More targeted approach to customers not always effective

Companies are constantly devising new ways of approaching the right consumer at the right time, but new research by the Customer Insights Center of the FEB shows that consumers don’t always appreciate this.

Dutch consumers are increasingly refusing unaddressed promotional material and putting themselves on the ‘do not call’ register. Many people find it disturbing to be called at 7 o’clock in the evening with all sorts of offers which they don’t really want, nor do they appreciate receiving a lot of unaddressed advertising material through the letterbox. But customers still do want and need certain products. So why don’t businesses try to provide only the information that an individual consumer is looking for at a given moment?

Behavioural targeting

The latest technique which enables companies to get the right message across to the right customer at the right time is known as ‘behavioural targeting’. Internet businesses like Facebook.com, Amazon.com and Bol.com are already doing a lot with this by making personalized recommendations to individual visitors.

In this way they bring products to the user’s attention which are intended to meet the needs of that particular customer at the time of their visit to the website. The advantage for the consumer is that he or she is offered products which more closely match their own tastes and requirements. The main benefit for companies is that their marketing becomes more effective. As a result less has to be spent on unsuitable advertising material which, in any event, will not lead to a purchase.

What do businesses think?

The commercial sector appears to be both interested and cautious in its response to these new developments. These effects have been investigated by Dr. Jenny van Doorn and Professor Janny Hoekstra of the Customer Insights Center of the University of Groningen, together with the VODW Marketing consultancy firm.

Managers of 12 leading Dutch companies were asked about their activities in the area of ‘behavioural targeting’. They almost all indicated that they would like to make more use of this technique in the near future. However, there are still obstacles to be overcome. On the one hand there are often no suitable systems that can turn the surfing behaviour of individual customers into tailored personal messages. On the other hand, privacy regulations form another obstacle because not all information known about payment history, for example, may be used for this purpose. On top of this, businesses are well aware of the possible damage to their reputation if they use sensitive private information about individual customers to make them suitable offers.

What do consumers think?

Research conducted among over 2,000 Dutch citizens shows that consumers are still unsure about behavioural targeting. The biggest stumbling block appears to be the way in which the customer data is used. As long as information about individual customers is used only to make a suitable offer, the intention to buy increases. But if the source of this customer knowledge is included in the offer, the customer walks away.

Using past purchase information and linking it to things the consumer puts on a social networking site like Facebook.com, for example, and then addressing the consumer with ‘Hello Mr. Smith, we know that you are a frequent caller and we would like to offer you the same phone subscription that two of your friends on Facebook have’, is generally not appreciated.

Nevertheless, it appears that Dutch consumers are more willing to buy if the offer is made more relevant to them. This shows that there is an interesting contradiction involved: on the one hand the consumer does not want to think that sensitive private information is being used, while on the other he or she does want companies to make more appropriate offers on the basis of such information.

Information
Director of the Customer Insights Center: Jelle T. Bouma
www.rug.nl/feb/cic