How Personalized Data-Driven Marketing Works

Marketing has come a long way in recent times and has evolved well beyond the one-size-fits-all approach. Personalized and data-driven marketing has become a secret weapon for companies that are focused on reaching the right audience in the right way.

But what exactly is personalized data-driven marketing, and why is it such a game-changer for today’s brands? This post will dive into how it works, including how tracking the best consumer data can be used to develop targeted campaigns that drive increased engagement and ROI. And then we are going to talk about best practices, challenges, and the future of this growing movement.

Data-Driven Marketing Personalized: What Is It?

Personalized data-driven marketing is, essentially, personalized marketing using detailed consumer information. Unlike the old ways of pushing some generic message to everybody, this is all about using things like purchase history, browsing activity, or demographics to deliver a more relevant message or offer.

Just think: browsing a retailer’s website and being presented with products that feel like gems hand-selected for you. That’s personalized marketing doing its thing.

Why Does It Matter?

Studies show personalization creates results:

• 80% of customers claim that they are more likely to purchase from a brand that provides personalized experiences (Source: Epsilon).

• Companies utilizing advanced personalization (according to McKinsey) can see an average of 20% uplift in sales.

It would seem that personalized marketing isn’t a “nice-to-have;” rather, it’s a requirement for any company that wants to be more than just a face in the crowd in a competitive, digital-first world.

Understanding Consumer Data

Personalization in marketing begins with data, so what is that data, how do companies collect it, and what ethical implications should marketers be aware of?

Types of Data

Here are some of the main categories of consumer data marketers use:

• Gender, Age, Income, Geographic (e.g. location, zip, etc.)

• Behavioral Info: What you’ve bought, what you’ve searched for, what you’ve clicked on in apps.

• Demographic Data: Age, gender, nationality, race, education, income, family information, and other information related to the demography.

• Psychographic Data: Hobbies, values, life outlook, personality traits.

• Transactional Data: Your history of transactions, payment methods.

How Is Data Collected?

Sourcing data is fundamental to personalized marketing, and it occurs through a number of sources such as:

• Website cookies that monitor user activity.

• Surveys and forms for directly collecting customer feedback.

• Brand engagement in social media.

• Social media analytics.

• Customer interaction and knowledge bases for storing and analyzing customer interactions.

• Order history from incentive or programs or purchase transactions.

Ethical Considerations

Though data-driven marketing is potent, it also poses ethical concerns for privacy and data security. What has to be Transparency First now?

Marketers must seek to lead with transparency by:

• Staying compliant with privacy regulations (GDPR, CCPA, etc.).

• Providing users with unambiguous consent before gathering data.

• Keeping confidential information secure with state-of-the-art encryption.

And as a reminder, respecting your audience’s privacy is not an option. Brands overlooking ethics are playing with fire when it comes to consumer trust.

How Data Drives Marketing

After all the data has been gathered, here is how data is changing the world of marketing.

Improved Targeting

Data is instrumental in enabling businesses to target precise demographics. So instead of a fashion brand targeting “all women”, it can instead focus on “women aged 25-34 in New York who have browsed high-end handbags recently”.

When messages are sent to less-defined, smaller audiences, brands are getting much higher engagement.

Enhanced Customer Experience

Personalization enhances how customers experience your brand. Examples include:

• Personalized emails with product offers from things you’ve bought before.

• Custom app notifications such as “Welcome back, Sarah! Your last order is en route”.

• Customized content that reflects the personal interests of the customer.

This leads to a frictionless and positive experience with the brand, which a customer is going to remember.

Increased ROI

Tune-in campaigns are cheap, and they are personalizable. Marketers are able to avoid wasting budget on irrelevant leads by engaging with those who are most likely to convert. So, to root your marketing deep, personalized marketing gives a 5-8x higher ROI than generic campaigns.

Real-World Examples

There’s already a high-performing model out there that companies are using right now: targeted, data-driven marketing methods. Here are some stories of success to inspire you.

• Netflix: Netflix is slick with behavioral data, analyzing each of its 200 million-plus users’ viewing habits to generate show recommendations in line with those preferences. It has already resulted in a better user experience and decreased churn.

• Amazon: Its product recommendation engine powers 35% of Amazon’s total sales. By scanning your browsing and buying history, Amazon also says it can make your homepage more personalized with products that you’re most likely to buy.

• Spotify: Spotify’s Discover Weekly feature is a personalized playlist generated by AI, based on an individual’s listening habits. This charming offer has become one of the most popular features of the platform.

• Nike: Nike’s NikePlus rewards app mixes in purchase history with tracking information to provide exclusive offers, fitness advice, and product suggestions for individual users.

Challenges and Solutions

Privacy Concerns

Consumers are becoming less and less trusting of the concept of giving up personal data. To address this:

• Be clear about what data you are aggregating and for what purpose.

• Present options for opting-in instead of automatically gathering data.

• Exchange data for value (i.e. discounts/personalized suggestions).

Data Security

A violation can erode trust and result in big fines. Combat this by:

• Utilizing a safe server to encode information.

• Data-handling practices are audited on a routine basis.

• Educating your employees on proper data security habits.

Managing Large Data Sets

Dealing with mountains of data can be daunting for a few companies. Adopting AI-based solutions and collaborating with experienced data analysts help to store, process, and utilize customer data effectively.

What’s Next for Data-Driven Marketing

AI and Automation

Automation is no longer in the stone age. In the not-too-distant future, artificial-intelligence-powered platforms will anticipate customer needs before they even say anything. Expect advancements in:

• Making real-time consumer trend predictions.

• 100% automated email and content for everyone.

Voice and IoT

Marketers are going to get smarter about using more data from voice assistants, and internet of things devices, toward more hyper-personalization of experiences. Imagine product recommendations that pop up on your smartwatch in response to voice queries.

Ethical AI

The discussion on fair, ethical AI in marketing is heating up. In the future, companies that are transparent in terms of data usage and are also responsible toward data usage will gain increased consumer loyalty.

The Reason Why Data is Your Most Important Marketing Asset

It’s all about relevance. When marketers can engage customers and prospects with personalized, data-driven messages, they get results. It helps companies forge authentic relationships with their audience, offering them content, deals, and experiences that feel custom-fit.

For businesses or organizations that are trying to navigate the maze of data collection, privacy issues, and tech innovations, things can be especially bumpy. But the benefits more than make up for these difficulties. It is by working with data both respectfully and strategically that marketing pros will be able to achieve lasting outcomes.

So are you ready to know more about personalized marketing or willing to give it a try in your business? What can you do to turn the tide? Begin by evaluating your current data strategy and take advantage of tools that will give you smarter targeting and better conversions!