs of each individual customer—has enormous potential to increase a company’s revenues and enhance customer loyalty. Whereas a customised product is based on a few standard op-
Who are your company’s primary customers?
Mostly businesses 58% Mostly consumers 19% Equal mix of businesses and consumers 15% Governments/ Public sector 8%
About our survey
In October-November 2006 the Economist Intelligence Unit conducted an online survey of 328 senior global executives on their companies’ current and planned strategies for personalising products and services. Fifty-two percent of the respondents are C-level executives including 30% who are CEOs. Respondents are from companies selling services (50%) and products (38%), with the remainder from companies selling an equal mix of products and services. Twenty-eight percent of respondents are located in North America, 27% in Western Europe, 31% in Asia-Pacific and the remainder in Latin America, Eastern Europe, the Middle East and Africa. Fifty-eight percent of the respondents report their company annual revenues are less than US$500m; 28% report revenues of US$500m to US$10bn; and 15% report revenues of US$10bn or more. In addition to the survey, we conducted 22 interviews with senior executives based in Europe, the Americas and the Asia-Pacific region.
tions, a personalised item is unique to each user, who can configure the product to suit his or her preferences and usage patterns. Customisation goes part-way toward personalisation, but because it creates solutions based on templates, its offerings are basically standardised. Mass customisation, the serial manufacture of one-off products or services, is similarly based on a finite combination of features and services, however large the set may be. Customerisation1, commonly defined as the marketing of products that the user can configure to his or her own needs, allows customers to make the product useful to them uniquely and personally, but typically requires active participation and effort on their part. Personalisation, by contrast, goes beyond customisation, mass customisation and even customerisation. It allows the customer to stamp a product with his or her own applications, preferences and configurations. Technology is particularly adept at enabling a high degree of personalisation, as in the case of the downloadable applications available on mobile
1
The word “customerisation” was coined by Jerry Wind, a professor at the Wharton School of the University of Pennsylvania.
© The Economist Intelligence Unit 2007
Personalisation: Transforming the way business connects
phones or personal digital assistants (PDAs). There is no question that the positive effects of personalisation are significant. Two-thirds of our survey respondents report that personalisation has delivered higher or much higher revenues for their companies. Nearly a fourth believe that personalised products and services are likely to affect up to half of their firms’ revenue base. Increasingly, the traditional measures of success, cost-effectiveness and quality, are being supplanted by variety, personalisation, and speed of delivery or deployment. The following are the key findings of our research: l Personalised products and services are a major determinant of business success. l Products and services will be mostly or totally personalised in five years, up from 37% today. l Personalisation has a strong positive impact on revenue growth: 80% predict an impact in five years. l By offering a large variety of possible products, features and services, personalisation has the power to increase sales and margins enough to transform business models. Information technology will be a vital component of successful personalisation in the next three to five years. Small businesses that personalise products manually will be increasingly limited by the scale they can achieve without technology in the face of global rivals. Larger businesses will use a number of applications to personalise their products and services, including mobile telephony, video conferencing, collaborative workspace applications, business intelligence applications, unified voice/video technologies, automatic upgrades and uploads, telephone and e-mail. Personalisation will greatly increase the need for people and interpersonal skills. People will be essential to listen to individual customers, ask scripted questions designed to elicit customer-specific formu-
las, design complex custom solutions and facilitate their implementation. Certain markets will adopt personalisation strategies more quickly than others. For example, Europe will personalise products faster than Asia because of the former’s heritage of cultural, linguistic and regulatory differences. The US will adopt technologically based personalisation solutions because these are the quickest and most efficient way to serve a market of its size. Small businesses and companies with innovative cultures will take to personalisation more rapidly than large ones because of their tolerance for, and encouragement of, organic growth. Affecting businesses and consumers worldwide, personalisation is an important trend that will influence corporate valuations, mergers and acquisitions, and business strategies. It will bond consumers and producers of products and services. It will have broader social implications for enhanced productivity and innovation by providing more appropriate tools than were available during the era of mass production. The ripest opportunities for personalisation are ones where the cost is low, the benefit is obvious and the customer understands what personal information is being used to produce the personalised result. A low cost of implementation for the company and its customers will ensure deep market penetration. An easy-to-use solution will ensure rapid adoption. And full disclosure of any private information that is used to personalise the product or service will make customers more loyal. The personalisation trend begs several important questions. Which technologies will best enable the spread of personalised products and services? Once people have access to all of these features through on-demand personalised solutions, will they still need pure services? And how much more efficient and innovative will the world be when everybody has tools that fit their needs more appropriately?
© The Economist Intelligence Unit 2007
Personalisation: Transforming the way business connects
Introduction
I
n the science-fiction thriller Minority Report, a jolly salesperson appears on a large flat-screen monitor just inside a Gap clothing store, greeting customers as they walk in. “Good afternoon, Mr. Yakamoto,” she says excitedly. “How did you like that three-pack of tank tops you bought last time you were in?” This scene is one of many that use familiar brands to portray a futuristic vision of wholly interactive and personalised advertising. Although the film is set in the year 2054, its depiction of an intensely personal relationship between companies and their customers may become reality much sooner than we think. In fact, in January 2007 the luxury automaker BMW began a pilot interactive advertising campaign in four US cities, using billboards activated by radio frequency identification. Select owners of the firm’s Mini Cooper cars received an RFID keyfob that contained an encoded custom message based on information they had provided previously. When they cruised near overhanging Mini billboards, the latter would light up to display a personal message. Personalisation, or tailoring products and services to the needs of individual customers, is becoming a major determinant of success, according to a survey of 328 senior global executives conducted in November 2006 by the Economist Intelligence Unit, in co-operation with Cisco. Over half of companies’ products and services will be mostly or totally personalised in five years, up from 37% today, according to the survey respondents. Furthermore, personalisation has a strong positive impact on revenue growth: 66% of respondents say it has a major impact today, but 80% predict such an impact in five years. Cost is less of a differentiator in increasingly saturated markets that offer abundant low-cost options.
© The Economist Intelligence Unit 2007
What does your company sell?
Only products 15% Only services 34% Mostly products 23% Mostly services 16% Equal mix of products and services 12%
How would you characterise your company’s culture?
Innovative (creative, intuitive, quality-oriented 37% Traditional (conservative, bureaucratically controlled) 21% Critical (negative, pessimistic) 2% Personal (individual- and values-oriented) 14% Impersonal (formal, strictly business) 2% Transactional (routine, rigid) 5% Interactive (flexible, empowering) 7% Collaborative (teamwork, consensus-oriented) 12% Don’t know 1%
“Providers have grown so large that customers feel they are being dealt with in a huge supermarket,” says one executive. “They are saying that they want something more customised than that.” Jimmy Wales, founder of the online encyclopedia Wikipedia, agrees: “They want more control over what they are
Personalisation: Transforming the way business connects
getting. They were willing to accept one-size-fits-all because of price, but given the choice they’d rather have a personalised solution.” By offering the customer the ability to tailor products and services to his or her own specifications, personalisation has the power to increase sales and margins enough to transform business models. Over half of our respondents expect personalisation to affect 2%–25% of their companies’ revenue base, while 23% say it would affect 25%–50%. Furthermore, personalisation increases margins, stickiness and loyalty, and customers are willing to pay extra for the interaction experience. Sixty-four percent of respondents assert that personalisation of their products or services has resulted in somewhat higher or much higher revenues. In a global business environment, it is almost impossible to operate without personalising merchandise to some extent. For instance, the chocolate equipment maker Lloveras, based in Spain, makes 90% of its sales to 52 countries, a task that requires extensive flexibility and cultural sensitivity to different customer environments. Legal and regulatory frameworks (such as those of the European Union) can also require that products be configured differently for different markets. In Japan, competition among links in the supply chain often results in a struggle for differentiation, with a consequently higher level of personalisation, more detailed product and process specifications, and more quality checks. Japanese companies and organisations have their own individually tailored quality inspection systems that are not necessarily related to international standards, and that often go above and beyond them, according to Per Knudsen, managing consultant for Global Expansion Network, a consulting firm that helps companies enter the Japanese market. And in China, domestic resource costs affect personalisation: In trucking, for example, the more expensive asset is the truck, not the driver as in the
How important are the following factors to your company’s current revenue growth?
(Percent of respondents)
Cost 42% Quality 56% Quantity/variety of products available to consumer 19% 27% Speed of delivery 30% Product/service innovation 36% Customisation of products/services 28% Customer loyalty 45% Customer satisfaction 26% 35% 39% 27% 32% 14% 2% 2% 11% 21% 22% 22% 34% 62%
1 Very important 2 3
28%
18%
9% 3%
7%
4 7% 3%
11% 4% 11% 7%
14% 5% 2% 27% 8% 2% 1
4
5 Not important
West, so Volvo China creates personalised solutions that save clients money by minimising the number of vehicles employed. Personalisation is legendary in the services industry. The Ritz-Carlton hotel chain runs a Leadership Institute for its internal and external clientele. The USbased retailers Nordstrom and Neiman-Marcus have a similar rapport with their upscale customers. Atherton Trust, a private wealth management company in the US, caters to its clients’ every need, including making vacation plans and even taking control of funeral arrangements for the family member of a wealthy patron. CEO Kraig Kast describes Atherton’s approach as “a 360-degree relationship” with the customer. In the future, however, the traditional face-to-face customer service model will not be scaleable enough to win in a fiercely competitive business world. Video rental stores, for instance, “will close by the thousands,” predicts Steve Swasey, director of corporate communications at the online movie distributor Netflix. “That traffic will move online. Blockbuster is transitioning to compete with Netflix.” The challenge for companies, then, is to provide an emotional and interactive experience for the customer at a lower cost than one-on-one customer service would entail.
© The Economist Intelligence Unit 2007 7
Personalisation: Transforming the way business connects
Delivering a personalised experience
T
o deliver a personalised experience, companies must be prepared to offer customers an almost infinite number of features and options. In addition, they must: l recognise the customer individually during every interaction; l collect information on the customer’s product usage and buying preferences; and l use the information gathered to make the next transaction an even better experience for the customer. The terms “personalisation” and “customisation” are sometimes used interchangeably, but they mean
In five years’ time, how important do you expect these factors will be to your company’s current revenue growth? (Percent of respondents)
Cost 46% Quality 65% Quantity/variety of products available to consumer 31% Speed of delivery 44% Product/service innovation 49% Customisation of products/services 39% Customer loyalty 55% Customer satisfaction 73%
1 Very important 2 3
25%
18% 23% 21% 35% 30% 37% 28%
8% 3%
8% 3% 2% 8% 5%
4 14% 4% 3%
35%
13% 5% 2% 13% 9% 6% 4% 6% 2%
18% 5% 2%2%
4
5 Not important
considerably different things. Personalised products and services are markedly different from their customised counterparts. A customised product or service is based on templates and offers a finite combination of features and services. Many products and services can be customised before they are bought. In contrast, personalised products and services adjust
© The Economist Intelligence Unit 2007
to an infinite range of customer needs after purchase, without needing to be custom-ordered. Personalised solutions, therefore, become an important part of customers’ lives and create a tighter bond of customer loyalty than customised solutions do. “It’s the whole persona—for example, the customer might want to get every ‘Batman’ product as soon as it comes out,” explains Doug McMellan, head of business development for Forum Nokia, a division of mobile phone provider Nokia that provides resources for mobile applications developers. “A lot of people get giddy about what they can do on their phone,” Mr McMellan says. “Personalisation used to be a custom color case, then a custom ringtone, then the caller’s picture instead of a caller-ID phone number, then the sound file of [the user’s] children, and now it is moving toward new enabling technologies that allow developers to download content from anywhere.” Wikipedia’s Mr Wales shares this enthusiasm: “[Web surfers] can’t believe they got a page that says ‘Edit this page. And then they notice there is a community they want to join. It turns the passive act of reading into an interactive experience—you chose the subject, followed the links, and got carried away.” Location-based services such as Global Positioning System (GPS) and radio frequency identification (RFID) tags promise to extend the personalisation revolution. Nokia has announced several GPS applications (eg, Travelogs) that enable the user’s friends and family to track his or her movements through a Web site. Another application helps consumers find places to eat based on GPS navigation, with their phone identifying where to go to find a restaurant and how to get there from their current location. “The connection of me, my location and my phone can generate a new social dynamic,” explains Mr McMellan.
Personalisation: Transforming the way business connects
Personalisation usually involves extending a common transaction into a personalised interaction. To do so successfully, the following tactics are most useful: Recognise the customer individually during every interaction. Two points of customer interaction are critical to establishing competitive advantage: (1) customer enquiry and the initial sale, and (2) service delivery and follow-up support. More than a third of our respondents say that customer enquiry and the initial sale present the strongest opportunity to establish competitive advantage. Forty percent find that their best chance to gain a competitive edge lies in service delivery and follow-up support interactions. Referrals by third parties also present a critical opportunity, according to 32% of participants. At the Ritz hotels, recognising the customer individually means addressing the customer by his or her name. At the electronic address book service provider Plaxo, it means connecting with friends and colleagues by name. At the online businesses Amazon, Google, or Yahoo, it means being greeted by name and seeing new information in a preferred style or format. For more complex sales, the introduction is more subtle: “Personal networks are the most important channel, and cold calls don’t work,” explains Cesare Guidorzi, marketing director in Italy for the global engineering and electronics firm Siemens. Mr Guidorzi relies on personal appointments with chief information officers to sell his wares. Collect information on the customer’s product usage and buying preferences. Having information on customers’ future needs or plans increases the chances of a subsequent interaction, say 45% of survey respondents. Fifty-nine percent obtain this information through their front-line salespeople; 46% use customer surveys. Companies use a variety of methods to collect customer data. Plaxo’s “Click to Connect” feature
Currently, to what degree does your company offer each customer the ability to configure products or services in a unique way?
The product is standard and we offer no customisable features 23% The buyer can order some features and value-added services 40% The buyer can customise most aspects of the product 26% The buyer has total freedom to shape the product to his/her specifications 11%
identifies Plaxo members and lets the customer add him or her to the electronic address book. Its affinity statistics rank order contacts in the customer’s address book by frequency of contact, by referring to e-mail history. At UPS, the transportation conglomerate, strategic account managers meet personally with customers to gather information. For Lloveras, the Spanish chocolate equipment maker, data collection involves signing up a new client to purchase one standard machine and developing more tailored products after the sale is complete (the machine that usually gets sold first is a universal refining machine, which gets rid of the most acidic components of the chocolate). The strategy works: 46% of Lloveras’s sales are to repeat customers. Use the information collected to make the next transaction a better experience for the customer. UPS uses its Package Flow Technology to enable drivers to be more informed when they greet their customers. In one case, the company delivered regularly to a disabled elderly woman, and the regular driver knew that he should wait for her to open the door and hand her the package. When a substitute driver took over, and was about to deliver the package, a message appeared on his device that said “Knock and wait.”
© The Economist Intelligence Unit 2007
Personalisation: Transforming the way business connects
An approach to personalisation
A
lthough personalised products run the gamut from conventional to quirky, companies find that personalisation strategies fall into one of three broad categories: l pure technology, which includes the features found in personal electronic gadgets; l pure service, or technical personalisation of existing products, mostly in a business-to-business environment; or l hybrid solutions, which combine technology with face-to-face interaction. Pure technology. Technology is the primary engine behind the growth of personalisation, playing a key role in many firms’ personalisation strategies. This has led to a systematisation of existing products and
the rise of new products and services for both businesses and consumers. Technology-based personalisation is characteristic of many electronics such as Apple’s iPod—for which the downloaded content is the personalisation—or personal computers, which are by their nature configurable to the user’s settings and preferences. Plaxo, the electronic address book company, has become a social networking tool by basing its business model on technology. It memorises the contact information of all the contacts in the customer’s address book, automatically updates that information, and facilitates user interaction with contacts through user photos, birthday reminders, e-cards, and invitations to join the network. Plaxo integrates with common address books such as
Case Study: UPS speeds towards personalised logistics
Y
ears ago, transportation was hardly likely to be personalised. The train left, the truck drove and
nationwide survey of companies. According to the 200 Annual RQSM, a survey by Harris Interactive that measures the reputations of the US’s most visible companies, UPS ranks No. 1 for people’s “trust in the company to do the right thing in the event of a product/ service problem, excellent customer service, and sincerity of corporate communications among US companies.” To achieve that desirable rapport with customers, UPS deploys both technology-based services and people-intensive solutions. In both cases, it leverages technology and financial tools to deliver results. For lower-volume shippers, a Solution Finder on UPS’s home page offers guidance on
the service and degree of “touch” appropriate for their role, industry, problem and type of shipment. For example, customers shipping internationally need to know whether the consignee is on a prohibited list, customs filing requirements, and how to calculate landed cost, including duties, shipping and taxes. “If you’re doing this without technology, you’re either guessing or you’re not including all the relevant costs,” says Mr Colletta. Higher-volume shippers are assigned account representatives that work across the UPS Supply Chain Solutions group to engineer the ideal solution. For example, if the customer needs to reduce SG&A cost, UPS might find a solution that involves less
the ship sailed whether your cargo was on it or not. But today UPS, the US-based global transportation giant, offers personalised services across the entire supply chain. Companies of any size or within any market segment can find the logistics solution that best fits their needs. UPS bases its operations on one-to-one relationships with its customers, according to Jordan Colletta, the company’s vice president of customer technology marketing. This strategy has apparently paid off: UPS tops the list for trustworthiness in a
10
© The Economist Intelligence Unit 2007
Personalisation: Transforming the way business connects
Microsoft Outlook and AOL Instant Messaging. WebEx, a US videoconferencing application, is another example of personalisation through technology. It serves businesses through a customisable Web site that can look like an extension of the business and that indicates the user’s scheduled meetings; supports large-scale Webinars that can open with a video for effect; and integrates with a back-end virtual office that has shared calendars, contacts, documents and task management, all of which can be personalised by each user. Joe Schwartz, director of marketing, describes WebEx as enabling a “Web touch” and contrasts this with many “high touch,” expensive selling models that are sold through a direct field sales force. At the other end of the scale are what Mr Schwartz calls “no touch” companies, such as Google Adwords, that interface with the customer exclusively via a Web site. “Web touch” is in between the two, and this is where Mr Schwartz sees the largest market opportunity. He envisions WebEx eventually integrating with other ap-
In five years, to what degree do you expect your company will offer each customer the ability to configure products or services in a unique way?
The product will be standard and we will offer no customisable features 11% The buyer will be able to order some features and value-added services 36% The buyer will be able to customise most aspects of the product 33% The buyer will have total freedom to shape the product to his/her specifications 20%
plications so that, for example, Webinars have built-in lead qualification features and the results of Webinars automatically feed into a customer relationship management package. DSTS, a Portuguese on-demand printing services company, uses a mix of proprietary technology and
shipping activity. The account manager consults a solution developer before meeting with the client, and can view the solution through a CRM application before talking to the client. For heavy-volume customers, UPS handles everything in a totally personalised way so that the customers can focus on their core competence. Often these solutions get embedded in the customers’ third-party applications. For example, the US-based Internet solutions provider Peachtree Solutions interfaces directly with UPS. UPS customers trust “Big Brown” because the company knows their needs individually. As in any relationship, intimacy and trust are interrelated: Customers will not share
enough information to allow personalisation until they trust the provider, but they will not trust the provider until it demonstrates an intimate knowledge of their operations. “Customers must trust you to share their secrets with you,” says Mr Colletta. UPS has become expert at the dance of building trust and intimacy. The company builds loyalty with individual customers through personalisation, according to Mr Colletta. It identifies customers’ preferences as “high-touch” or “low-touch.” “Some customers are high-tech, savvy, digest information quickly and they want to just go,” says Mr Colletta. “Others would rather call you or get the one answer they need, then leave.” UPS
systematically uses its magic to sense and respond to customers’ needs. The company operates on an “ears, hands and brain” principle: The ears understand the customer, the hands quantify the problem and design a solution, and the brain integrates and tests technologies that embed the solution. Such coordination puts UPS in the enviable position of being able to use customer information to improve each subsequent interaction. Ironically, customers would not identify personalisation as their reason for selecting the company, according to Mr Colletta. While the personalisation is invisible, its results address customers’ needs more precisely, which keeps customers coming back. n
© The Economist Intelligence Unit 2007
11
Personalisation: Transforming the way business connects
What impact do you believe personalisation currently has on your company’s growth?
Strong positive impact 25% Positive impact 41% No impact 28% Negative impact 5% Strong negative impact 1%
algorithms to crunch raw data from the customer to produce personalised documents such as water bills in any colour, with customer-targeted inserts. Customers can add their own colors and icons. The online encyclopaedia Wikipedia also uses a technology-based model. Wikipedia allows any user anywhere in the world to add or delete content from its body of knowledge, making it both personalised and accessible to anybody at any time. Most Web surfers doing a Google search will run across content from Wikipedia. A not-for-profit business, Wikipedia is not an example of the high sales or margins that can be reaped from personalisation, but rather an example of how personalised technology models can flourish once they become popular. Pure service. Service businesses, especially in the financial services, IT services and consulting industries, tailor their products and processes to individuals and individual clients. When they can continue to customise the product even after the client is won, they are personalising their services. AmpTec, a German biotech company, customises its research process for many clients. A recent customisation for Novartis helped attract at least ten new customers, according to AmpTec’s president,
12 © The Economist Intelligence Unit 2007
Dr Guido Krupp. “Each client requires different support, so you have to customise everything,” adds Knudsen of Global Expansion Network. IT services and systems integration companies solution-sell by mixing software with services. At IBM France, the hardware and software are largely standard, but many of the services are custom. Systems integration services are split, with some being “off the shelf” and some personalised. In Italy, Siemens has highly structured processes that use a customer survey to design a personalised solution. Even product firms can personalise their offering through a pure service approach, although this is less common. Volvo Trucks uses its “Go Gold” solutionselling strategy to sell distribution solutions, not trucks. Sometimes its customers only need a quarter to a fifth of the trucks they think they do, according to Gary Wu, Volvo’s strategic alliance manager in China, where Volvo has helped Coca-Cola reduce 42 distribution centres to 11 and decrease its vehicle requirements from 150 to 40 trucks—a boon in a country where trucks are viewed as more expensive assets than drivers. Mr Wu estimates that 80% of Volvo China’s sales come from its pure service approach. As a result of the Go Gold program, Volvo China has risen from sixth place to third place in truck sales, doubled unit volume in two years and increased its margins. Hybrid model. A third delivery model connects personalised technology and face-to-face interaction, combining the customer service impact of face-to-face customer communication with the scale benefits of technology. In the early 2000s, brick-and-mortar companies edged out many Internet start-ups because they were able to “touch” the customer. Similarly, in 2010, the companies that can integrate back-end technology while still having human beings face the customer may lead the next generation of successes. The movie distributor Netflix allows users to select
Personalisation: Transforming the way business connects
movies online, then delivers them via the US Postal Service. Its hybrid model combines databases and Internet functionality with 41 distribution centres that use manual labour to insert disks in sleeves and deliver the movies to households. On the customer-facing end, the company is highly personalised: “Netflix has 6.3 million websites for 6.3 million members,” says Steve Swasey, director of corporate communications. The company automatically tracks purchase history, and more than 60% of users rate the movies they rent based on a five-star rating scale. Netflix automatically correlates ratings to make movie recommendations. It is able to measure the effectiveness of its personalisation tactics by monitoring daily yardsticks such as how many and which users logged on, searched, joined or cancelled. Similarly, UPS offers a Web-based front end and application tools, combined with face-to-face interaction by drivers and account managers. For
small shippers and first-time customers, it offers a surprisingly detailed Solution Finder on its Web site that allows shippers to determine landed cost, duties, shipping costs and taxes. On the back end, UPS drivers provide well-trained and deliberate human interactions. Jordan Colletta, vice president of customer technology marketing, describes these disparate parts of the organisation as “the ears, hands and brain” of the entity that provides personalised on-demand service with a unique customer interaction every time. Nokia does not personalise its own mobile phones, but provides the tools for others to do so. As the adage goes, it sells the shovels to the gold-diggers instead of panning for gold itself. As such, it supports both Web-centric applications like Adobe and Macromedia and their delivery through a hardware product. The customer actually “touches” the content by holding the device.
Case Study: Plaxo enables technological networking
P
laxo, a US-based online business, uses technology to link people to their colleagues and friends
extent of personalisation by tracking customer behaviour in the first month of usage, based on the number of hits on the landing page (the page the recipient gets to when he or she accepts an invitation) and conversion rates. Recently, the company teamed up with Jajah, an Internet calling service, to provide customers with a feature called “Click to Call” that enables them to click on a name in their Plaxo address book and call that person directly. Also available is a mobile product that allows customers to access their address book on their cell phones. Thanks to Plaxo’s intensely personalised interface, users benefit from the system without having to do anything differently from before. “Nobody has to do anything
special as in other social networking sites like Myspace, Facebook, or Friendster,” says John McCrea, Plaxo’s vice president of marketing. “[Plaxo] has embedded the DNA of the system into the tools you already use.” Members are electronically identified and their personal details added to the user’s address book; when users invite friends or colleagues to join Plaxo, the invitee is sent to a Web page that sports a picture of the person sending the invitation. Eventually, Mr McCrea believes, Plaxo will grow into a large consumer Internet company like Google, Yahoo! or eBay through viral growth generated by requests for contact information updates, birthday reminders, dynamic signatures and invitations to join the network. n 1
through their electronic address books. Relying on only 0 employees, the company helps 1 million users keep their e-mail addresses and contact information updated automatically. Address books can be accessed through AOL and synchronised with popular software such as Microsoft Outlook. As information changes, Plaxo populates the correct information into each affiliated member’s address book. Plaxo warehouses its data in an Oracle system and analyses usage statistics in detail, providing users information about their networking activity. It even “measures” the
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Personalisation: Transforming the way business connects
Making it happen: Combining technology and the human touch
E
ffective personalisation involves combining upto-date technology with human interactions. Our research indicates that: l the technologies used in personalisation will become increasingly sophisticated and include unified media, mobile telephony, business intelligence applications, and collaborative workplace applications; and l people will be essential to provide the communication, listening and customer support skills that enhance the customer experience. Enabling technologies. The prime catalyst of the personalisation revolution is information technology; therefore, it should be no surprise that leveraging IT to pursue a personalisation strategy is a key success factor. Corporate leaders need to build a robust IT network with infrastructure that can collect and de-
liver information in real time at no incremental cost. Ahmad el Nashar, business development manager at Egyptian shipping company Barwil-Unitor, explains: “The ability of firms to personalise will be based on strong IT systems—hardware, software, PDAs [personal digital assistants], and sharing between these systems.” Per Knudsen, managing consultant for Global Expansion Network, agrees: “Technology plays a role in customisation. Technology [even] plays a big role in irrigation methods needed for growing fruit.” Mobile telephony is the most striking technology trend. Respondents rank personal digital assistants (PDAs) as the most important technological application to improve personalisation over the next five years. Eighty-two percent of our survey respondents say PDAs will play a role in their personalisation strategy; 56% are using them today, and 28% will deploy
Case Study: Flexibility and speed pay off for Sampo Bankas
S
ampo Bankas, the fourth largest bank in Lithuania, differentiates itself by personalising its products. The bank
banks are selling the same products. There are two differentiators: flexibility and speed,” says Norbertas Zioba, the bank’s business development director and a board member. By flexibility, he means personalised solutions that suit the individual customer’s needs. By speed, he means the time taken to approve a customer’s mortgage. Sampo’s impressive growth—for the past three years it has been the fastest-growing bank in Lithuania—results largely from its personalisation strategies, which it has masterfully applied with a mix of common
sense and the use of appropriate technology. For example, in fast-growing Lithuania, people often want to buy an apartment in a house that is not built yet. Competing banks would not approve a loan unless it was backed by hard assets, but Sampo finds other ways to achieve its customers’ objectives. It accepts co-signatories, gets an employer to guarantee the loan or even works with the contractors to deposit cash into the applicant’s bank account against a letter of credit. “[Personalised] solutions are always the best solution for individual
sells mortgages and loans, as well as some private banking services, to businesses and consumers. It reaches most of its customers through electronic banking, advertising, and through its branch network when customers come in to apply for a loan or make a transaction. Sampo has no franchise or dominant market position, no proprietary technology and no magic training program. “Almost all
1
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Personalisation: Transforming the way business connects
them over the next five years. Plaxo, along with its partner Zingy, is supplying Plaxo Mobile Plus through wireless service providers. The Lithuanian bank Sampo Bankas offers SMS Banking so its customers with GSM phones can find out their account balances and make transfers while on the run. Seventy-five percent of the Lithuanian population uses GSM phones, and 15% use SMS Banking, according to Norbertas Zioba, business development director at Sampo Bankas. Collaborative workplace applications such as instant messaging and file-sharing will also create important personalisation opportunities: 77% of our respondents say they will use them over the next five years, up sharply from today’s 48%. More than 300 million people worldwide regularly use instant messaging, sending nearly 12 billion instant messages per day. Video conferencing will play a major role in personalisation strategies, according to 75% of our survey respondents. Forty-one percent currently use video conferencing, and 34% expect to deploy it over the next five years—a number that could be much
How have advanced technologies (such as VoIP, streaming video or Podcasts) affected your company’s interactions with customers in these areas?
Average time to facilitate communication 15% 26% Number of interactions initiated 30% 7% Agility to respond to customer requests 26% 12% Frequency of miscommunication 3% 14% Customer satisfaction 28% 11% Customer loyalty 24% 7% Ability to personalise products and services 21% 9%
1 Strong positive impact 2 3 No impact
45% 1%1% 49% 2% 48% 3% 59% 8% 3% 47% 2% 1% 53% 2% 1% 55% 2% 4
5 Strong negative impact 6 Don’t know
12% 12% 11%
4 13%
11% 13% 13%
larger, given the mature nature of the technology, were it not for its substitution by easy-to-use and nearly ubiquitous instant messaging and file-sharing. Business intelligence applications will be a major factor in personalisation. For 72% of respondents, these applications will support their personalisation strategies by capturing targeted customer information. Moreover, respondents intend to deploy
customers,” says Mr Zioba. “The question is how to optimise costs while doing this.” Sampo accomplishes this through its branches, as well as with technologies such as customer relationship management (CRM) programs, mobile telephony and e-banking. The branches, however, are the most critical, because they enable Sampo to give customers its full attention. By shifting from transactions (currency exchange, loan repayment) to interactions (up-selling from mortgage to life insurance, credit cards, car lease), the branches have greatly increased sales of new
products to existing customers. “Customised solutions are always the best solution for individual customers,” says Mr Zioba. “The question is how to optimise costs while doing this.” For Sampo, the answer lay in developing a set of “pre-customised” solutions to choose from. It now personalises 0% of its solutions by picking options from this menu. In addition, Sampo trains agents to interact with customers. “You must ask two questions of any customer who comes to make a payment to you,” says Mr Zioba. It’s a
compulsory system, just like at McDonalds— ‘Would you like to try this new product?’” Mr Zioba also advises asking open-ended questions, even if the answer is a simple “Yes/No” option. Asking about customers’ credit cards or retirement planning gets customers to talk about their true needs to the salesperson. “It improves the relationship between customer and salesperson. The customer has shared a lot of information about career, family and retirement, and the customer knows that the more open he or she is, the more business value there will be.” n
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Personalisation: Transforming the way business connects
business intelligence applications over the next five years more than any other technology: 39% say they will install it at some point over that period. Plaxo warehouses its data in an Oracle application and compiles daily statistics on customer attrition and cannibalisation. It even has a liquid-emitting diode sign in its corporate office showing how many users
Which traits/skills do you think are most important for your employees to possess in order to deliver a meaningful customer interaction?
Creativity 4% Communication skills 43% Humour 1% Discipline 4% Insight into customer needs 39% Product knowledge 9%
joined in the last hour and the last 24 hours, and how much revenue was booked in the last hour. Unified voice, video and data networking is the technology that will experience the greatest increase in adoption over the coming five years, according to survey respondents. Thirty-seven percent expect deployments in this area over the next five years—a more significant roll-out plan than any other technology mentioned here except business intelligence applications. This is a sharp increase from today’s levels: “Unified media is currently deployed in only 15 percent of North American and 14 percent of European enterprises,” reports a study by the technology consulting firm Forrester Research. Regardless of the technology, the availability of content and automatic updates will help companies make a seamless connection with users. Applications
1 © The Economist Intelligence Unit 2007
similar to story development software will enable the personalisation of audio and video content, and automatic updating will reduce the burden of personalisation on the user. Popular Telephony’s global operations manager, Edmund Read, describes the ideal form of personalisation as one that “automatically suggests (and provides!) the best usage options and productivity promoting tools based on constant analysis of usage by a company, a department or a single employee.” For instance, Microsoft Office learns frequently used keystrokes and menu commands and displays them as they reach usage thresholds. Our survey indicates that telephone and e-mail are by far the primary means of achieving personalised customer experiences. Half of the respondents find e-mail one of the three most helpful technologies, and nearly as many (47%) say that the telephone is among the three most useful. “Nothing surpasses the value of a personal phone call,” says Atherton Trust’s Mr Kast. Focus groups also rank high because of their strong element of human contact. Interestingly, very few respondents say that technologies such as Web chat, streaming video, Webcasts, and Podcasts are helpful in improving the customer relationship. Only 3%–7% of respondents rate those technologies among the three most useful activities, although they acknowledge that these technologies strongly increase their agility to respond to customers (38%), compress the time to facilitate communication (41%), and increase personalisation of their products or services (30%). But these technologies’ early stage of adoption limits their effectiveness for the time being, according to interviewees.
Personalisation: Transforming the way business connects
The people behind the data
T
echnology and data integration, however, are not sufficient. People are essential to personalisation as well. Says Joe Schwartz, WebEx’s senior director of Marketing, “You can’t just link up databases and expect the business relationship to thrive. You have to link up the databases and then allow people in your business ecosystem to collaborate. That’s the way the next generation is going to grow.” People are critical antennae for sensing and responding to customer input. In fact, 43% of respondents say that their employees need to possess communications skills more than any other attribute in order to deliver a meaningful customer interaction. The most important “people” skill may well be simply listening to customers. Sampo Bankas finds that its branches are vital for this type of communication. “The best time to clarify the customer’s wants and needs is when he or she is in front of you,” explains Mr Zioba of Sampo Bankas. “That way, the customer is not answering e-mail or playing computer games while you are talking to him. It’s the most expensive channel, but it gives the best return.” People are also critical for building the trust and relationship to close a sale. At Singapore’s GFIA, “people are the key constraint,” says Mr Douglas. “You have to grow slowly—hire one analyst every six months and bring them up the curve. You have to train them.” Mr Douglas explains that effective training requires travelling, talking to people, conference calls, e-mails and constant communication. FoundOcean’s president, who adds trade shows and conferences/presentations to the list, describes the process as “shoe leather and air miles.” IBM puts all its new salespeople through eight months of training where they learn to listen to customers. Siemens Italy’s Mr Guidorzi says that sharing dinner
with customers creates an open, relaxed and informal atmosphere. “They think they have more negotiating weapons if they don’t tell you anything, but you need information to personalise.” Jordi Torres, sales and marketing manager at the chocolate company Lloveras, adds that “the personal relationship is essential in this world. If you know that the customer likes hockey or football, you can talk with them and show sincere interest in their life, hear their problems, apply a bit of emotional intelligence in the relationship. That is 50% of the sale. The rest is the technical solution and the price.”
How does your company capture buying preferences and behaviours?
Point-of-sale data
34%
Surveys
46%
Front-line salespeople
59%
Website interactions
20%
Service calls
24%
Other
8%
Do privacy concerns hamper relationships with your company’s customers?
Often 11% Sometimes 43% Rarely 46%
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Personalisation: Transforming the way business connects
Customer service support increases dramatically with personalised products and services, and people play a key role here as well. As Popular Telephony’s Mr Read explains: “Once a customer is interested in customising, the amount of personal contact with the sales force increases.” As part of his company’s personalised after-sales program, the feature and options development teams receive briefings about every personal follow-up and use the feedback to guide the development of improvements and new features. The greater the complexity of a custom solution, the greater the number of people involved throughout the organisation. Our survey responses show that implementing a personalisation strategy touches nearly every functional area of the enterprise, including operations, sales, marketing, customer service and information technology. Integrated solution providers like UPS excel at sharing information and analysis internally and presenting it to the customer in a unified and personalised way. People are also critical for relating to different
Which of the following applications of technology does your company have now, or expect to deploy in five years, to deliver more personalised customer experiences?
Virtual data storage 31% 22% 30% Unified voice, video and data networking 37% 18% 29% Voice-over Internet protocol (VoIP) 32% 36% 21% Click-to-talk 8% 33% 39% Web chat 33% 27% 30% Instant messaging 25% 24% 43% Personal digital assistants (PDAs) or other mobile devices 13% 26% 56% Video conferencing 34% 41% 20% Video messaging 16% 30% 36% Collaborative workplace applications (eg, instant messaging, file sharing) 17% 29% 48% Business intelligence applications 34% 39% 14%
1 Have now 2 Expect to deploy within 5 years 3 Do not expect to deploy within 5 years
In your opinion, what obstacles stand in the way of your company’s implementing a personalisation strategy?
Lack of management buy-in
24%
Fragmented staff structures
24%
Lack of customer information
23%
Decentralised customer information
22%
Inadequate IT infrastructure
29%
Inadequate budgets
28%
Overall company culture
27%
Competing agendas
25%
None of the above
15%
17% 16% 11%
4 20%
10% 7% 5% 5% 18% 6% 13%
cultures. This is especially true in Europe, with its disparate cultural heritages. “Face-to-face interaction is very important in Italy,” explains Daniela Papetti, marketing manager for Cabur, the Italian electrical supplies manufacturer. “Even Sweden and Denmark, which are next to each other, are still very different,” points out Mr Knudsen of Global Expansion Network. The most common methods for training people involve face-to-face communication. The leading techniques are on-the-job training (69%), peer mentoring (45%) and training by a supervisor (44%). Some companies use innovative methods to instill creativity in customer-facing personnel: simulated customer meetings, scripted customer interactions, interactive video training with “set-piece” scenarios, customised classroom training, online training, and story-telling to relate to customers’ emotions. Direct face-to-face communication may become less prevalent, however, as teleconferencing and videoconferencing technologies allow individuals to establish informational and emotional connections remotely at far less cost.
4 Don’t know
1
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Personalisation: Transforming the way business connects
Key success factors
D
espite all its benefits, personalisation is not a panacea for corporate ills. Indeed, it could come at some risk of decreasing sales or customer loyalty if done the wrong way. Companies should ensure that three prerequisites are in place before developing personalised products or services: l The cost of personalisation should be reasonable for both the company and its customers. l Configuring the product should require little or no incremental effort on the customer’s part. l Disclosure of private information used to personalise the product should be transparent to the customer. Low cost of implementation When companies offer sophisticated, tailored solutions before the market adopts the conveying technology, or before enough customers demand such products to make them profitable, they risk alienating customers and losing money. Dr Krupp of AmpTec says that given the heavy investment required to personalise a product, it is sometimes better to wait for the market to grow so that the initial spending can be amortised across a larger number of customers. Popular Telephony’s Mr Read finds that small businesses are more likely to buy totally customisable solutions than are large companies. “Usage logs also show us that most small and medium-sized businesses take customisation personally. No two systems are the same, and a variety of features allows them to test each until they find the most efficient for their business processes.” In contrast, he says, “large businesses are still practicing the traditional cycle. They buy a customised system, deploy it and wait until they grow or the technology expires before
‘upgrading.’ In our case, large businesses prefer to customise the system first and then control upgrading on a per-feature basis. We expect this behaviour to change when the simplicity of total customisation becomes clear.” Large companies may pass up customised or personalised products in favour of a proven solution. FoundOcean, the manufacturer of concrete oil rig drilling platforms, is actually trying to deliver a more
What information exchanged during a customer interaction do you think would most increase the chance of a subsequent interaction for your company?
Personal information 12% Information about new products/services 10% Information about a customer’s lifestyle 5% Information about customer’s buying preferences 13% Information relating to a customer’s future needs 33% The company’s business plans for products/services 12% The company’s innovation cycle 4% Opportunities to offer feedback 6% Rewards and incentives 2% Don’t know 3%
standard product because its large oil company clients are highly conservative. Due to the magnitude of their investment in oilfields, they aim to reduce risk wherever possible. Therefore, FoundOcean’s customers prefer to buy established solutions. Ease of use Consumers and businesses can be turned off by personalised solutions that require too much
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Personalisation: Transforming the way business connects
time and trouble to configure. The wrong process or technology can actually alienate the user. Consumers hate VCRs that need extensive programming or lengthy log-in procedures to arrive at a customized Web site. Businesses are put off by systems integration that is so painful as to reduce the perceived benefit from personalisation.
What impact do you believe personalisation will have on your company’s growth in the next five years?
Strong positive impact 42% Positive impact 38% No impact 15% Negative impact 3% Strong negative impact 1%
l Atherton Trust had its new customers select between many options when first joining the company, an approach it thought would result in the identification of the portfolio that would best match their needs. However, Atherton’s customers preferred fewer choices, so the company simplified its offering, forming three major product groups. l UPS offered its smaller customers a Web-based “technological point solution” and its larger customers personal interaction with an account executive, according to Mr Colletta, the company’s vice president of customer technology marketing. However, some smaller customers wanted the attention that comes with a dedicated account representative, and some larger customers preferred to do business over the Web than with a person. UPS customers’ personalisation preferences are sometimes driven by business size, but at other times by situational, demographic or psychographic factors. While UPS has segmented its customers in many ways, it still struggles to identify the right extent of personalisation for a new account. Disclosure Some customers are willing, even anxious, to reveal information to vendors in exchange for a personalised solution, while others are dead set against it. The objectors view personalisation as a violation of their privacy if they need to allow prying eyes to track their movements. Mr Kast of Atherton Trust explains that some of his firm’s wealthy clients want to receive personalised communications every 20 minutes, while others prefer absolute privacy until they call. As with cookies, e-mail, and RFID, what is a convenience to some may be a nuisance to others. As a result, the scalability of personalised solutions will rely on a relationship of trust with the customer.
Personalised solutions can require extra effort of individuals or businesses that would prefer to be presented with a product rather than to have to make choices or configure an item. Thus, ease of use can determine the success of a personalisation strategy. Three very different companies learned similar lessons about placing too much of the burden of personalisation on the customer: l Popular Telephony had pre-configured its peerto-peer (P2P) network administration consoles so that customers could design their own interfaces by pointing and clicking with their mice. However, its customers preferred to manage their own configuration, so the company adjusted course by leaving the product as an empty palette. Customers could then completely configure call routing, messaging logic and numbering plans to suit their individual needs.
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Conclusion
T
echnology will help companies that have been personalising in a manual way to scale their operations and become more competitive globally. Although today’s applications are focused predominantly on e-mail and the telephone, many other technologies—such as wireless telephony and integrated voice and data platforms—will rapidly become important vehicles for delivering personalised solutions. “The Internet is a once-in-a-lifetime change agent,” explains John McCrea, vice president of marketing for Plaxo. “We’re still in the early phases of seeing the transformative effects of this global network, which will change everything about the way business is done.” In the next five years, companies will personalise their products and services through labour-intensive solution-selling, labour-light technological personalisation, or an integrated, customer-driven range of human and technology interfaces. As businesses move to develop their personalisation capabilities, the economy will derive significant benefit: first, from the direct increase in company revenues attributable to the ability to secure more customers and sell them higher-margin products, and second, from increases in productivity and innovation that will occur as companies and individuals use tools that are better suited for them. Although technology is critical to personalisation, however, it will not replace human beings. If anything, people will become more interconnected as technology provides infinitely more opportunities for them to help deliver and personalise solutions for maximum personal benefit. New developments such as telepresence technology, which give users the experience of actually being present at activities (eg, conferences, meetings, or entertainment/education-
al events) that are remote from their own physical location, will facilitate collaboration and deliver the live, face-to-face interaction that is vital to establishing an emotional connection. The human touch will be needed at multiple stages of interaction, from the initial sale through customer service and renewal or product/service upgrade. “More and more participation from people online will make people want to build things, grow things, and affirm their own values, yielding a deeper kind of satisfaction,” explains Wikipedia’s Mr Wales. Companies, however, must approach personalisation with some degree of caution. They can risk failure by placing too much burden on an unwilling user, by doing it too early or too late for it to be economically viable, by relying on technologies that customers have not adopted yet, or by invading customers’ privacy. Other important questions remain. Which technologies will be the best vehicles for personalising products and services? Once people have access to on-demand personalised solutions that embed expertise, will knowledge work like tax accounting and consulting disappear? And how much more efficient and innovative will the world be when people have tools that fit their needs more appropriately? Based on these ideas and implications, there appears to be more than enough opportunity for another generation of IT pioneers.
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Appendix Personalisation: Transforming the way business connects
Appendix: Survey results
In October-November 2006 the Economist Intelligence Unit conducted an online survey of 328 senior global executives on their companies’ current and planned strategies for personalising products and services. Our sincere thanks go to all those who took part in the survey. Please note that not all answers add up to 100%, because of rounding or because respondents were able to provide multiple answers to some questions.
In which region are you personally located?
Asia-Pacific 30% Latin America 8% North America 28% Eastern Europe 6% Western Europe 26% Middle East and Africa 2%
What is your primary industry?
Aerospace/defence
2%
Agriculture an agribusiness
1%
Automotive
2%
Chemicals
2%
Construction and real estate
4%
Consumer goods
6%
Education
3%
Energy and natural resources
4%
Entertainment, media and publishing
2%
Financial services
What are your organisation’s global annual revenues in US dollars?
$500m or less 57% $500m to $1bn 9% $1bn to $5bn 13% $5bn to $10bn 6% $10bn or more 15%
19%
Government/public sector
4%
Healthcare, pharmaceuticals and biotechnology
12%
IT and technology
11%
Logistics and distribution
3%
Manufacturing
7%
Professional services
8%
Retailing
2%
Telecommunications
3%
Transportation, travel and tourism
4%
22
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Appendix Personalisation: Transforming the way business connects
Which of the following best describes your title?
Who are your company’s primary customers?
Mostly businesses 58% Mostly consumers 19% Equal mix of businesses and consumers 15% Governments/ Public sector 8%
Board member 4% CEO/president/ managing director 30% CFO/treasurer/comptroller 5% CIO/technology director 3% Other C-level executive 9% SVP/VP/director 14% Head of business unit 7% Head of department 6% Manager 14% Other 8%
What does your company sell?
Only products 15%
What are your main functional roles?
Customer service
16%
Only services 34% Mostly products 23% Mostly services 16%
Finance
21%
General management
38%
Equal mix of products and services 12%
Human resources
5%
Information and research
9%
IT
11%
Legal
3%
Marketing and sales
46%
How would you characterise your company’s culture?
Innovative (creative, intuitive, quality-oriented 37% Traditional (conservative, bureaucratically controlled) 21% Critical (negative, pessimistic) 2%
Operations and production
8%
Procurement
3%
Risk
9%
R&D
6%
Personal (individual- and values-oriented) 14% Impersonal (formal, strictly business) 2%
42%
Supply-chain management
2%
Strategy and business management Other
2%
Transactional (routine, rigid) 5% Interactive (flexible, empowering) 7% Collaborative (teamwork, consensus-oriented) 12% Don’t know 1%
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Appendix Personalisation: Transforming the way business connects
How important are the following factors to your company’s current revenue growth?
(Percent of respondents)
Currently, to what degree does your company offer each customer the ability to configure products or services in a unique way?
The product is standard and we offer no customisable features 23% The buyer can order some features and value-added services 40% The buyer can customise most aspects of the product 26% The buyer has total freedom to shape the product to his/her specifications 11%
Cost 42% Quality 56% Quantity/variety of products available to consumer 19% 27% Speed of delivery 30% Product/service innovation 36% Customisation of products/services 28% Customer loyalty 45% Customer satisfaction 26% 35% 39% 27% 32% 14% 2% 2% 11% 21% 22% 22% 34% 62%
1 Very important 2 3
28%
18%
9% 3%
7%
4 7% 3%
11% 4% 11% 7%
14% 5% 2% 27% 8% 2% 1
4
5 Not important
In five years’ time, how important do you expect these factors will be to your company’s current revenue growth? (Percent of respondents)
Cost 46% Quality 65% Quantity/variety of products available to consumer 31% Speed of delivery 44% Product/service innovation 49% Customisation of products/services 39% Customer loyalty 55% Customer satisfaction 73%
1 Very important 2 3
In five years, to what degree do you expect your company will offer each customer the ability to configure products or services in a unique way?
8% 3% The product will be standard and we will offer no customisable features 11% The buyer will be able to order some features and value-added services 36% The buyer will be able to customise most aspects of the product 33% The buyer will have total freedom to shape the product to his/her specifications 20%
25%
18% 23% 21% 35% 30% 37% 28%
8% 3% 2% 8% 5%
4 14% 4% 3%
35%
13% 5% 2% 13% 9% 6% 4% 6% 2%
18% 5% 2%2%
4
5 Not important
2
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Appendix Personalisation: Transforming the way business connects
What impact do you believe personalisation currently has on your company’s growth?
Strong positive impact 25% Positive impact 41% No impact 28% Negative impact 5% Strong negative impact 1%
Which of the following factors most influences the purchasing decisions of your company’s customers?
Brand 16% Quality 30% Necessity 18% Convenience 5% Price 18% Customer service 12% Don’t know 1%
What impact do you believe personalisation will have on your company’s growth in the next five years?
Strong positive impact 42% Positive impact 38% No impact 15% Negative impact 3% Strong negative impact 1%
To what extent do the following customer interaction offer your company an opportunity to establish competitive advantage?
Customer enquiry 34% Initial sale 37% Order change 8% Product shipping 9% Service delivery Follow-up support 32% 16% 6% 4% 1 40% Repeat purchases (add-ons or bolt-ons) 37% 9% 8% 3% 28% 15% On-site sales visit 13% 2% 29% 9% 20% 27% Needs analysis 18% 10% 7% 3% 28% 35% Contract negotiations 16% 33% 11% 2% 24% 13% Online/offline information about product or service 17% 33% 28% 8% 2% 12% Referrals to product or service by third party 32% 9% 5% 1 18% 35%
1 Strongly support unity 2 3
36% 36% 33% 18% 39% 16% 29% 13% 14%
17% 16%
8% 4% 1 6% 2%2% 16% 29% 6%
4 7%
24% 21%
10%
6% 2%
4
5 Little or no opportunity
6 Don’t know
© The Economist Intelligence Unit 2007
2
Appendix Personalisation: Transforming the way business connects
What information exchanged during a customer interaction do you think would most increase the chance of a subsequent interaction for your company?
Personal information 12% Information about new products/services 10% Information about a customer’s lifestyle 5% Information about customer’s buying preferences 13% Information relating to a customer’s future needs 33% The company’s business plans for products/services 12% The company’s innovation cycle 4% Opportunities to offer feedback 6% Rewards and incentives 2% Don’t know 3%
Which of the following best enables your company to personalise its products and services?
Telephone
35%
41%
Fax
3%
Postal mail
7%
Events/trade shows
18%
Direct sales
31%
Direct personal contact
63%
Focus groups
16%
Web chat
2%
Voice-over Internet protocol (VoIP)
4%
Streaming video
2%
Podcasts
1%
Webcasts
Which of the following technologies/activities do you see as most helpful in improving the relationship your company has with its customers?
Telephone
47%
6%
Not applicable—we do not have personalised products or services
8%
Other
2%
51%
Fax
4%
How have advanced technologies (such as VoIP, streaming video or Podcasts) affected your company’s interactions with customers in these areas?
8%
Postal mail Events/trade shows
26%
Direct sales
27%
Direct personal contact
68%
Focus groups
13%
Web chat
3%
Voice-over Internet protocol (VoIP)
5%
Streaming video
3%
Average time to facilitate communication 15% 26% Number of interactions initiated 30% 7% Agility to respond to customer requests 26% 12% Frequency of miscommunication 3% 14% Customer satisfaction 28% 11% Customer loyalty 24% 7% Ability to personalise products and services 21% 9%
1 Strong positive impact 2 3 No impact
45% 1%1% 49% 2% 48% 3% 59% 8% 3% 47% 2% 1% 53% 2% 1% 55% 2% 4
5 Strong negative impact 6 Don’t know
12% 12% 11%
4 13%
11% 13% 13%
Podcasts
2%
Webcasts
8%
Other
5%
2
© The Economist Intelligence Unit 2007
Appendix Personalisation: Transforming the way business connects
To what extent has your company’s overall revenue growth changed as a direct result of delivering personalised products and services?
Growth is much higher 17% Growth is somewhat higher 47% No change in growth 14% Growth is somewhat lower 2% Not applicable 16% Don’t know 4%
What metrics does your company have in place for monitoring the customer experience?
Customer satisfaction surveys
61%
Repeat purchase accounting
30%
Exit interviews
16%
E-mail follow-up
27%
Video or voice monitoring
4%
Return/cancellation rates
23%
Service calls/letters as percentages of shipments
13%
Outbound telephone surveys
14%
In-package customer surveys
5%
Secret shoppers
7%
Not applicable
How does your company train its personnel to interact with customers?
Written operating procedures
34%
13%
Don’t know
2%
Other
5% 69%
On-the-job training On-site classroom
27%
Training by supervisor
44%
Peer mentoring
45%
Which traits/skills do you think are most important for your employees to possess in order to deliver a meaningful customer interaction?
Creativity 4%
Self-guided learning
27%
Not applicable
10%
Communication skills 43% Humour 1% Discipline 4% Insight into customer needs 39% Product knowledge 9%
Don’t know
1%
Other
2%
© The Economist Intelligence Unit 2007
27
Appendix Personalisation: Transforming the way business connects
How does your company capture buying preferences and behaviours?
Point-of-sale data
34%
Which of your company’s business processes do you think requires the most reengineering to deliver a personalised customer experience?
Sales 21%
Surveys
46%
Front-line salespeople
59%
Customer service 18% Marketing 19% IT 14% Finance 6% Operations 22%
Website interactions
20%
Service calls
24%
Other
8%
Do privacy concerns hamper relationships with your company’s customers?
Often 11% Sometimes 43% Rarely 46%
In your opinion, what percentage of your company’s revenue base would be affected by more personalised customer interactions?
0% 3% Up to 25% 56% 25 to 50% 23% 50 to 75% 10% 75 to 100% 8%
2
© The Economist Intelligence Unit 2007
Appendix Personalisation: Transforming the way business connects
Which of the following applications of technology does your company have now, or expect to deploy in five years, to deliver more personalised customer experiences?
Virtual data storage 31% 22% 30% Unified voice, video and data networking 37% 18% 29% Voice-over Internet protocol (VoIP) 32% 36% 21% Click-to-talk 8% 33% 39% Web chat 33% 27% 30% Instant messaging 25% 24% 43% Personal digital assistants (PDAs) or other mobile devices 13% 26% 56% Video conferencing 34% 41% 20% Video messaging 16% 30% 36% Collaborative workplace applications (eg, instant messaging, file sharing) 17% 29% 48% Business intelligence applications 34% 39% 14%
1 Have now 2 Expect to deploy within 5 years 3 Do not expect to deploy within 5 years
17% 16% 11%
4 20%
10% 7% 5% 5% 18% 6% 13%
4 Don’t know
In your opinion, what obstacles stand in the way of your company’s implementing a personalisation strategy?
Lack of management buy-in
24%
Fragmented staff structures
24%
Lack of customer information
23%
Decentralised customer information
22%
Inadequate IT infrastructure
29%
Inadequate budgets
28%
Overall company culture
27%
Competing agendas
25%
None of the above
15%
While every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper.
© The Economist Intelligence Unit 2007
2
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