Making It Personal – Chapter One

Chapter One

AUTHOR’S NOTE: This excerpt represents the first half of this chapter, which was written and published in 2001. I’m writing about sensitive subjects. To avoid embarrassing any company, every section in italics is fictional, but designed to illustrate realistic scenarios.


ELECTRONIC BOOK REAL TIME REPORTING NETWORK
DATE: Today
READER TRACKING NUMBER: B43267
BOOK: Making It Personal ISBN 0-7382-0536-2
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PRIMARY MOTIVATORS: Career, societal impact, conversational interest
MOTIVATION (CONFIDENCE LEVEL): Medium

Someday soon, when you read a book like this on your digital book reader, a record of your reading habits will be created in a company’s database. You’ll be motivated to allow this intrusion on your privacy by some sufficiently attractive offer. Your reading habits will be analyzed, categorized, and compared. You’ll be much more aware than you are today how your reading skills compare to other people’s, and so will the rest of the world. But you may not think much about this process, because everything in your life will be monitored and analyzed in this fashion, unless you take forceful steps to prevent it.

Businesses will get much more personal in their interactions with individuals. These interactions will span from the intrusive to the supportive, depending on the attitude of each business. This is not a trend or a business fad. It is not the result of a decision made by a CEO. It cannot be reversed, short of a global disaster. It is the inevitable result of the continuing spread of interactive and database technology. The question is: What do you do about it?

Making it personal means treating different people differently. Even in business-to-business settings, such as when IBM is buying a service from General Electric, individuals at both companies influence the outcome of the transaction through their behavior and values. The more you can understand and accommodate each individual’s values, the greater your ability to influence the outcome. Technology makes this possible to a much greater degree than ever before.

In this book, I primarily use the word “personalization,” which I intend to describe the practice of companies using information about an individual to change the way they treat that person. Whatever you call it, we won’t be talking much longer about personalization as though it were a separate discipline. Everything is going to get personal, and the techniques I describe will become a critical, taken-for-granted element of the way we all do business. You will no more think of ignoring the differences between people than you would think of charging a customer for a product you never delivered. When business nears this level, words such as “personalization” will fade from use. So, too, will personalization as a software category or a trade show focus. It will be everywhere.


With fifteen years of engineering experience under his belt, Ryder McAllister was in his first week as director of product marketing for a high technology company. This was his first meeting with the unit’s other senior managers.

“OK, let’s review what we know about this group of consumers,” said Jeffrey Neves, COO, turning towards the database expert, Michael Golder, who rose faster than you would expect a six-foot, six-inch man to move.

Michael clicked on the projector and started his spiel.

“As you know, we’ve identified 50,000 consumers as a test group to prove that our one-to-one marketing program works.”

“Each of these consumers is in a household that earns over $110,000 per year. They’re all two-career couples, which makes it more likely they are time-starved. At least one adult in each household has graduated from college, which increases the odds that they are Web savvy, and thus will be easier-and less expensive-for us to serve.

“We’ve also done an analysis of each household’s purchases over the past year, and know which ones have purchased one or more new cars during the past two years, taken expensive vacations, or generally spent aggressively on discretionary luxury items.”

Ryder was impressed. Maybe marketing was more of a science than he had assumed.

“How precise is your analysis?” asked Jeffrey.

Michael shrugged. “Every transaction we have is accurate, but we aren’t able to capture all the transactions. So if we know they bought three cars, it really means they bought at least three cars.”

Jeffrey seemed to be satisfied with that and gestured for Michael to continue.

“Of course, we also know their addresses and phone numbers.”

Spotting an opportunity to ask an obvious question without betraying his lack of knowledge, Ryder asked, “Michael, I didn’t hear you mention any details regarding our sales to this group over the past year. Do you have information on that?”

Michael looked confused. He glanced at Jeffrey, who seemed interested in the answer.

“These aren’t customers,” said Michael. “They are prospects, people to whom we want sell.”

It was Ryder’s turn to be confused. “You have all these reams of information about people who have never bought a single product from us? How do we know so much about them?”

“It’s not hard,” said Michael, “Just expensive and time-consuming. We acquire the information from third-party database providers, and then use our own data analysis and segmentation processes to build profiles of this test group. But under expansion economics, with the right response rates and purchase patterns, this could be extremely profitable.

Ryder paused, not sure if he was being really stupid, or if he wanted to push so hard during his first week in a new business. But it was such an obvious point, even a hard-nosed engineer couldn’t miss it.

“How do these folks feel about the fact that we know so much about them before they’ve expressed the slightest interest in our firm?”

There was an extended silence while the people around the table considered this point. At last Michael said, “I don’t know. No one ever suggested we should ask them. Besides, if we did, it could just spook them, and we’d be defeating our own purposes.”

Ryder nodded thanks and forced a smile on his face, but he was thinking: I want my old job back.

This is one current view of personalization, but far from the complete picture. I call this superficial marketing, designed to generate mass sales from the use of personal information. It may work, but it’s not the subject of this book.

Too many companies ignore the personal side of one-to-one relationships. Typically, this means they just collect personal information so they can sell more of whatever products happen to be in their marketing plans. It’s as if a husband explained, “Sure, I care about my wife’s feelings and our relationship, I just don’t want to have to listen to her problems or worry about understanding her needs.”

Personalization is not just a topic for marketers, but rather the logical result of technology’s impact on all business relationships, from those with customers to employees, suppliers, and partners.

In 1993, Don Peppers and Martha Rogers wrote a now classic book called The One to One Future: Building Relationships One Customer at a Time. It talked about why every business must establish a Learning Relationship with each and every one of its customers. The idea was that if a company could motivate people to teach it how to best serve their needs, then that firm would be able to serve the customer better than any of its competitors. By making loyalty more convenient for a customer than disloyalty, the company gains a loyal customer, perhaps for life. A simple example of this practice is PC banking. To start paying your bills online, you must first enter the names and addresses of each company you wish to pay. If you like, you can also set up automatic monthly payments for bills that are the same amount each month, such as your mortgage or cable bill.

Imagine that you sign up with the first bank to offer online bill payment and go through the lengthy set-up process. A few months later, every bank in town starts offering a similar service. How attractive is the idea of switching? Would you do so to save an extra one dollar per month? How about three dollars? The more work you have invested in sharing your personal information with a company, the greater interest you have in making the relationship work. This is the essence of a Learning Relationship, and the driving factor behind personalization, which Peppers and Rogers refer to as one-to-one relationships.

Done properly, one-to-one initiatives create a win/win situation for a firm and the people who have dealings with that firm. In the case of customers, personalized service saves them time and money and gives them access to better and more relevant information. Firms that develop personalization techniques enjoy reduced costs, increased revenues, and stronger loyalty. These companies are also better able to adapt to changing markets. If companies listen to feedback and react to it in a meaningful way, they are able to change every day. This type of change is less wrenching, and more profitable, than waking up one day and realizing sales have declined by 50 percent.

Traditional product-driven companies such as Black & Decker and Prudential Insurance have a limited number of products to sell. When they get feedback from customers, they typically use this information to steer the customer towards one of their existing products. “Based on your needs, I suggest our variable rate annuity product,” an insurance salesman might say. But only a small percentage of customer feedback actually changes the firm’s behavior. Real one-to-one marketing or personalization means that a company takes customer feedback and uses it to actually customize a service or product for that customer. So while product-driven firms stay rooted producing the same products for all their customers, one-to-one firms change every time they interact with a customer. The better they are able to do this, the closer they come to evolving just as fast as their markets are changing. Technology lowers the cost of both gathering customer feedback and using it to customize a service.

In the last few years, many companies have hopped onto the one-to-one marketing bandwagon and started developing personalization techniques for their customers. However, most firms that say they are implementing one-to-one marketing programs are doing it for their own benefit, not for the customer’s benefit. Here is what many companies are doing:

Computer-Aided Direct Marketing
Remember Michael Golder’s marketing plan? His firm is using personal information to attract prospects. Using a combination of advertising and targeted promotions, the company will be focused on selling certain products or simply making more money, not on understanding each customer’s needs. Direct marketing-what most people think of as junk mail-was merely annoying when computers were 100,000 times dumber than they are today. Now it’s becoming unacceptably invasive. For reasons that I’ll explain in this book, the days of using personal information for advertising are numbered. It’s likely that this practice will be outlawed or highly restricted by new legislation.

One-Way Dialogues
In a true relationship, either party can initiate a conversation, and both parties have to be ready to interact and willing to change their behavior based on feedback from the other party.

Selling Out Relationships
With growing frequency, companies are being vilified in the press because they have decided to sell information about their customers to other companies. In many cases, such sales represent a complete departure from the purpose for which the customers supplied their information. Network Solutions, the domain name database firm that initially had exclusive rights to maintain the Web’s “address book,” is selling information about all the customers in its database. “On your mark, get set, go!” announces an ad targeted at direct marketers. “Available for the first time ever. Approximately 6 million unique customers, sliced and diced for you to target prospects, learn about a specific audience or retain customers Take this information and run with it.” This type of action sends a loud and clear message to customers that the company values its relationship with them less than it does their own wallet.

When we strip away these false impressions of one-to-one relationships, what is left?

First, and most importantly, in any relationship between an enterprise and a person the enterprise must acknowledge that the person has a right to control and access his or her personal information. Without this understanding, there will be no trust and no lasting relationship.

The most valuable information about a person’s needs and preferences exists in that person’s head. Despite the proliferation of third-party data providers and devices that track our movements and actions, humans are complicated, often irrational, creatures. We are fickle, and our lives take unexpected turns. It is vastly more difficult to serve a person without that person’s compliance. People will be less likely to cooperate with an enterprise if they feel unsure about the company’s true intentions.

Second, one-to-one relationships work when an enterprise seeks every opportunity to provide a meaningful benefit to individuals, such as saving them time or money, or providing them with more relevant information. These are not the traditional benefits that accrue to companies, but rather to stakeholders in that company, whether they are customers, employees, investors, or suppliers. Most businesses need to think about how their actions benefit the individuals as well as the firm’s bottom line. Businesses that do this will enjoy dramatic benefits, but only as a result of satisfying individuals.

Third, this type of relationship only works if the individual provides feedback and value back to the enterprise. Companies exist to make a profit. Somehow, the person must be able to compensate the company fairly for its services.

Finally, true one-to-one relationships are constantly evolving. Companies that are motivated to accommodate the qualities that make each person unique will enjoy the benefits of loyalty. People are motivated to collaborate because they are rewarded for doing so. The result is a series of ongoing interactions that benefit both the individual and the company.

These four characteristics can be applied to any business relationship, whether it involves finance, human resources, operations, product development, information technology, marketing, legal, sales, maintenance, quality control, logistics, customer service, or the loading dock. One-to-one relationships will become increasingly important in all these areas. By understanding these relationships, and how to support them, you’ll be able to stay close to the people that bring you business success, and you’ll be able to avoid-or at least minimize-the privacy issues that will increasingly plague other businesses.

Memory Is Everywhere
(Obtained from the files of an insurance company)

COMPANY CONFIDENTIAL: INSURANCE RISKS

To summarize the results of Project X-9, we have built profiles of 5,000 current policyholders that detail:

- All the foods they have purchased through supermarket loyalty programs, highlighting purchases that are high in fat and excessive purchases of alcohol and/or sweets

- Cruises they have taken that have a tendency to attract people with sedentary lifestyles and/or excessive consumption patterns

- Motor vehicle records showing speeding tickets and DWI offenses

- Plus eight other negative lifestyle indicators

Based on the above, we have validated our ability to use such third-party information to identify high-risk policyholders. The next step is to decide on the appropriate corrective actions. In our next meeting, we must decide whether to:

- Adopt an holistic approach and show these policyholders how to lead a healthier lifestyle

- Discourage or reject outright policy applications from people who exhibit these behaviors

- Take no action, due to the sensitive nature of this personal information

When you think about how personal a business relationship should be, it’s important to understand the preponderance of new technologies that will increasingly track our every movement and interaction. Technology has changed the rules of business relationships, and the laws under which we operate, to a much greater extent than most people realize. Each technology is a potential double-edged sword, which can be used to benefit people, or to work against them. Before you use such a sword, it’s critical to dull the edge you don’t want to use accidentally.

Memory is everywhere.

Nothing short of a global disaster will stop the spread of technologies that make it easier to track the daily actions of people and organizations. We take for granted how quickly voicemail, ATMs, e-mail, the Web, cell phones, PDAs, GPS devices, alphanumeric pagers, wireless computers, and countless other microchip devices have permeated our daily lives. Every device adds a layer of memory that didn’t exist before, because most are linked to a database owned by at least one company.

Every time a person uses a piece of technology to communicate with others, to save time or money, or to enjoy special treatment such as a shorter line at the airport, that person takes a risk that the information revealed by his activities will be used against him.

Technology remembers what we do, and few people understand the extent to which business-and life-will be drastically different in a society that never forgets than it was in one that forgot 90 percent of what happened.

Techniques that seem innocuous when applied to customers, such as keeping records of what people buy or who they communicate with on the Internet, are perceived as terrifying when applied to employees. Few employees recognize how widespread employee monitoring has become.

The American Management Association conducts surveys that examine how companies monitor their employees. In 2000, they discovered that “nearly three-quarters of major United States firms (73.5 percent) record and review employee communications and activities on the job, including their phone calls, e-mail, Internet connections, and computer files. The figure has doubled since 1997, when AMA inaugurated its annual survey, and has increased significantly over the past year.”

Matt Kramer of Control Data Systems in Minneapolis, a firm that helps companies analyze their e-mail traffic, reminds us that you can never erase your e-mail messages. “I can take my machine out in the parking lot, run over it in a car, throw it in the bottom of a swamp, never to be recovered again, and it still doesn’t matter. Because copies of the e-mail I sent to other people are sitting on servers all over the world.”

Given that companies collect data about their employees’ activities, let’s think about the types of patterns for which a firm could search:

- Employees who contact competitors or executive recruiters via e-mail or telephone
- Employees who call their home number more than three times a day more than 50 percent of the work days, which could indicate a lack of focus on work
- Employees who are failing to contribute an acceptable amount of content to the firm’s knowledge management systems

I’ve kept this list short for now, just to give you the general idea. We’ll explore these implications in far greater detail later in the book. But it’s important to recognize that until now, companies haven’t had access to nearly as much information about individual employees, suppliers, partners, and customers as they will have over the months and short years ahead.

Every day, someone invents a better way to identify, differentiate, interact with, and customize the treatment of individuals.

As I type these words on my laptop, software was just introduced that can determine whether the words are being typed by me, or by some other person using my machine. A technique called “keystroke dynamics” monitors the pressure, speed, and rhythm of a person’s typing, which apparently is almost as unique as your fingerprints.

Net Nanny is using this technology, which it calls Biopassword, a service designed to provide an additional level of security for company networks. It works like this: When you log onto a network with a username and password, the system monitors your typing style. The notion is that even if someone steals your username and password, the system will recognize that someone else is using your password, and it will prevent them from logging on.

This technology is just one example of the field of biometrics, in which machines recognize people using biological traits. Among other characteristics, people have unique fingerprints, voices, facial features, and retinal and iris patterns.

Biometrics has been around for years but has yet to enjoy widespread acceptance. One reason is that biometrics technology tends to be overly complex and a bit upsetting to many people. Fingerprinting, for example, is associated with crime, rather than with good customer service or healthy employee relationships.

Net Nanny’s approach is unique because it is a pure software solution; there are no body part scanners or mechanical devices. “Biometric technologies are becoming a more viable, accepted way of authenticating a user, but in order for them to be widely incorporated and accepted by security professionals and end users, they must be unobtrusive and easy to deploy,” said Mitch Tarr, vice president of strategic alliances for BioPassword.

If people and companies are willing to accept biometrics, life will get dramatically better in many ways. You won’t need a driver’s license, credit card, or ATM card. Machines will verify your identify based on personal characteristics. Instead of swiping your credit card in a supermarket, you’ll just look at the amount displayed, and a retinal scanner will confirm your identity.

No one will be able to steal your credit card. Identity theft will get harder. Lines will get shorter.

EyeTicket Corporation is testing its services at airports in Charlotte, North Carolina, and Frankfurt, Germany. EyeTicket(tm) allows travelers to check themselves in and board aircraft using iris recognition, without credit cards or other ID, and without standing in line. The system can be accessed by any airline, which means that travelers need to just register once, and then can use the system on any participating airline.

EyeTicket is also being tested at sporting and entertainment events. Instead of buying a physical ticket, people can enter a stadium by looking into the EyeTicket monitor.

Many of the transactions I just described used to be anonymous. Seven of us went to see “Lion King” in Los Angeles. The theater has no idea who six of us are; it only knows the identity of the person who purchased our tickets via his credit card. If he used cash, he’d be anonymous, too. But if the theater used EyeTicket or a similar system, there would be a record of the people sitting in each seat.

As others have pointed out, most companies aren’t tracking individuals as they surf the Web; they are tracking individual computers. Six people live in my household, and we all use the computer in my family room. There are many “cookies” on the hard drive of that machine, placed there by the hundreds of Web sites we visit. But in most cases, the cookies do not identify a person; they identify the personal computer in the family room. A technology such as Biopassword could someday erase this confidentiality, enabling Web sites to identify each of us via our typing or browsing habits.

Iain Drummond is CEO of Imagis Technologies, a company that offers another type of biometric technology, which is facial recognition. The company’s services were initially developed to help law enforcement and security organizations. The Royal Canadian Mounted Police, or RCMP, approached Imagis to help solve a problem. Drummond said, “Criminals, not surprisingly, were often uncooperative when they were being booked. They refused to give their names, or provided false names. RCMP asked us to develop a system that would search a suspect’s face against a database of mugs shots, which we did.”

More recently, a casino was having problems with gangs who were infiltrating the casinos and intimidating dealers and other casino personnel. Casinos are difficult places to take good pictures of people who don’t want to be identified. Besides, most cameras in casinos are thirty feet high, and gang members and professional gamblers seldom look up. So the firm had to get much better at identifying faces. Today, Imagis uses over 250 facial characteristics to identify a face.

In biometrics, you hear a lot of talk about compliant versus noncompliant subjects. Criminals are noncompliant subjects; they don’t want to be identified, will not look squarely at a camera, and will do everything possible to deceive. Compliant subjects are generally people whom you are protecting or treating in a special manner. Drummond describes a bank that recently approached Imagis to help develop a solution to help prevent ATM fraud.

“Basically,” said Drummond, “you stand behind me, see my personal identification number, steal my card, and clean out my account. Using our facial recognition technology and the cameras already in ATMs, the bank could confirm that person who is putting card into ATM actually is the right person. This doesn’t add additional level of surveillance; the bank already knows you’re at the ATM, because you are putting your card in. This is a situation in which you are compliant, because you want your money, and you don’t want anyone else to get it.

Compliant people will look right at the camera and will come take another picture when they grow a beard or get glasses. The single greatest factor in determining compliance is whether the person being identified is comfortable with the purpose, method, and end result of being identified. Think about the Imagis technology now being used in casinos. Professional gamblers don’t want to be identified, but high rollers do. If the end result of being identified is that you get free drinks and dinner, and a much better hotel room, you will likely be thrilled to have your photo taken.

Compliance is going to be one of those words that you knew but seldom used, until suddenly everyone uses it. Without the compliance of individuals, a firm can barely use the wealth of technologies that enable stronger and deeper relationships between it and the people critical to its ongoing success. The paradox of personalization is that people increasingly expect personalized attention, but if you get too personal, they get scared and want to have nothing more to do with you. It is difficult to know where to draw the line between personalization and privacy, and this is made even more challenging by the fact that every person draws his or her line differently.

Here’s the key question: How do you give people enough confidence to be compliant with technologies that recognize and record their typing patterns, entrances into buildings, outgoing e-mails and incoming telephone calls, and a bevy of other activities?

Companies must be able to explain to individuals that a certain tracking technology is in their interest because it will save them time, or money, or both. They also need to describe the benefits the firm enjoys and to set boundaries around the use of such technologies. Here are some of the ways a company might justify the use of such technology:

- To make sure every employee gets promoted just as soon as he or she demonstrates a certain level of achievement, we need to do a better job of tracking your performance and milestones

- To give your children every possible advantage, you should consider giving them access to our personalized educational services

No matter what explanation you provide to motivate compliance, companies must make a convincing case why it is in their interest to use this technology solely in ways that benefit both the person and the company.

People will only feel comfortable with new information technologies when they trust that companies are committed to keeping their information private. People must understand how both they and the companies involved will benefit through the use of a new technology. This is an utterly different standard than existed in the past, because people were not being asked to divulge so much information on such an unrestricted basis.

Bruce Kasanoff is President of Now Possible, a consulting and research firm. Contact him via email (bruce at nowpossible.com) or at 203-341-9448.