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"The future of marketing is tailored for everything," wrote Amanda Mull in the Atlantic. The start-up Prose supplies personalized hair care products to order to customers who have previously completed a survey, while Care / of sells personalized dietary supplements and Curology offers personalized skin care products. One of the most successful startups with a personalized (and mentored) value proposition is online fashion retailer Stitch Fix, which makes buying fashionable clothing easier and more convenient than before. The company collects data through an initial questionnaire and ongoing customer feedback and compares individual consumers with human stylists who select specific items for each consumer. The company then ships a selection of garments to consumers, either as a recurring service or on a one-off basis. Stitch Fix combines "data and machine learning with human judgment" to curate clothing recommendations and streamline other aspects of operations, employing dozens of data scientists. In 2019, just eight years after its inception, the company had sales of nearly $ 1.6 billion.

One company that has aggressively and impressively pursued personalization as a strategy is global cosmetics company L’Oréal. For some time now, the company has been personalizing its marketing and communication through the use of its customer data platform. However, the company is committed to personalization beyond marketing. In 2020, the Perso Skin Care System was launched, which uses artificial intelligence to enable consumers to create highly customized cosmetic formulas at home. With the consent of consumers, the system collects data on their preferences, skin condition (with the help of AI-based analysis of images taken on consumers' smartphones) and environmental conditions that may affect the skin. Based on this data, the device creates and outputs just the right formula for skin care products for consumers who use raw product components in cartridges in the device. With a similar lipstick device, consumers can choose the color they want using a panel on their smartphone – a welcome and revolutionary alternative to the common practice of having dozens of different shades on hand. Going forward, customers will be able to refine their products even further and "create a lipstick shade that matches their outfit or choose a color that is currently trending on social media".

Personalization strategy: past and present

Personalization as a strategy is hardly new – since the 1970s, restaurant chain Burger King has promised consumers that they can cook their burgers the way they want (i.e. you can choose which toppings to put on their sandwiches). What has changed is the technology that makes personalization much more economical on a global scale. Taking traditional approaches to globalization – what we call the old globalization – companies could personalize their offerings for individual consumers, but only by making thousands or even millions of varieties of a physical product. Companies today manufacture relatively few varieties of the physical product, but use software to provide potentially hundreds of millions of functional variations. For example, Gatorade is introducing a patch that analyzes consumers' sweat and uses this to select drink formulations that best suit their body's needs (consumed from a bottle that consumers also customize through Gatorade's website). In order not to be outdone, Burger King has now used digital technology to improve consumers' options and provide them with personalized offers and customizable sandwiches.

Even a single physical product design can now mean many things to many people in different regions. Tesla only offers four car models (Model 3, S, X, and Y) but allows for a highly personalized experience. After the purchase, drivers can “adjust the positioning of the seat, steering wheel, mirrors, suspension, brakes and many other functions” and thus create an individual user profile. This ability creates, in the words of one reviewer, "a unique feeling that the vehicle is becoming an extension of a driver". Software updates for the Model S allow the car to learn a driver's daily commute and then provide traffic updates. They also allow the car to download calendar information from a user's smartphone so that the car can automatically generate driving instructions for upcoming events. Tesla appears ready in the coming years to use an in-cab camera to detect users as they get into the car and instantly reconfigure numerous elements of the car for them – what CEO Elon Musk has called "dynamic personalization" .

The Tesla example shows how global companies can profitably combine service and personalization to bring breathtaking new offerings to the market. Tesla's cars are not just physical objects, they are “connected” vehicles that serve as platforms for the digital delivery of services and for building an ongoing relationship with consumers. Tesla can always personalize its cars with software updates downloaded from the Internet. However, downloads are also used to provide many other improvements and tweaks on an ongoing basis. Regardless of the other challenges, Tesla's business is more resilient and operationally advantageous as the company can introduce new features and respond to product quality issues faster and more cheaply.

Addressing the global consumer

Although the music streaming service Spotify initially offered generic, human-curated playlists to listeners around the world, it now uses algorithms to tailor and personalize playlists to suit individual tastes. The company hopes to see a steady increase in user interaction, as in 2018. Likewise, every element of the Netflix platform is tailored to user preferences, which the company determines through experimentation during user visits (e.g., suggesting specific content to display, whether a user clicks on it). By 2019, the company had created over three hundred million user profiles that Netflix algorithms used to generate personalized content recommendations. The company uses people to categorize shows by topic so the algorithm can suggest recommendations fairly accurately (roughly 80 percent of the content Netflix users consume comes from the algorithm recommendations). Rather than segmenting offerings by nationality or other traditional demographics, the company's algorithms analyze how consumers consume content and, based on that, enable Netflix to improve two thousand global "taste communities". In addition, the company adapts its recommendations on a regional basis, taking into account local preferences and government regulations.

Whether or not companies personalize their offerings, the rise of the global consumer has been so profound that some companies are creating new offers and promotions for cross-border consumer groups that are defined by affinity, not geography.

When music producer and DJ Marshmello hosted a live virtual concert for millions of concert-goers as part of the global video game Fortnite in 2019, he performed for the affinity group of video game consumers around the world. When Niantic released its Pokémon Go game in 2016, it also targeted the affinity group of gamers around the world and, according to media reports, had sales of nearly $ 1 billion in one year. Serving a global community of basketball fans, the NBA will be adopting technology in the near future that will allow consumers to personalize their viewing experience regardless of their physical location.

Other large global companies pursuing digital models are bypassing geography and targeting consumers with common interests, such as: B. those who stay in a common brand ecosystem (such as Apple, Android or Tencent) while searching for products and services. The rise of seamless global digital connectivity at falling costs (described in the introduction) means that companies are defining consumers not only by their country of location, but also by their digital identity. All users of the fast-growing transportation network company Gojek (think Uber for motorcycles) access the service through apps on their phones. The service is identical or at least similar across national borders, subject to legal or regulatory restrictions. For Gojek, these consumers are not defined by their Indonesian, Thai, or Vietnamese identity (the company currently operates across Southeast Asia). They are global consumers, and the company's value proposition is designed to serve them seamlessly everywhere.

Implications for executives

In the years to come, value propositions that combine the physical with the digital and use data to deliver personalized offerings to global customers will flourish across industries. Many companies will no longer sell products or services per se, but rather deliver results and create experiences. A large technology company announced that the service solutions it offers for its line of computer servers will soon account for 50 percent of its sales, up from 10 percent in 2019. Among industrial companies, digital services for physical products are the fastest growing part of the business. As we have seen, the future for automotive companies lies in offers for connected cars and mobility. Companies that can build and develop these skills well will be successful. Those who don't either become suppliers to those who do business or they go out of business.

How do you build and deliver these new value propositions? Because of our work with customers, we recommend that you first think about the following key questions:

1. Which main pain points do you already solve for your customers? Do you really understand these in sufficient depth? You can expect your customers to rely on you for their fuel purchases, but what they really solve is getting from point A to point B. How else could your company help customers solve this more fundamental problem through a digital problem? Service offer?
2. Is the opportunity attractive enough? Does a service value proposition you provide create a sufficiently large market opportunity in solving customer problems? What costs (related to capital investments, retraining, reorientation of incentives, etc.) would you incur to get this solution to market? Which companies would you compete with? How will this new value proposition affect your existing business?
3. Do you have the right resources to develop a successful solution? Have you put together a team that can offer experiences, not just services? Do the team members have the agility, collaborative mindset and sense of the zeitgeist necessary to fully address the customer problems you need to solve? What other infrastructure (manufacturing facilities, data architecture, etc.) do you need to set up?
4. Are you organizationally prepared? If you're a large global company, is your entrenched bureaucracy preventing you from developing new value propositions and getting them off the ground? How could you better position your teams to function like startups? Are your executives focused enough on these projects to ensure their success? If you've traditionally been a product-driven company, what internal adjustments do you need to make to successfully deliver a service or solution?

Ultimately, creating new digital value propositions requires a change in the mindset of executives, a new form of customer focus. No matter what type of product or service you currently offer, you need to be willing to fundamentally redefine it to maximize the value that customers will get over the life of that product or service. If you've been selling washing machines to local consumers for a long time, should you still be doing so? Or should you sell a laundry washing solution to global consumers that allows your consumers, for example, to work remotely, change the cycle and compare notes with other washing machine owners about which settings and detergents are best for certain types of dirty clothes? If you are currently selling a hair care product to local consumers, should you be doing that anyway? Or should you be selling a hair care solution that allows customers anywhere to get a personalized product that might come as a subscription-based service?

In order to answer such questions, you need to develop a much deeper, more rigorous, and more sensitive view of customers and their needs than the one you currently have. Traditionally, companies developing new offerings have sought the voice of the customer, but they have generally limited their research to conducting surveys and conducting focus groups that only involve marketing and R&D teams. In order to be successful with digital-physical business models, customers, business unit teams, technology teams, customer behavior experts and external partners must be brought together to undertake a so-called customer journey. Illustration of how customers use and benefit from your product or service throughout their entire life cycle; and then explore how you can increase that value through digital and other means.

Contribution to Branding Strategy Insider By: Dr. Arindam Bhattacharya, Dr. Nikolaus Lang and Jim Hemerling, excerpt from their book: BEYOND GREAT: Nine Strategies for Thriving in an Age of Social Tension, Economic Nationalism, and Technological Revolution

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