In my conversations with customers and partners there is an issue which frequently comes up – the difference between targeting and personalization. I have heard the terms used interchangeably, so it only seems fair to explain the key differences as I see them. To sum it up, targeting is about marketer needs and personalization is about consumer needs. Both techniques can increase revenue but they come at it from different angles.
Segmentation and targeting
Targeting is about marketer needs and insights. Rewind to the one size fits all experience. The site shows the same offers, content and products to everyone. With targeting, marketers and merchandisers take insight from their experience and attempt to show relevant offers, content and products to visitors. They use a variety of techniques, but the most common involves segments and rules. Most marketers have a few buckets that they group customers into and this is as much for the marketer as anything else – new visitors versus loyal shoppers, soccer moms versus football dads, etc. The marketers believe that these groups buy different stuff or react to different content or promotions. In addition, these segments make sense to the marketers and help them organize their thoughts and content around key groups. For example, a marketer wants to provide an incentive for first time shoppers to come back again. So, they setup promotions to target visitors in this segment. This is a great strategy. It allows the marketer or merchant to control what the visitor sees and hopefully allows them to optimize based on business needs.
Personalization happens in real-time
Unlike targeting, personalization focuses on consumer needs. What offers, content or products will a particular visitor find most relevant based on their current needs. To create a relevant, personal experience for each visitor, a personalization engine soaks in all kinds of information about the visitor – where did they come from, where are they located now, where do they live, what did they search on, what page are they looking at right now, what have they bought before, what segments are they a member of, etc. All this information combined with powerful machine learning algorithms tells a personalization engine what content or products they are most likely to be interested in right now. As the visitor moves through the site, their intent can change. At first they may be interested in a new sweater and then their interest shifts to new jeans. The personalization engine goes along with them and continuously personalizes the content and products to best meet their needs given all the data that is available. Personalization at this level is not something that a marketer or merchant can figure out ahead of time.
Targeting and personalization working together
Targeting and personalization can actually work together quite effectively. A modern personalization engine actually uses the marketers segments as one of its inputs. The domain expertise used to generate the segments can be quite useful. If segments prove to have different interests then the personalization engine should provide different content to each segment. In addition, domain experts may want to promote or target certain items within personalized areas of the site based on their business needs. For example, marketers may want to target a promotion at members of a loyalty program or merchandizers may want to make sure that the combinations of items are always shown together. Either way, the idea is to show the most relevant and hopefully valuable offers, content, and products to consumers that will encourage them to buy more, and buy more often.
Hopefully this distinction makes sense. When marketers and merchants think of the offers or products they want to promote, they are thinking about targeting. When retailers let visitors drive the decision making with their data and based on their intent in real-time, they are personalizing.