CEO & President Member Newsletters

1Q 2020: An Impersonal Letter About Personalization from the ARF CEO

Happy New Year!

I hope this message finds you well—pleasantly rested after the holidays and ready to start the new year with energy, optimism and dedication. At the ARF, we remain dedicated to the principles that were clearly stated in our founding document: to further through research the scientific practice of advertising and marketing. In this noisy and uncertain era, that mission remains as critical as the day it was penned.Making New Year predictions has become commonplace: for some a cliché, for others an amusing parlor game, and for others still a serious exercise in scenario planning. I will resist the temptation to add to the seasonal crystal ball gazing, but my topic does assume that in 2020, the industry’s fixation on personalization will clash with rising demands for privacy.

Making New Year predictions has become commonplace: for some a cliché, for others an amusing parlor game, and for others still a serious exercise in scenario planning. I will resist the temptation to add to the seasonal crystal ball gazing, but my topic does assume that in 2020, the industry’s fixation on personalization will clash with rising demands for privacy.

Interest in personalization has grown significantly over the past five years, driven by an explosive growth in data and by more powerful tools for using those data for targeting or analysis. Many companies experimented with personalization of their products or of their marketing, with mixed results. From the ARF’s perspective, the challenges to successful personalization are likely to get tougher. As our second annual privacy study—which came out last year—showed, people are becoming less willing to share their data. Browsers are stepping in where legislators fear to tread and making consumer privacy controls a competitive feature—a development that will degrade some personalization systems.

If the cost-benefit equation for personalization was problematic for many companies in 2019, I submit that it will only get worse in 2020. Of course, there are many vendors today who claim expertise in helping marketers overcome these challenges. What’s at issue is whether their claims are credible. How good are the data? Can an investment in personalization generate positive ROI? If so, will it fit alongside a long-term strategy of building brand equity? Does personalization benefit the consumer in a way that overcomes the fear of personal information being misused? What about the issue of noncompliance in an increasingly strict regulatory climate? 2020 stands to shed light on these questions.

Product personalization is especially problematic since the production of most products requires a degree of standardization to be economically viable. Some luxury markets thrive on product personalization (e.g. designer fashion, luxury travel, architecture), and of course specialized medicine and similar professions can involve highly personalized solutions, but in most cases product personalization doesn’t make scalable economic sense. In most cases, when designing products, companies should think about how to serve discrete market segments with products that reflect different needs, preferences or tastes. Taking product targeting to the extreme of personalization usually won’t pay off.

Personalization of marketing communications and advertising represents a more difficult cost-benefit assessment for many companies. Many have argued for its benefits. For existing customers who have consented to a direct (i.e. first party) relationship with the marketer, personalization is usually expected, and performance standards are exacting. For this reason, data management platforms and consent management have become increasingly important to many marketers. But this doesn’t mean that marketers have carte blanche to personalize advertising to those who have not consented or who do not have an existing direct relationship with the marketer.

In 2020, those who try to personalize their ads to prospects are asking for trouble, particularly as browsers roll out their new privacy features to thwart pixel-based identity mapping and as a new, more restrictive regulatory climate takes shape. Some voices in the industry promote the use of algorithms to customize ad creative. These mathematical marvels can piece together hundreds of creative elements in order to dish up the “perfect” ad for each, individual viewer. However, the jury is still out on the efficacy and ROI of this approach. While we await more empirical evidence, companies should be careful about a line that should not be crossed.

Taken too far, personalization can undermine a brand’s core premise—the thing it stands for; by trying to be all things to all people, a brand can end up appearing disingenuous. What’s worse, personalized offers could easily slip into the realm of discriminatory pricing, redlining or even denial of equitable access.

In sum, personalization of marketing and advertising needs to be managed very judiciously, for the benefit of your customers, with an eye toward the rising risks if you make mistakes. DMPs will need to be ultra-secure. Consent management will be a top priority. Contracts with third party vendors will need to be reviewed. Don’t treat personalization as a bandwagon that must be joined since, in many cases, it may be inappropriate. The new decade will raise the costs of mismanaging personalization, so you’d better be certain of the compensatory benefits.

But we had marketing and advertising long before we had the cult of personalization, and both marketing and advertising will survive just fine if personalization is curbed. In the end, most marketing is not about micro-targeting and personalization. It’s about improving your probabilities and messaging prospects with the right message at the right time. This can be done efficiently, effectively and safely using such time-tested techniques as contextual targeting. That way, no one’s data is compromised, the risk of backlash is nullified and a win-win for both the marketer and the consumer takes shape.

All the best,
Scott