Magazine article Business Perspectives

How Electronic Commerce Has Led to the Return of Personalized Marketing

Magazine article Business Perspectives

How Electronic Commerce Has Led to the Return of Personalized Marketing

Article excerpt

The new business paradigm of electronic commerce, spawned just a few years ago, is evolving quicker than any previous business shift in history. Its fundamentally new ways of doing business in both the so-called "business-to-consumer" and "business-to-business" arenas have the propensity for generating major shifts in the business world and in society itself. With features that include mass customization, online auctions, increasingly sophisticated supply chain links, and electronic exchanges in which competitors coordinate business functions with each other, the emerging new business models are breathtaking both in the rapidity of their development and in the breadth of their concepts. Among these new business models is a new marketing technique known as personalized marketing, one-to-one marketing, or customer relationship management (CRM). What is personalized marketing and is it really new?

Personalized marketing simply refers to a retailer offering a customer specific products for his consideration based upon what the retailer already knows about the customer. For most of retail history, even well into the 20th century, this personalized knowledge was exactly how marketing was normally practiced. Imagine that you were a customer walking into the town or neighborhood dry goods or clothing store. The shopkeeper typically greeted you by name and perhaps engaged in a bit of conversation about your family, your work, or other aspects of your life. Then, the shopkeeper asked what kinds of goods you were interested in viewing that day and often made suggestions about specific merchandise based upon what he knew about you. This knowledge might have included (formally or informally) your age range, family members, income level, and, very importantly, your past buying patterns. Thus, the shopkeeper might have suggested some new clothes for you or your children, based upon the style of clothing the shopke eper knew that you favored from past purchases. This all seemed quite natural and worked very effectively. The relatively limited number of customers the shopkeeper maintained matched the number of facts (as a practical matter) he could remember. The friendly atmosphere relaxed the customer, and the shopkeeper's guidance toward specific goods saved the customer time while increasing the probability of the shopkeeper making a sale.

After World War II, dramatic social changes took place in the United States. These changes included the growth of suburbs, increasing dependence upon the automobile, and the growth of shopping malls, department stores, and supermarkets with the corresponding decline in small, neighborhood stores. The most recent developments in this trend are "super stores" and no-frills warehouse stores. While large stores can provide economies of scale, better product selection, and lower costs, the personal touch is often missing. Yet, large stores mean large numbers of customers, and it is almost impossible for store personnel to remember these customers on an individual basis. Today, when you walk into a store, you are most often a nameless stranger to the store personnel; they know nothing about you personally. Although store personnel try to be helpful, their knowledge base is geared only toward the store's wares, limiting their usefulness to you. As Prof. Abraham Seidmann of the University of Rochester pointed out, wh en you go to a supermarket today, generally the very first thing that a store employee says to you is, "Paper or plastic?" With the advent of self-service checkout stations, even that greeting seems like a luxury. Among marketing professionals, the response to this environment and the concomitant development of the mass media has been segmented marketing. Why is beer advertised on football game telecasts? Because the assumption is that a fair proportion of the population that watches football games likes beer.

However, people like the personal touch and miss it in this environment. …

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