The one cost that marketers don't consider
When the end of the quarter comes, it’s time to decide which tactics are worth investing in for the next one. Making this kind of choices can be hard, as not choosing the right ones may cost high conversion rates and revenue.
Nowadays, marketers who don't invest in personalization leave money on the table. And how is it possible to estimate how some KPI improvements could boost the overall performance? You could, for example, calculate how a given conversion rate improvement would directly impact the final result.
Consider the following rule:
Say you're looking at a 5% potential conversion rate increase by personalizing your site experiences. In this case, you would have an improvement of 5% in the overall result, representing the money you're leaving on the table by not doing that.
Looking at the numbers makes it easy to see that not having more revenue is the equivalent of an invisible cost. Failing to invest in personalization and CRO is to fail to improve performance and therefore fail to increase the conversion rate and, ultimately, the profit.
As digital marketing channels become more saturated, brands must improve their performance to meet rising consumer expectations, consequently increasing revenue. And many factors show us that CRO and personalization are the right investments. With the right tools and professionals, it is possible to turn this opportunity cost into revenue.
The power of personalization in marketing
Consumers reward companies that get personalization right. They spend significantly more (34% on average) when they get personalized experiences from businesses. 1 in 3 consumers say they would shop with a brand they've had a good experience with, even if there are cheaper and more convenient options.
The bar for personalization is so high that non-personalized communications now pose a business risk. Consumers now view personalization as the default standard and expect it from the brands they choose. A research study by Mckinsey shows that 71% of consumers expect personalization, while 76% get frustrated when they don't have it. Further research reveals that companies that personalize their marketing communications generate 40% more revenue than companies that provide the same default experience for all of their audiences.
So how does personalization impact opportunity cost?
The opportunity cost of lack of personalization
Personalization significantly impacts businesses, affecting major areas like lead quality and engagement. It has earned significant validation in various industries and keeps gaining commercial viability.
The more time passes, the greater the repercussions for brands still lacking personalization in their marketing communications. Here are a few areas that would keep driving costs and compounding over time.
Reducing economic profit
It's easy to let the cost of adopting personalization overshadow the benefits that come with it — the risk is more negligible when you keep operating in the same way. However, due to increased competition, the reverse is now the case. 62% of consumers say brands lose their loyalty if they keep delivering un-personalized experiences.
Personalization has also proven to lower acquisition costs by 50% and drive revenue up to 40%. The alternative of not personalizing customer experiences increases the cost of doing business, creates unnecessary overhead costs, and overlooks innovation opportunities.
Increasing competitor intelligence
In the past, personalization was considered a nice-to-have capability for marketing. But it has now become the core driver of how businesses market and design digital products. Small and large companies are fighting for consumer attention through targeted campaigns and personalized communication. Companies that do not focus on building innovation strategies leave room for competitors to take over.
As competitors integrate personalization into their workflows, they constantly iterate and improve their user experiences, thereby increasing their potential for positive results. Each successful experiment they perform moves them forward, leaving others in the dust. However, choosing to invest in personalization closes the competitive gap and allows you to regain your market share.
Steepening learning curve
Creating a personalized marketing strategy requires time for learning and implementation. The later you get in the game, the harder you work to catch up. Even with considerable investment, it's tough to make up for the lost time and learnings that come with it. Adopting personalization earlier decreases your learning curve and the likelihood of error, giving you time and space to AB test and shape your overall strategy.
Rising consumer demand
Despite their efforts to create tailored user experiences, businesses still meet challenges when they realize consumer expectations continue to rise. And those who already deliver fantastic customer experiences know that innovation never stops.
You must keep fine-tuning the purchase processes and providing reassurance on products and services. The faster you move to personalize your communication with reliable and real-time user data, the more you'll be able to reduce unsatisfactory experiences with your brand.
Measuring the impact of personalization
Personalization opens up new ways to boost CRO and revenue by tailoring user experiences. But it also impacts your business in other ways.
Cutting remarketing costs
Let's look at the example from the Sem Parar challenge. They set some personalization rules on their website to reduce investments in remarketing campaigns and increase conversion rates.
Before this, users who would click on their Facebook ads got redirected to the landing page that matched the ad offer but most times didn't match the overall offer on the home page. This resulted in lower conversion rates from the targeted users who further returned to the website looking for the offer. Sem Parar's CRO team, noticing this, used personalization to segment users that had already seen the ads and ensured the home page offer matched the campaign ad for them.
Fixing fragmented experiences
Choosing not to use personalization strategies results in fragmented experiences for your users. It creates a poor user experience as consumers encounter different information across channels.
For instance, a user may visit your website and interact with your customer service via live chat. Then if they have new questions and return to the live chat, they are given answers that don't fit the ones they got in the previous conversation, or they're presented with an entirely different process for getting answers. When users experience this scenario, they feel you don't have your act together, and their impression of your brand goes down.
Personalization creates an omnichannel point of view. It provides a seamless and concise user experience, resulting in a 23x higher customer satisfaction rate.
Using data correctly
Measuring the impact of personalization in situations such as in the examples provided above requires analyzing data from all customer touch points.
The right personalization platform curates and provides data to yield deep insights like customer behavior and buyer personas. With this, you can look at the right data before creating personalized experiences and also, later on, quantify the impact personalization had on your overall marketing strategy.
Marketing technology stack
The major challenge marketers face is the existence of black boxes or outdated technology stack that gets in the way of controlling the user experience. It results in inefficient workflows, making it nearly impossible to launch new initiatives based on data and easy to lose track of your user's story.
Investing in the right data platform and personalization solution can help you easily control the customer experience cohesively and measure what changes with personalization.
Importance of AB testing and CRO in reducing the opportunity cost
We've talked a lot about personalization. But it's also important to note that AB tests can reduce associated opportunity costs. AB tests and CRO go hand in hand. To increase conversions, you must constantly test what personalized experiences ressonate with your audiences.
The goal of AB testing is to provide a balance between taking business risks and reaping the rewards. Marketers should understand how to serve consumers best to reach their conversion goals. Choosing to hypothesize and test different versions of a webpage helps you see which version performs better, ultimately leading to optimization and growth.
As AB tests usually result in a risk/reward ratio, neglecting to test different versions adds to the unnecessary cost of not detecting and implementing a true winner. Testing for the best-performing variant saves operational costs in the long run if implemented.
Personalization is a win-win strategy
Consumers reward companies that recognize and prove they know their customers with higher conversions and ROI. Personalization is also a business need, which is now considered a basic expectation by 70% of consumers.
To ensure long-term success, marketers can no longer afford to ignore personalization or implement it carelessly. Investing in the right personalization solution reduces costs by improving operational performance and drives additional growth and revenue. The result is a double dose of rewarding marketing practices.
Don't miss the opportunity to meet your customers' expectations and get better results. Create your free account and explore our platform to discover how personalization can be the key to your business success.