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Data Insights Are Human Insights

Personalization ≠ Customization

Modern websites and digital experience platforms personalize a customer’s digital experience, not just across different interactive media such as web, email, and mobile, but also in real time, using contextually relevant, up-to-the-minute learnings about the individual. Using this kind of technology, along with data and analytics, today’s marketer can treat different customers and prospects differently, employers can treat different employees differently, and government clients can treat different citizens differently.

Too often in conversations, however, executives use personalization and customization synonymously. Yet they are not the same. Customization is a narrower form of personalization—when you customize something, you are also personalizing it, but when you personalize something, you aren’t necessarily customizing it.

This distinction can best be understood by considering the kinds of data and analytics used to drive the process, and whether the process involves third-party data about a customer, the customer’s observed past behaviors, and the customer’s direct input or specifications.

Personalization relies on any or all of these three sources of information. You can personalize a customer experience by relying on third-party data, observational data, or direct customer input. And the key benefit of personalization is that it streamlines the customer journey, removing friction from the customer experience by making each different experience more individually relevant to each different customer. For a business, when the customer experience is personalized, the customer or prospect enjoys a more frictionless experience and becomes more likely to purchase.

Customization, however, is a subset of personalization, because it must involve some type of direct input from the customer. When something is customized we say it is “made to order,” and we say that for a reason. A product, service, or experience can only be customized if it is made according to an individual customer’s specification or direction. Customization, as a result, is inherently collaborative. For something to be called “customized,” a customer must have participated in the specification process in some way, providing data about how she herself wishes to be treated.

For a business, this act of collaboration means that in addition to the benefit of streamlining the customer experience and making it more frictionless, the customer will actually have the satisfaction of having achieved this through her own input. As a result, any truly customized experience will generate far more actual customer loyalty than a merely personalized experience.

Consider how the online bill-pay function works at a bank. If you use your bank to pay your bills online, then first you need to input the names and addresses of your payees. After a few cycles you will have built up a directory of payees that is easy to access and makes paying your bills online a more frictionless experience.

But now you will be more reluctant to switch banks, for two reasons. First, because if you switch to a different bank to pay your bills online you’ll first have to input your list of payees all over again. In effect, changing to another bank involves more friction than it used to.

Whenever a customer can be served more relevantly by accommodating some type of direct input or specification, this kind of customization will create loyalty that mere personalization won’t. Sometimes this customer input can be in the form of purchasing or usage patterns. Netflix, for instance, makes better recommendations to you the more videos you buy from it, and Amazon does the same with the products you buy from it.

The loyalty-creating power of true customization is something Joe Pine, Martha Rogers, and I first wrote about in a Harvard Business Review article more than 20 years ago. But if anything, these principles have become even more relevant today, in an age of mobile apps, omnichannel interactions, and technologically sophisticated personalization tools.