Is personalization working? Budgets are increasing, but martech challenges threaten future investments

In a recent survey of 200 marketers, 86% told Merkle they have budgets defined for personalized messaging initiatives and 82% had martech solutions in place to implement personalization. Further, 89% claimed to have the “organizational structure” needed to execute personalized multi-channel marketing plans.

It would appear marketers are prepared to deliver on consumer expectations. There is also evidence that suggests businesses that excel at personalization have a competitive edge. For example, retailers using advanced personalization messaging tactics drove 17% higher revenue than retailers relying on “more basic” efforts, according to Merkle’s findings.

And yet, Gartner predicts, in the next five years, 80% of marketers who have invested in personalization will drop their personalization efforts.

The problem with personalization

Gartner’s findings are based on marketers either seeing a lack of return on investment or experiencing too many obstacles when trying to manage the customer data needed to power effective personalization initiatives — or both.

“Technology makes up 44% of marketing spend on personalization,” reports Gartner, “Despite the investment in tools, 26% of marketers polled cite technology as a key obstacle to personalization.” In other words, more than a quarter of marketers see technology as a problem rather than a solution when implementing personalization programs.

Research by Forrester backs up Gartner’s findings, with nearly half of the customer management executives it surveyed reporting they do not have the required technology needed to fully manage customer and prospect data.

Too much data, imperfect technology

Forrester’s findings offer more insight into the obstacles marketers face when trying to roll out comprehensive, integrated personalization efforts. The research firm found that businesses have, on average, 17 different technology applications leveraging customer data, with an average of 28 different data sources used for generating customer insights and customer engagement.

“The biggest challenge at this point is linking the data together,” said one director of marketing operations interviewed by Forrester. Personalization efforts may fall flat, not because marketers lack the necessary data, but because they don’t have martech solutions to wrangle and connect the massive amounts of available data to their marketing campaigns.

In fact, only 38% of the customer data management executives Forrester surveyed said they knew where all of their customer data is stored — meaning a large majority of companies aren’t even sure where they keep their data.

“I’ll have email data from a subscriber, and then I’ll have social data from a subscriber. I’ll have sentiment data from a subscriber. I’ll have customer journey data and web analytics data, but it won’t all be in one place,” said a vice president of marketing for a telco company in Forrester’s report.

Merkle, too, found these gaps play out tactically: “We see some evidence that the greatest use of channel data is within that channel, indicating a siloed approach to personalization. For example, email responses are used most in the email channel, and digital media exposure data is used most in the digital media channel.”

The irony here is that personalization is suffering from siloed systems — the same challenge that plagues customer experience processes on a business-wide scale.

Reconsidering measurement of success

“In order to be successful, digital marketers now need to provide meaningful experiences to their consumers in real-time with speed and precision and at scale,” said BrightEdge COO Krish Kumar, “Personalization is a big part of that delivery system, but many marketers have traditionally struggled to keep pace of consumer change and tailor experiences in a systematic way across not just one, but all of their digital channels.”

For personalization to prove valuable, Garter says marketers need to reconsider how they measure its impact: “Marketing leaders focused on a marketing use case must shift from campaign performance to business impact as a measure of personalization effectiveness.”

Companies that continue to focus on campaign-level outcomes are missing the bigger picture in terms of what personalization can deliver. Reframing what “personalization success” means by measuring its impact on overall customer experience requires more coordination, but can offer a more comprehensive measure of its efficacy.

“Instead of measuring the impact of personalized content recommendations at the individual level, select test-and-control groups to measure the impact of personalization that does not necessarily lead directly to a purchase,” advises Gartner, “This approach relies more on cross-functional staff collaboration and less on technology dedicated to marketing. It delivers superior outcomes, heading off misguided personalization technology investments.”

The light at the end of the (personalization) tunnel

According to Kumar, personalization is core to all marketing success — a fact he says won’t change. “It’s the approach that needs to change,” said Kumar, “In order to truly scale personalization efforts, marketers need to embrace technology that helps them deliver dynamic and personalized experiences that perform across all of their digital channels.”

Marketers are currently allocating 14% of their marketing spend to personalization, reports Gartner. Whether or not more will be spent on personalization in the future depends on how well marketers are able to overcome the obstacles inherently attached to personalization — and their ability to prove its impact on the bottom line.

“The best marketers I have seen are embracing technology — specifically machine learning and automation, firstly, to understand what their consumers are looking for in real-time, and then with the help of automation, immediately responding with tailored personalized content and messages that resonate,” said Kumar, “When marketers do that — ROI increases dramatically.”