Imagine that you’re walking down a busy city street. As you near a bus station, the screen on the side of the shelter lights up. Its processor collects data from the cell phone in your pocket,  greets you by name, and displays a personalized ad for your favorite brand of toothpaste. Sound like something out of a Black Mirror episode? These tailored billboards were actually inspired by the Tom Cruise classic, Minority Report. And they’re set to roll out across Europe in the coming years. Bidooh, the innovative advertising company that spearheaded the project, aims to integrate its technology in 3,000 screens across Eastern and Central Europe within three years. 

The rise of personalized marketing

It’s no surprise that personalized marketing has become one of the most effective ways for businesses to promote themselves and drive revenue. The digital world bombards today’s consumers with an unreal number of ads every single day. And most people are increasingly skeptical of advertisers and overt sales pitches. We’ve already talked about how the strongest marketing tactics rely on building an emotional connection between marketers and their audience. Personalized marketing creates an audience of one, allowing marketers to break through the noise, increase trust, and drive sales. 

A recent survey by Infosys showed that personalization has an impact on what 86% of consumers purchase. As many as 25% admit that personalization “significantly influences” buying decisions. Thanks in large part to these numbers, creating an entirely personalized customer experience has become a top priority for many companies. 

The role of data in personalized marketing 

Eric Siegel, a consultant and the chairman of a conference called Predictive Analytics World, notes: “We’re living through a golden age of behavioral research. It’s amazing how much we can figure out about how people think now.” In the pre-digital age, marketing was grounded on experience, instinct, and speculation. Now, data allows marketers to see into the minds of their consumers before, during, and after each advertising campaign. 

Using data tracking and analytics, marketers today learn their customers’ preferences, behaviors, and tendencies. They know if you tend to buy your groceries at 6 pm on Saturday, or before work on Wednesday. 

And, thanks to sophisticated data-mining, they know what you buy, from where, and when. Plus machine learning and artificial intelligence track what ads get their customers’ attention, and what goes unread, allowing successive waves of ads to be even more targeted. With smart devices and location tracking services, companies can even track customer behavior off the internet. Unless you’ve left it at home or taken steps to disable the function, your smartphone knows where you’ve been, when you were there, and how long you spent. 

How is all of this information useful? 

One of the major tenets of modern marketing is to know your audience. Without a solid understanding of who you’re trying to appeal to, many marketing efforts fall flat. Imagine for a moment that you’re the Marketing Director for just one, common household item: Neosporin. Most households need antibiotic ointment for cuts and scrapes, but why they need it varies. 

If you’re marketing to a single, college-aged demographic, you might emphasize how Neosporin should be a staple in your [insert outdoor activity here] kit. If you’re marketing to families with small children, you might emphasize how Neosporin reduces the chances of scarring, or how the new formula is pain-free for kids’ sensitive skin. 

Data allows companies and brands to launch more precise ad campaigns, using past behavior to predict future responses. In fact, most major retailers have a “predictive analytics” department, which helps them understand both consumers’ shopping and personal habits,  track buying patterns, and note changes or disruptions. 

“When it comes to behavioral targeting, Amazon is undoubtedly number one.”

Many big brands like Coca Cola, Nike, and Cadbury are taking personalization to the next level. But when it comes to behavioral targeting, Amazon is undoubtedly number one. Their personalized site content delivers dynamic, data-driven recommendations in real-time, while email marketing campaigns suggest “frequently bought together” bundles and remind you to continue where you left off if you leave an item in your cart too long. Plus many of the e-commerce giant’s favorite customer features, like the Wishlist, actually give the company more insight into what their customers want and how to deliver it.  

Since purchasing consumer analytics firm, Zodiac, Nike has also been pushing the boundaries of personalization. Using aggregated customer data, Nike launched its cutting edge Nike+ loyalty scheme, the innovative SNKRS personalized shopping experience, and the product personalization app, NikeID. 

When personalized marketing goes too far

Not all personalization, however, is created (or received) equally. Target’s now-infamous pregnancy coupon incident shows the consequences of taking data-driven marketing too far. In his article, “How Companies Learn Your Secrets,” Charles Duhigg notes that new parents are a retailer’s holy grail. “Most shoppers don’t buy everything they need at one store,” he explains. “Instead, they buy groceries at the grocery store and toys at the toy store, and they visit Target only when they need certain items they associate with Target.” 

Childbirth, however, disrupts typical buying habits. Exhausted new parents are more likely to buy groceries, toys, and cleaning supplies at the same store— if they’ve been primed to do so ahead of time through targeted advertising. Target decided to market directly to women entering their second trimester of pregnancy in an attempt to influence future buying behaviors. 

“We knew that if we could identify them in their second trimester, there’s a good chance we could capture them for years,” Target’s statistician Andrew Pole told Duhigg in their 2012 interview. “As soon as we get them buying diapers from us, they’re going to start buying everything else too. If you’re rushing through the store, looking for bottles, and you pass orange juice, you’ll grab a carton. Oh, and there’s that new DVD I want. Soon, you’ll be buying cereal and paper towels from us, and keep coming back.”

Unfortunately, the company’s pregnancy-prediction algorithm worked too well. 

One store outside Minneapolis had to deal with an angry father who brought in a mailer addressed to his teenage daughter. The personalized ads included deals on maternity wear, baby clothes, and nursery furniture. When the manager called to apologize a few days later, the father seemed sheepish. “I had a talk with my daughter,” he said. “It turns out there’s been some activities in my house I haven’t been completely aware of. She’s due in August. I owe you an apology.”

This story went viral in 2012, prompting many to ask the question: how are companies collecting and using information? What’s the difference between Amazon recommending Neosporin the day after you buy a mountain bike and Target sending you nursery deals after you buy prenatal vitamins and cocoa-butter lotion? 

Transparency is key

The issue with data-driven personalized marketing is that many consumers worry that their privacy has been violated. Forbes staffer Kashmir Hill cheekily compares it to browsing through someone’s social media before a first date: “Even if you’ve fully stalked the person on Facebook and Google beforehand, pretend like you know less than you do so as not to creep the person out.” 

However, a 2015 study by the Journal of Retailing found that overt data-collection (or letting consumers know up front exactly how and why you’re collecting their information) leads to higher click-through rates and more trust in personalized marketing efforts. The Harvard Business Review reported similar findings, noting that trust enhances the positive effects of using personal information in ways consumers deem acceptable. “As a general rule of thumb,” they write, “we suggest that marketers at least be willing to provide information about data-use practices upon request.” These small disclosures go a long way towards cultivating trust between companies and consumers. 

Personalized marketing should add value to the customer experience

While it seems evident that targeted marketing is here to stay, there are still guidelines for how best to practice personalization. A recent analysis by PostFunnel emphasizes one thing: “Done well, personalization should add value for your visitors, helping them find what they are looking for or guide them in their journeys. Personalization ‘just because you can,’ on the other hand, is never a good idea.”