A beautiful myth: The cost (and more cost) of personalization
After years of hyping the benefits of personalization, even the biggest booster-minded Internet research companies are admitting that it hasn’t delivered what it promised, as Simon van Wyk writes.
Ten years after first appearing on the online radar, personalization still hasn’t taken hold on commercial websites. And it may never take hold, if businesses pay attention to a report published in October by Jupiter Research.
The report, called “Beyond the Personalization Myth”, found that personalized websites are four times more expensive to run than ordinary corporate sites, and they are twice as likely to attract visitors who will never pay for anything. Worse still, it found that 25% of consumers actually avoid personalized websites because they fear their personal information will be abused.
Personalization has not come a long way since marketing experts Don Pepper and Martha Rogers coined the term back in 1993. As Australian technology writer David Shore writes, “Around 1995, technology-oriented marketing types put Peppers and Rogers together with the Internet and concluded that online commerce would be one-to-one marketing’s killer app.
“Online stores, the Internet strategists concluded, needed unique, one-to-one relationships with all their customers. And customers who entered such close relationships would find it difficult to leave and establish new relationships (and enter new personal data) at some other site.”
The high point for personalization was in the late 90s, fuelled by reports such as “Personalize or Perish?” by Forrester Research.” Companies such as Broadvision and ATG convinced companies all around the world to spend millions of dollars per installation on personalization technology, without a framework in place to measure whether companies would make any return on their seven-figure investments.
But developing technology sophisticated enough to achieve the promise of one-to-one marketing offered by the Web has turned out to be one of the most difficult technical challenges faced by commercial websites.
As usability consultant Jakob Nielsen says, “Web personalisation is much over-rated and mainly used as a poor excuse for not designing a navigable website.”
Technology writer Gerry McGovern wrote back in 2000: “Personalisation is a great idea. But before buying some personalisation tools, ask yourself this simple question: Why would someone want a personalised version of my website? Or, maybe even ask a few more rudimentary questions: Why would someone want to visit my website in the first place? Why would they want to come back?”
David Shore writes that, “Personalisation technology understands consumers poorly. Amazon.com, the poster child of personalisation, will start recommending needlepoint books to you as soon as you order that ideal gift for your great aunt. At this point, even the thickest consumer is apt to realise he and his online bookstore aren’t that close.”
And consumers aren’t that thick. According to the Jupiter report, only 14% of consumers say that personalized offers or recommendations on shopping Web sites lead them to buy more often from online stores, and just 8% say that personalization increases their repeat visits to content, news or entertainment Web sites.
On the other hand, most consumers stated that basic site improvements would make them buy or visit Web sites more often - 54% cited faster-loading pages and 52% cited better navigation as greater incentives.
According to Matthew Berk, Research Director at Jupiter Research, “Most Web site personalization projects fail to deliver real business benefits. Our industry has always assumed that a personalized Web site was a better one, both for the visitor and the site operator. Our research has found that this is not the case.”
The report said personalization was not only ineffective, but surprisingly expensive. Personalizing a site was more than twice as likely to result in finding visitors who would never pay for anything, as it was to attract paying customers, the study found.
Why hasn’t personalization worked? Web content and design expert Gerry McGovern says it’s because, “most people don’t have a compelling reason to personalize. It hasn’t worked because the cost of doing it well usually significantly outweighs the benefits it delivers.”
“People go to web sites to accomplish specific tasks, and the best investment you can make in a website is to help people accomplish those tasks,” Matthew Berk said. “If the report has one goal, it’s to ring a warning bell to companies who thought that simply having personalization was to have a better web site.”
Given flexible, usable navigation and search, Web site visitors will be more satisfied with their experiences and will find fewer barriers to the profitable behaviour sought by site operators, according to the report. “In fact, good navigation can replace personalization in most cases.”
Berk calls website personalization a “beautiful myth.”
“The ROI of personalization is dramatically unproven everywhere we’ve looked,” says Berk.
Proponents of personalization claim that increases in customer satisfaction justify the investment. However, of companies that determine their online budgets as a percent of revenue, only one in five used comparable metrics to justify personalization ROI, according to the Jupiter study.
Berk believes that that is a strategic miscalculation. He says operating a personalized website can cost upwards of four times that of operating a comparable dynamic site.
“Measuring customer satisfaction is fine,” Berk says. “But if you’re going to spend a boatload of money on a site, you should measure how if affects revenue.”
David Shore writes, “Traditional business likes the Internet personalisation story. It suggests that Internet retailing might lock in consumers and churn out margins as fat as bricks-and-mortar retailing. For the most part, this is a delusion. Internet personalisation is not a Big Idea but a Small Idea, a Special-Circumstances Idea, a Use-With-Care Idea. It is an idea that most websites should, for now, dismiss.”
Gerry McGovern says there are some simple ways to achieve the benefits promised by personalization. “When I come to your website I want your view of how you will solve my problems. I want to get in and out quickly with as little effort as possible. How do you keep me happy? Simple.
“Teach your staff how to write well. Design a layout that allows me to read easily. Spend time creating a navigation that is simple and intuitive. Fix your search engine. Get the basics right. Garbage in, garbage out. Do you want to pay four times more for personalized garbage?”