The History Of Personalization

Summary

MarTech Podcast ™ – Episode: The History Of Personalization

Host: Benjamin Shapiro
Guest: David Edelman, Senior Lecturer at Harvard Business School, Executive Advisor at Edelman Advisory Services, and Author of Personalized Customer Experience in the Age of AI
Release Date: January 6, 2025

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Introduction

In this engaging episode of the MarTech Podcast™, host Benjamin Shapiro delves into the evolution of personalization in marketing with esteemed guest David Edelman. Edelman, a Harvard Business School lecturer and marketing expert, shares his extensive knowledge on how personalization has transformed from rudimentary targeting to sophisticated, AI-driven customer experiences.

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Early Stages of Personalization: Direct Marketing (00:32 - 06:00)

David Edelman begins by tracing the roots of personalization back to 1989, predating the Internet. During his tenure at the Boston Consulting Group, he observed that early personalization efforts were primarily focused on direct marketing—utilizing direct mail and telemarketing to target specific customer segments.

David Edelman [02:32]: "The first wave was basically what we called direct marketing. It was direct mail telemarketing. And most of it was fairly reductive... It was more about targeting and reductive to be efficient in terms of spending your budget."

Edelman explains that while these methods allowed for targeting, personalization was limited to broad segments rather than individual customization. For instance, companies like L.L. Bean would send catalogs that, while somewhat tailored, lacked the depth of true personalization.

David Edelman [04:21]: "It wasn't excessive personalization, but it was really more basic segmentation... we'd send a Focus phishing catalog for you."

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The Internet Era: Data-Driven Personalization (06:00 - 09:34)

With the advent of the Internet, personalization took a significant leap forward. Edelman highlights how real-time data collection and digital channels like email allowed marketers to target individuals more precisely.

Benjamin Shapiro [06:00]: "When the Internet era first started... what we're calling personalization is only around targeting, essentially the creative is basically the same."

Early Internet personalization involved A/B testing of emails, optimizing subject lines for higher open rates, and tailoring landing pages based on user interactions. This era emphasized data-driven strategies to enhance marketing efficiency and effectiveness.

David Edelman [07:18]: "If Ben versus David got different offers for different products, you would know what you had actually sent them."

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Web 2.0 and the Rise of Multifaceted Personalization (09:34 - 13:39)

As Web 2.0 emerged, personalization expanded through mobile integration, content management improvements, and the proliferation of digital advertising and social media. These advancements introduced new outbound channels and richer data sets, allowing for more sophisticated targeting.

David Edelman [07:39]: "We get into three different things that happen in the Web 2.0 era: Mobile, content capabilities, and digital advertising and social media."

The integration of location-based targeting and app notifications enabled marketers to reach consumers in diverse contexts and moments, shifting strategies from broad campaigns to more responsive, real-time interactions.

David Edelman [09:34]: "Instead of just saying, I've got a campaign, who am I going to send it to?... I have an opportunity to sell Ben. Let me put together the right thing through a channel. Ben tends to react to and send that to him right now."

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Influencers and the Democratization of Personalization (12:41 - 13:54)

Benjamin Shapiro introduces the concept of influencers as a pivotal development in personalization. The rise of micro-influencers—everyday individuals with niche followings—has transformed how brands engage with consumers.

Benjamin Shapiro [11:24]: "Every person becomes this influential figure in your life... it's like, oh, you know what? Mom makes a little money off of being a YouTube celebrity."

This shift underscores the importance of personal relationships and authentic endorsements in enhancing personalized marketing efforts.

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The AI Era: Beyond Marketing to Comprehensive Customer Experience (13:54 - 19:43)

Transitioning into the AI era, Edelman emphasizes that personalization is no longer confined to marketing tactics but has become integral to the overall customer experience. Brands like Netflix, Spotify, and Uber exemplify how personalized data-driven experiences can drive engagement and loyalty.

David Edelman [12:41]: "We're moving from thinking about this in just a marketing frame of mind to one that's about more broadly, customer experience."

Edelman shares his experience at Aetna, where personalized videos were used to help customers understand their health plans, resulting in improved customer satisfaction and reduced call center inquiries.

David Edelman [14:07]: "We found a capability from a company called Sunday sky that can do personalized videos... that led to fewer calls into the call center, Net promoter scores going up."

He contrasts this with poor personalization practices, such as Nespresso's aggressive sales tactics, highlighting the importance of zero-party data—information willingly shared by customers—to enhance personalization authentically.

David Edelman [16:59]: "What they could have done is ask me... that's zero party data. I'm very happy for you to have that data and then use it to serve me better."

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AI-Driven Data Management and Continuous Learning (19:43 - End)

Edelman discusses the challenges of managing the abundant data marketers have access to, likening it to a river that requires careful management to harness effectively. He stresses the necessity of continuous testing and learning to discern which personalization strategies resonate with different customer segments.

David Edelman [19:43]: "Good marketers are constantly testing and learning... using AI to create and manage different test cells to find the best approaches."

AI tools like multivariate testing and machine learning algorithms are pivotal in identifying and implementing the most effective personalization tactics, ensuring that marketing efforts evolve based on real-time data and customer behavior.

David Edelman [21:46]: "It's not just understanding what the outcomes are, it's understanding what variables actually have an impact as well."

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Conclusion

In wrapping up, the discussion underscores that personalization has evolved from basic targeting to a sophisticated, AI-driven strategy that permeates every aspect of the customer journey. Edelman's insights highlight the critical balance between leveraging vast data and maintaining authentic, customer-centric experiences.

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Notable Quotes

• David Edelman [02:32]: "It was more about targeting and reductive to be efficient in terms of spending your budget."
• David Edelman [04:21]: "It wasn't excessive personalization, but it was really more basic segmentation."
• Benjamin Shapiro [06:00]: "Personalization is only around targeting, essentially the creative is basically the same."
• Benjamin Shapiro [11:24]: "Every person becomes this influential figure in your life."
• David Edelman [12:41]: "It's about more broadly, customer experience."
• David Edelman [14:07]: "That led to fewer calls into the call center, Net promoter scores going up."
• David Edelman [16:59]: "That's zero party data. I'm very happy for you to have that data and then use it to serve me better."
• David Edelman [21:46]: "Understanding what variables actually have an impact."

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Connect with David Edelman

• LinkedIn: David Edelman
• Company Website: Edelman Advisory Services
• Book: Personalized the Book

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Stay Tuned

For more insights on marketing and technology, subscribe to the MarTech Podcast™ and follow us on YouTube, Twitter, Instagram, and TikTok. Connect with host Benjamin Shapiro on LinkedIn at Benjschapp.

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This summary captures the essence of the conversation between Benjamin Shapiro and David Edelman on the history and future of personalization in marketing, highlighting key developments and the transformative role of AI.

Transcript

[Benjamin Shapiro]

The Martech Podcast is a proud member of the I Hear Everything Podcast Network. Looking to launch or scale your podcast, I Hear Everything delivers podcast production, growth and monetization solutions that transform your words into profit. Ready to give your brand a voice? Then visit iheareverything.com.

From advertising to software as a service to data, across all of our programs and clients, we've seen a 55 to 65% open rate. Getting brands authentically integrated into content performs.

[David Edelman]

Better than TV advertising.

[Benjamin Shapiro]

Typical lifespan of an article is about 24 to 36 hours. If we're reaching out to the right person with the right message and a clear call to action, then it's just a matter of timing.

Welcome to the Martech Podcast, a member of the I Hear Everything Podcast network. In this podcast, you'll hear the stories of world class marketers that you technology to drive business results and achieve career success. Here's the host of the Martech Podcast, Benjamin Shapiro.

Welcome to the Martech Podcast. I'm your host, Benjamin Shapiro and today we're going to discuss customer strategy in the AI era. Joining me is David Edelman, who is a senior lecturer at Harvard Business School and the executive advisor to Edelman Advisory Services. He is also the author of the Personalized Customer Experience in the Age of AI. And today David and I are gonna talk about the history of personalization. All right, here's the first part of my conversation with David Edelman, the author of Personalized Customer Experience in the Age of AI. David, welcome to the Martech Podcast.

[David Edelman]

Terrific to be here, Ben, thank you.

[Benjamin Shapiro]

Excited to have you, Honor and a privilege to have somebody with your storied history of success in marketing. And hey, a Harvard Business School professor's no joke. You must know a thing or two.

[David Edelman]

I think I do.

[Benjamin Shapiro]

Well, glad to hear it. You're the perfect person to talk to. Not only about what's happening today with artificial intelligence and personalization, obviously something that's on all marketers mind, but we're going to kind of go from the Wayback Machine to the present. Let's talk a little bit about the history of personalization. Starting off with the stages of personalization. Give me a breakdown here of what you consider the stages. Stages of personalization?

[David Edelman]

Yeah, we've actually been talking about personalization for quite a while. Way back in 1989 and I'm dating myself before the Internet. I was a young consultant at the Boston Consulting Group and three clients were asking us what can we start doing with customer data that we are collecting. And out of that I wrote A piece called Segment of One Marketing. And that really was one of the first waves. And it was even before that when we had catalogs and things like that. The first wave was basically what we called direct marketing. It was direct mail telemarketing. And most of it was fairly reductive. I have something I want to send. Who should I send it to? It was more about targeting and reductive to be efficient in terms of spending your budget. Then the Internet happened.

[Benjamin Shapiro]

Let me interrupt you before we go on. Let's do this in a linear fashion. I want to ask you more questions about the Segment of One. You wrote the book on it. We will get into the various segments. What I'm hearing from you is that the channels were direct mail. So I'm thinking you're using the post office. You mentioned telemarketing. My first job at a college to date myself was literally knocking on business doors, being like, hey, do you want to buy phone service and water coolers? I consider that to be direct mail. How is it personalization, though?

[David Edelman]

So the basic start of that was somehow I knew that if you had bought from this catalog, you bought. L.L. bean is a perfect example of this. It wasn't excessive personalization, but it was really more basic segmentation. And because, Ben, you had bought some stuff from the general catalog that was about phishing. We're going to now send a Focus phishing catalog for you.

[Benjamin Shapiro]

I'm trying to put myself in the mindset of 1989. Apologies for interrupting you, but I guess the reason why it's personalization is the strategies back then were radio, tv, billboard, newspaper. There was no sense of actually figuring out who you're reaching out to. And that's why this notion of just basically what we would consider now targeting was personalization.

[David Edelman]

That was the closest we can get.

[Benjamin Shapiro]

Okay.

[David Edelman]

And there was a dream that we could go further. People were starting to talk about. I was starting to talk about it. But the channel was limited in terms of its ability to both gather enough information back and deliver something that really could be just for Ben. So then we got into the digital era, the start of online, start of the Internet. And that era in personalization started to go after those two blockers. So one blocker was getting enough information about Ben and actually getting it faster and understanding about Ben in the moment. So the interaction on digital channels had a whole exhaust of data, some of which you could actually act on in the moment. Ben just went into search, landed on your site. You can now start showing Ben things because of where he came from you could get the right landing page to match Ben's interest. And if Ben looked at something and then didn't buy, you'd follow up and try to retarget Ben again. So most of this was about following people and trying to match where you thought they were.

[Benjamin Shapiro]

So there's a different channel mix here with the Internet era and a lot of it's driven by data. When the Internet era first started and we moved from this notion of the targeting or the personalization is only around targeting, essentially the creative is basically the same. We're delivering the same mail piece. We're just only delivering it to people that we think are likely to buy. And that's what we're calling personalization. The Internet comes out and you not only get a real time data signal, but you mentioned we're changing the landing page to be specific to somebody when we realize that they're in market. What are some of the early outbound marketing channels that we're using? Go away from direct mail. We're on the Internet. How are you actually targeting and keeping in touch with the prospects?

[David Edelman]

So the main thing is email. In the early days, a lot of it was similar to direct mail sending email, but doing that in a way where the distribution per person is dramatically cheaper and you can also get much more again of a data exhaust trail. Did somebody actually click on it? And then you also know after they click on it what they actually saw. So if Ben versus David got different offers for different products, you would know what you had actually sent them. And then you can have a landing page that matches.

[Benjamin Shapiro]

It's like the early days of AB testing and you're understanding if your subject lines or your copy are converting and we're looking if the subject is good, then we're going to get a higher open rate and if the copy is good, we'll get a higher click through rate. Get somebody to our website and go from there. What happens after the sort of early Internet era?

[David Edelman]

So then we get into three different things that happen in the Web 2.0 era. Mobile, you're interacting on a device that also has location so you're in a place in time which would make that very relevant for certain kinds of things that could happen in real time, such as being in a retailer, for example, that you're actually in a retail store and you could get potentially offers. So one is that the second is content capabilities. Dramatically improve content management, the ability to manage content in a componentized way so that you don't have to create five completely different wholly Constructed PDF emails you can mix and match and you can take a general template and slot in different things depending on the data that you have about benchmark. And then the third is digital advertising and social media expanding and way more capabilities based on interests, connections, content that you interact with. All of that creates another outbound channel that has gotten dramatically more sophisticated in terms of its data in order to much better to target you, possibly even individually.

[Benjamin Shapiro]

So we've got this notion here in this tailoring and targeting era, the web 2.0, where we're now having more content, not only real time signals, but an understanding of location because of the mobile rise. Talk to me about the marketing strategy. Before we were telemarketing, then we were using email marketing. We've all lived through this relatively recently. But what do you see as the shift in terms of not only how we're targeting, in terms of understanding context, but where we are targeting?

[David Edelman]

Yes, so we're targeting through text messages. We're starting with permission, being able to actually send you a text notification. We can also send you an app notification because in mobile, if you've downloaded my app as a retailer, then I then can send you notifications of things relating to offers and stuff that you can access through the app. So you've got a couple more very important channels that have opened up through mobile itself, as well as the fact that you're just simply online more because of your mobile device. You're looking at social media, you're checking your phone. Your accessibility as an individual to be able to receive digital messages has skyrocketed. It's not only when you're sitting with a laptop or desktop in front of you, it's all the time. So that changes marketing strategies as well, because you can catch people in many, many, many more contexts in real time. And from the marketer's perspective, it actually goes even more towards pull versus push, because instead of just saying, I've got a campaign, who am I going to send it to? Which was not only happening in the direct mail era, but was happening in the email era too. You are now saying, okay, Ben's in this situation at this moment. I have a sense of what Ben is interested in. I have an opportunity to sell Ben. Let me put together the right thing through a channel. Ben tends to react to and send that to him right now. So it's turned around to responsive to your situation versus just simply pushing what we want to promote.

[Benjamin Shapiro]

What comes to my mind when you're talking about the difference between push and pull and this sort of Web 2.0 era was also the rise of the notion of the influencer, Where I know not only are you interested in a specific subject, I know that you have a relationship with a specific person. So we see not necessarily only actors and actresses being the ones who are promoting brands and services because they have access to distribute the message over media. Every person becomes this influential figure in your life. We go from these sort of macro influencers, the Kim Kardashians of the world, and now all of a sudden, it's like, oh, you know what? Mom makes a little money off of being a YouTube celebrity talking about knitting or whatever he or she is into. That, to me, is kind of the biggest thing that happened in the pre AI era. Not only are we personalizing with location and delivery methods, but also who is delivering the messages changed dramatically. Now we're in a new era, what you're calling the age of AI. So what do we take from the history of personalization, going through the pre Internet era to where we are today that can tell us about how we should think about personalization today?

[David Edelman]

So one of the most important things overall is that we're moving from thinking about this in just a marketing frame of mind to one that's about more broadly, customer experience. So it's not just to get someone to buy. It changes the way you might experience a brand. How you use the product, how you get customer service, how you learn about new things you can do to expand your engagement with the product. Think about brands like Netflix, Spotify, Uber. All of those are brands that we are increasingly drawn to, not just because they're good marketers, but because the actual experience is using data about ourselves to deliver unique value. That's changing things now. So it's becoming a way of competing, of corporate strategy based on personalized experiences.

[Benjamin Shapiro]

So personalization isn't just a marketing tactic, is what I'm hearing from you. It's not just the message to try to drive someone into your ecosystem. It has to be carried beyond the marketing through the interaction with your products or services.

[David Edelman]

Yes. And let me just give you a very simple example of this. When I was chief marketing officer at Aetna, we realized people did not understand their health plans, and that leads to a whole lot of problems.

[Benjamin Shapiro]

We probably still don't.

[David Edelman]

So one of the things we did was we wanted people to understand their health plan. So we figured video would be a good way of doing it. But everyone's health plan is different. And how do we create 20 million different videos? Well, we found a capability From a company called Sunday sky that can do personalized videos. And these are crude, these are simple animation type stuff. But they're engaging and they're personalized so Ben can see who in his family is covered. Oh, your wife doesn't have a primary care physician relationship. Here are three in your area that are accepting new patients that are in network. Click here to schedule, by the way. Also, here's three urgent care centers near you. Here's where they are on a map so you don't have to go to an emergency room. Here's how the economics of your plan works. So all of those things that's completely personalized, that's not marketing, but it is part of the customer experience. And that led to fewer calls into the call center, Net promoter scores going up, people actually opening our emails more often.

[Benjamin Shapiro]

You know, it's funny, when we think about personalization in the AI era, my head goes to we've got all this vast amount of data and the challenge for marketers has been able to interpret it and find the right signal, so the right place and time and message to be able to deliver to drive a marketing activity. And I hear what you're saying is it's not just the marketing activity that's going to be disrupted through this new technology, but it has to be carried all the way through what you say in marketing then has to be delivered in the product. And so essentially your product becomes shapeable like clay, because we have an understanding of the person's interests before they actually become a customer. Are there any specific uses of data or the way that we understand customers that you think is changing?

[David Edelman]

I think we are using more and more the interactions we have that aren't just kept, the interactions that aren't just in a separate E commerce or product silo, but they're being used to manage more broadly the experience or not. And I think one of the challenges is thinking about how you can use customer information that you could actually easily collect that you're not. Let me give you another example. I recently moved and when we moved, we upgraded our coffee at home to a Nespresso to get nice espresso. So the Nespresso machine came with 100 pods. Within two days after I got this, the Nespresso and the pods, I am getting bombarded by Nespresso every day with offers to buy more pods. I have 100 pots. They should know that. How much coffee do they think we drink?

[Benjamin Shapiro]

I mean, if you're in your 20s, that might last you a week or two.

[David Edelman]

All right, but by the second week they're also pitching us to buy another machine so they know we are not a small business. This is a residential address. They should be able to figure that out. Why are they just bombarding me with offers? What the actual information they could have done is two days after ask me, how do I like it? Did I know that I can make iced drinks with it? What flavors do I like best? How much coffee do we tend to drink in a week? Would we like to go on auto replenish? Would you like to try some new flavors that could completely change the relationship, make it totally personalized. And that's actually just zero party data. We call it Ask me. I'm very happy for you to have that data and then use it to serve me better. But that's not mentally where they're going. Their strategy hasn't thought about it as a personalized experience. They're just trying to milk me. And just because I bought an espresso they think it's personalization to just bombard me with offers. So it requires a change in perspective about how you're using data and what data you can actually collect. Because in a lot of cases you could also just ask me.

[Benjamin Shapiro]

I always think about the amount of data that we're able to collect basically being like a river, right? You can get lost in it, or you could use it to get to where you want to go. And when I think about sort of this arc that we've described of going from focusing on targeting with sort of blunt objects, direct mail and telemarketing into the digital era where we're basically using personalization to send messaging and maybe there's some customization on the landing page experience. We have this explosion of mobile and content which just gave us so much more that we can do so much data, so many places, so many different vehicles and now all of a sudden marketers are sitting there drowning in that river of data. And hopefully this new AI era of personalization means that personalization a isn't just a marketing tactic. It's something that is carried on through into the product experience. But it also allows us to digest more and understand of the data what is relevant, what messages are going to have an impact. And honestly, on the other hand, what is too much? So we avoid the would you like to buy your second hundred of Nespresso pods experience this week. That's my dream for artificial intelligence and personalization is that it allows marketer to digest the vast amount of data that we have so we can make better decisions in Terms of the experience, what's your hope?

[David Edelman]

I think that is true, but I want to add one more thing, which is you don't automatically know per se, which messages work if you haven't tried a whole bunch of things. So AI lives off the data that you feed it, and whatever you fed is the limits of what it knows. So good marketers are constantly testing and learning, testing and learning, testing and learning and using that to create data. Because what motivates Ben to take action is likely going to be different than what motivates Dave. So you need to understand what the possibilities are, but you don't even know until you try. And AI can enable that. It can actually create five different versions to test. That's gen AI. But then there's other AI, such as machine learning AI. Like there's a company called Offer Fit that we've used that can do multivariate testing that can actually manage you using basically five different variables at once across a whole bunch of cells to test whether it's the message, the offer, the timing, the channel, all of those variables. For example, if you sign up with Shopify, you get a free trial. They want to convert you from free to paid. They use Offer Fit to manage across 500 different possible combinations of offers they could give you to sign up to. Paid. They use that to create all the test cells and constantly run experiments that feeds their AI that then tells them the best thing for Ben versus Dave. But then they keep trying new things in order. They throw more into the hopper because there may be new things they haven't tried yet that could work. So there's another piece of this. It's not just the river. It's how you manage what flows into the river, so to speak, in order to start creating more signal instead of just all the noise that's in the river.

[Benjamin Shapiro]

It's not just understanding what the outcomes are, it's understanding what variables actually have an impact as well. All right, that wraps up this episode of the Martech podcast. Thanks for listening to my conversation with David Edelman, the executive advisor and senior lecturer at Harvard Business School. If you'd like to get in touch with David, you could find a link to his LinkedIn profile in our show notes, or you can visit his company's website, which is edelmanadvisoryservices.com you can also find his book at personalizedthebook.com. if you'd like a summary of this podcast, or if you'd like to be our next guest speaker on the Martech podcast, head over to martechpod.com, you can also find us on YouTube, Twitter, Instagram. We're even on TikTok now. And if you'd like to contact me, let's connect over on LinkedIn. My handle is Benjschapp. B E N J S H A P and if you haven't subscribed yet and you want a daily stream of marketing and technology knowledge in your podcast feed, hit the subscribe button in your podcast app and we'll be back in your feed tomorrow morning. All right, that's it for today, but until next time, my advice is to just focus on keeping your customers happy.

[David Edelman]

SA.

[Benjamin Shapiro]

Thanks for listening to the MarTech podcast, and I hear everything. Production Looking to launch or scale a podcast like this one for your brand? Then visit iheareverything.com.