In economics and marketing, personalization suggests the utilization of data to tailor content and communication to individual customers’ preferences, interests, and behaviors.
And from a purely economic perspective, personalization is great. The service (and/or product) changes as a function of who you are, becoming a better fit for your needs, wants, and preferences. This adds value to your customer experience—at least hypothetically.
But there’s a catch. That’s only true from a functional perspective.
Life, inconveniently enough, transcends mere functionality, rendering discussions of personalization incomplete without factoring in the psychology of consumption. That means economic value, in itself, is insufficient in describing, predicting, or improving customer behavior.
Personalization cannot be fully successful unless it considers the following three values…
Feeling.
Personalization may only be successful when customers recognize that a product or service is being tailored to their benefit—and feel seen in return. If personalization occurs behind the scenes and remains unnoticed by the customer, it fails to evoke the emotional impact of feeling seen, noticed, heard, and understood. In this way, it reduces itself to a merely functional feature rather than an integral part of the customer’s psychological experience of consumption.
Understanding.
As the psychology of consumption reveals, enjoyment and understanding are intrinsically tied. The better we understand how a product (and/or a service) works, the more value we can derive from it. By understanding our phone’s apps and functions better, for example, we simultaneously extract greater value and become far more likely to appreciate and enjoy the creative ingenuity of the product. Thus, by explaining their products and services better, businesses not only enrich customer understanding and promote enjoyment but also engage in successful personalization.
Idiosyncratic fit.
Last but not least, personalization should not neglect the creation of an idiosyncratic fit—a product or service that customers believe is created specifically with them in mind, responding to their needs, wants, and preferences. This perception not only increases the appeal of the product or service and the customer’s willingness to pay but also promotes trust, brand loyalty, and openness to additional offerings.
While personalization that incites these three values—in addition to economic benefit—enriches a brand’s economic and emotional value, one that merely relies on economic utility will do more harm than good.
In failing to make their customers feel seen, understood, or provided with the right idiosyncratic fit, businesses not only lose a sale—they lose trust and alienate their customers.
To hear me talk about this, don’t forget to stream the video above.
Irrationally yours,
Dan Ariely
