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The Psychology of Personalized Marketing

We know personalized marketing works. In fact, customers not only want brands to personalize their experiences, they expect it from all brands. According to McKinsey, “Seventy-one percent of consumers expect companies to deliver personalized interactions. And seventy-six percent get frustrated when this doesn’t happen.”

But why? Why is personalization the tipping point when it comes to brand satisfaction? Well, as it turns out, there are scientific, psychological reasons that support personalizing your brand’s customer experience.

What is Personalized Marketing?

Before we explore the psychology of personalized marketing, let’s do a quick refresh on personalized marketing. “Personalized marketing is defined as designing and delivering tailor-made products and services to individual customers. In other words, personalized marketing involves differentiated offerings for individual customers, and thus, it has often been described as one-to-one marketing and customerization.”

There are three keys to unlocking personalization: the right person, the right message, and the right marketing channel.

The Right Person

Through historical data and collecting new zero- and first-party data, your brand has the ability to identify customers on an individual level. For example, you can tell if a customer made a purchase, when they made a purchase, and if they left a review. Each customer is unique and how they prefer to be communicated with is unique as well.

The Right Message

That brings us to the right message. Now that you have your customer data and understand how they interact with your brand, it’s time to think about what marketing messages they may find helpful. If they just purchased an item, maybe you send a followup email with instructions on how to use the product. But, you have to consider how you send the message as well.

The Right Channel

Determining which marketing channels to use is a crucial part of a personalized customer experience. You know who you’re trying to reach and what you want to say, but where you send the message could make or break your campaign. If your customer has never opened an email from you, don’t waste your time sending yet another email—try a push notification or an SMS message. See what works for that individual and stick to it.

Now that we’ve done a quick refresh on what personalization is, let’s get into why it works.

Psychology of Personalized Marketing

As a consumer, we know when a brand gets personalization right. There’s an unmistakable warm, fuzzy feeling that comes over us when we get a message that was seemingly written just for us—but why? It may, on the surface, seem obvious, but we’re curious why people are drawn to more personalized content.

The Cocktail Party Effect

Close your eyes. Okay wait, no. Can’t read an article with your eyes closed. Just imagine you’re at a cocktail party. There are small groups of people scattered around, each having their own conversations. Somehow, you manage to hear one group’s conversation and make your way over.

The Cocktail Party Effect is “the phenomenon of the brain’s ability to focus one’s auditory attention on a particular stimulus while filtering out a range of other stimuli, such as when a partygoer can focus on a single conversation in a noisy room.” Essentially, our brains have the ability to determine what is relevant to us and what isn’t, and can swing our attention towards what’s relevant.

To tie this to personalized marketing, an article by Behavior Change Strategist, Jennifer Clinehens, cites a study in the National Library of Medicine. This study says that when determining relevance in a conversation, hearing one’s own name can quickly pull focus.

So, if you send a marketing email and your message lands in an inbox full of other marketing messages from various brands, simply adding the customer’s name in the subject line can capture the customer’s attention better than those without it.

The Dopamine Effect

Dopamine is a neurotransmitter that the brain releases as a result of experiencing something pleasurable. Like TechCrunch says, “When we do these things, we get a chemical reward that connects the activity with a positive feeling.”

By creating unique, individualized experiences, brands can trigger a dopamine release for customers. Personalization often creates efficiency, so the experience with personalization is seen as more rewarding than those experiences without.

TechCrunch uses the examples of Walmart, Spotify, Netflix, and Amazon. “You can create a unique account, answer quick and easy questions about your tastes, and immediately get exciting recommendations. They continue to refine your profile by learning your browsing habits and matching you to new things that pique your interest. You might not like every pick, but you get that jolt of excitement that comes with something new and interesting to you.”

By creating a customized, real-time, personalized customer experience, brands can harness the power of dopamine to create a reward cycle—keeping your customers engaged.

Personalization is Hard…Psych!

It’s really not. With the right marketing tools your team should be able to easily collect and consolidate customer data, which can then be used to create individualized campaigns.

We should clarify, when we say “personalization” we don’t just mean personalized by large segments. Yes, segmenting by a general commonality—say, for example, location—is a good initial first step, but it’s too broad. Just because you live in the same area as someone, doesn’t mean you want the exact same experience when shopping. When we say “personalization” we really mean individualization.

Still not hard, however. By constantly collecting user data and implementing AI to better understand customer sentiment, you can individualize your campaigns, capture customers’ attention, and deliver a dose of dopamine.

To learn more about Iterable and how it can help you individualize your marketing campaigns, schedule a demo today.

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