When consumer personalization is bad
Consumers are virtually flooded with personalized offerings that presented to them as bargains. But in reality, only a fraction of those are perceived as valuable. Research shows that consumers even respond more favourably when a marketer downplays how good of a fit a promoted product is to the consumer’s preferences.
Personalized offerings are highly touted among retail marketers. The assumption is that by tailoring offerings the consumer’s preferences and offering the right product, to the right customer at the right point in time it is possible to increase both consumption and loyalty. However, research shows that over-emphasizing the personalization can backfire and reduce marketing effectiveness. This relationship is investigated in the article Beating the market: the allure of unintended value (Journal of Marketing Research) by researchers Sela et al. They show that:
Consumers prefer offerings when the messaging does not make it seem like the marketer knew how well the offering would suit them. Consumers like to think that they outsmarted the retailer in getting a good offering, and that the retailer does not know how well the offering would fit their preferences (and charge a higher price than they otherwise would have)
Personalized offerings work best when they seem to fit consumers’ preferences by accident, rather than having been carefully designed to fit consumers’ preferences
However, when consumers are unfamiliar with the product or when the brand is trusted the value of personalization is more likely to have a positive impact
Much of the current marketing research and practice focus on the benefits of personalized offerings. However, there is a clear risk that explicit customization undermines the extent to which a customer perceives the offering as a bargain. In categories where there is an uncertainty about the product fit (e.g. books, music, clothes) or where it is socially desirable to like a specific product (e.g. lifestyle products) explicit customization is a more attractive option. However non-explicit customization is more desirable when consumers are familiar with the product and more concerned about the offerings’ value (e.g. subscriptions, cars, financial services such as insurances).
You can read the article here (paywall)
/the Formulate team