Product Personalization in Business Strategy: A New Frontier of Competitive Advantage

The current business landscape

Market forces, if left unchecked, constantly conspire to drain our profits. A powerful trading strategy can counteract these trends, but a good strategy is hard to formulate. Nowadays, companies face an increasingly dynamic and competitive business environment. Technological advances, changing customer expectations and increasing competition have changed the rules of the game. In this environment, personalization is emerging as a new frontier for competitive advantage. Organizations that can take advantage of personalization to improve the customer experience have an opportunity to stand out from the crowd and gain a significant competitive advantage.

Personalization is essential for differentiation in an increasingly saturated market. An effective business strategy must set itself apart from the competition, and personalization allows companies to do just that. By personalizing their offer, companies can demonstrate that they are willing to go above and beyond to meet the needs of their customers, which in turn can be a deciding factor for consumers when making their purchasing decisions.

The basics of product personalization

In simple terms, personalization refers to tailoring a product or service to meet the specific needs and wants of an individual customer. This can range from personalizing customer communication to personalizing the product or service itself.

Personalization in business strategy can go beyond simply tailoring a product or service for a customer. It can involve personalizing the entire customer journey, from acquisition to retention, and everything in between. This customer-centric approach can lead to increased customer satisfaction, which can result in higher retention rates and customer loyalty.

Personalization: the promise and the challenge

Personalization promises a deeper connection with customers, which can lead to greater loyalty, satisfaction, and ultimately, higher growth and profitability. However, customization also presents challenges. It requires a deep understanding of customers and the ability to use that understanding to consistently deliver relevant and engaging experiences.

Additionally, customization often requires significant changes to existing processes and systems, and may require new skills and capabilities. Therefore, personalization should be considered as a long-term strategy that requires significant commitment and investment.

The building blocks of personalization

According to the global consultancy McKinsey, an effective strategy is more than a series of well-informed decisions. It is a meticulously designed and executed journey, made up of various “building blocks” that, when properly managed, can lead to significant success.1​.

Organizations that have been successful at personalization tend to have several building blocks in common. These include a robust customer database, the ability to extract meaningful information from that database, the ability to use that information to personalize customer experiences, and the ability to deliver those experiences efficiently and at scale.

Effective personalization also requires a customer-centric mindset and a willingness to experiment and learn. Organizations that can combine these building blocks have a good chance of achieving a competitive advantage through personalization.

Customer centric data model for product and services personalization


Here’s a business strategy based on McKinsey’s seven building blocks that you can follow to develop an effective personalization strategy:

1. Frame (Frame)

The first step is to identify and define your ideal client. Who is it? What needs and wants do they have? The answers to these questions will help you frame the key strategic decisions and questions for a personalization strategy. Also, it is important to identify the challenges and opportunities in the competitive environment that may influence your strategy.

Identify who your ideal customer is and what their needs and desires are. This defines the key strategic questions and decisions that must be made to satisfy these needs and wants.

2. Diagnose (Diagnosis)

At this stage, you need to understand how your company is currently creating customer value and how it could be improved. How do your customers feel about the current experience? Where are the opportunities for further customization? A solid diagnosis will allow you to identify the key areas you need to focus on.

Analyze how your company currently creates customer value and where there may be opportunities for improvement. This may involve collecting and analyzing customer data, as well as researching and understanding their needs and wants. It may also involve creating a organization-wide data model that is customer-centric rather than traditionally focusing on products.

Customer centric data model for personalization

3. Forecast

The next step is to forecast how your customers’ needs and wants might change in the future. This may involve analyzing market trends, monitoring technological innovations, and anticipating possible changes in customer expectations. This forecast will allow you to adapt your strategy to future changes.

Consider how your customers’ needs and wants might change over time. How might these changes affect your company?

4. Search

Once you’ve diagnosed the current situation and forecast the future, the next step is to explore different ways to satisfy your customers’ needs and wants. This may involve experimenting with different personalization approaches, testing new technology, or exploring partnerships with strategic allies.

Explore different ways to meet the needs and wants of your customers, both now and in the future. This may involve generating ideas for new products or services, or modifying existing ones to better suit individual customer preferences.

Hyper personalization in checklist customer onboarding
Checklist for digital onboarding of hyper-personalized customers.

5. Choose (Choose)

After exploring the different options, it’s time to make a decision. What personalization strategy will they implement? The choice should be based on your diagnosis and prognosis, as well as the feasibility and potential of the different options you have explored.

Decide which customer-focused and personalization strategies to implement based on diagnosis and prognosis.

6. Commit

Once you’ve chosen a strategy, it’s time to commit to it. This involves developing a detailed action plan, allocating the necessary resources, and communicating the strategy to the entire team. Commitment ensures that the strategy is implemented effectively.

Develop an action plan to implement these strategies and allocate the necessary resources to carry it out. This may include creating personalized marketing campaigns, improving the customer experience at all touch points, segmenting customers, and delivering products or services tailored to individual needs.

7. Evolve

Finally, it is important that your strategy is not static. You should continually monitor the results of your personalization strategies and adjust them as necessary. Also, you should always be aware of changes in the needs and desires of your customers and be willing to adapt your strategy accordingly.

Monitor the results of your strategies and adjust as necessary. Measure the impact of customizations in terms of customer satisfaction, retention, and loyalty, and make changes if necessary to improve results. 

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Conclusions to take away

Implementing an effective personalization strategy can seem like a daunting task, but there are a number of steps companies can take to make it more manageable. These include collecting customer data, analyzing this data to gain insights, implementing technologies that enable personalization, and measuring the impact of these strategies on business performance.

A critical part of personalization is the collection of customer data. Companies need to invest in technology and approaches that allow them to effectively collect and store customer data. This may include demographic information, behavioral data, transaction history, and more.

Once the data has been collected, companies must analyze it to gain valuable insights. This may include identifying customer segments, understanding customer preferences and behaviors, and predicting future customer needs and behaviors. This information can then be used to inform personalization decisions.

Technology plays a crucial role in the implementation of personalization strategies. Businesses must invest in technologies that allow them to effectively personalize their products, services, and communications. This may include customer communication management (CCM) systems, customer relationship management (CRM), email marketing software, and data analytics and business intelligence tools.

Finally, companies need to measure the impact of their personalization strategies on business performance and stay agile to support any changes in customer behavior. This would include using the information provided by the technologies mentioned so far to measure performance over time and then implement improvements based on these results.

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