Personalization is arguably the most important consumer trend. The National Retail Federation named personalization as the top retail tech investment for 2019. Although implementation varies across categories, personalization is most popular in skincare. It is important since it opens up a world of inclusivity for people of different skin colors, hair types, hair colors, allergies, skin types, health concerns, etc. Although personalization can be useful and accurate, often it is nothing more than a marketing ploy. Here I attempt to lay out the Bull and Bear case for personalization.
What Is Personalization?
Many consumers, investors, journalists, and CPG and beauty industry executives incorrectly use the terms personalization and customization interchangeably, leading to confusion. According to a Personalization webinar by Cosmetics Design, personalization involves devising product attributes that provide a superior and more unique fit for a specific segment of consumers. Personalization allows brands to recommend products after analyzing a customer’s data, habits, and preferences. Meanwhile, customization allows consumers to be empowered in the creation of their product by allowing them to pick or mix ingredients, fragrances, and colors. The fundamental difference is: personalization refers to service while customization refers to product.
While customization provides consumers with a sense of control, fun, and engagement, customization options do not make it any easier for customers to figure out what products will work best for them because consumers are not product or ingredient experts. Clinique iD, which allows customers to choose between 3 different hydrating bases and then mix in 1 of 5 different active concentrate cartridges, is customizable beauty. Meanwhile, Clinique Clinical Reality is its personalization service, a survey that helps digitally guide customers through the discovery process of finding the right skincare products.
There is a spectrum of personalization. Increasingly, many brands are moving towards a combo of personalization and customization in which the experience may include providing or recommending products. An example of a brand that offers a personalized experience with customized product is Curology, which offers prescription skincare that is customized for a consumer’s skin via telemedicine.
There is a spectrum of customization. Usually, customized products are made for groupings of customers, and there are a few base formulations that are tweaked with fragrance, color, or concentration of active ingredients.
Increasing customization works for some categories such as hair color and color cosmetics such as lipstick or foundation, since manufacturers are usually only tweaking a base formula with pigments. However, it has proven to be difficult to increase customization in other verticals such as skincare and haircare due to dramatic complexities and costs around supply-chain logistics. For example, for each customization, there must be stability and regulatory testing in addition to manufacturing adjustments with ever-increasing costs. More importantly, we must ask ourselves if it is even necessary to offer a custom product? Will it have better efficacy than a product that is recommended via personalization?
The Bear Case
The value of advanced personalization isn’t realized if consumers don’t understand the difference between DIY and algorithmic filtering versus diagnostics-driven personalization and have an unreachable level of expectations. With the vast majority of brands, the promise of personalization only involves simple filtering with an algorithm—no diagnostics, science, or AI. The filtering algorithm itself is often inaccurate and inconsistent since it based on a subjective lifestyle survey.
Even diagnostic tools such as selfie analysis aren’t reliable. Selfie analysis can be inconsistent since it’s dependent on lighting and the quality of a phone’s camera. For example, when I tried Olay’s Skin Advisor App, the first time I tried it said I was 29. Then I tried it again within a few hours and the app told me that I was 27! My skin age assessment has ranged on the app from 27 to 34 years old in the past 2 weeks with no changes to the survey.
Often times, the science that drives the marketing of personalization is still in its infancy, as in the case of genomics, epigenetics, microbiome, and RNA, and may remain inaccurate for years to come. With DNA reports, a person may be genetically predisposed to have certain traits, but those traits may never be expressed. Further, with DNA, a consumer can get different results from different companies’ reports. Some genomics companies’ have questionable science; one such company was even featured at a recent Personalization Summit. Investors and consumers often don’t know how to determine whether the science or technology is reliable. While science is a good starting point, it often isn’t enough. James Evans, a physician and geneticist at the University of North Carolina School of Medicine, says in a recent MIT Tech Review article that our “limited knowledge about how genes are involved in the integrity of our skin can’t be used to design tailored products or care—at least not yet. Plus, factors other than genetics, like diet, weather and pollution, also have a big impact on our skin.” Even if the science and AI are accurate, they will fail to provide a comprehensive assessment for useful personalization if other important metrics such as weather, pollution, diet, hormones, and exercise are missing.
- If customers’ expectations are not managed around the accuracy of a brand’s level of personalization, it can just become bad, costly marketing. Customers get upset because products don’t deliver. They will see that nothing is special about the personalized vitamin or shampoo and revert to using un-personalized products.
- There will be a backlash against science and tech-driven skincare products—even the lesser-known ones with reliable, accurate, and more comprehensive diagnostics will suffer.
- People buy a replacement product (such as a vitamin or retinol) because they discovered key ingredients while testing personalization solutions.
The Bull Case
In a world of fluffy consumer marketing, personalization begins to provide real value. Brands identify personalization as an opportunity for both customer acquisition and conversion. It allows a consumer to navigate a world of new brands, products, and ingredients.
Specialty retailers/brands start to value their enormous user data beyond email addresses and create customer user experiences. Proper information architecture will consider offline data, online data, robustness, predictive behavior through AI, and constant data improvement. User data is updated dynamically (new research, new genes, new microbiome marketers, etc. are incorporated into the models). Companies ask themselves if the data is applicable to a wide-enough audience—is it diverse, is it biased? Are the results accurate enough? Is the best possible assessment for personalization being offered?
User-driven tools and metrics become available that educate consumers and enhance personalization. For example, product reviews are valuable since not all products are equal even when they contain the same active ingredients. Product reviews will be utilized in product recommendation engines in order to increase accuracy, not just increase short-term sales at the expense of long-term value. Ingredient databases such as Credo’s ClearForMe Tool will be utilized to help consumers avoid allergens, irritants, or carcinogens across CPG categories.
Companies will incorporate proven technology from fields such as genomics and microbiome to enhance personalization. To execute the best experience, marketers will have (or develop) domain expertise in their consumer category and omni-channel retail, and a basic understanding of underlying technology. The best experiences will be achieved with partnerships between the most innovative players in the tech, biotech, genomics (such as uBiome, 23andMe, Perfect Corp, AutoMat, Canfield Scientific, and Google) and beauty/CPG industry brands and retailers. uBiome is leading the way with its patents, products, and partnerships; it just announced its new partnership with L’Oréal for personalized skincare.
Some Innovative D-to-C Personalized Brands:
eSalon has created fully customized hair color to rival that of a high-end salon colorist complete with fully personalized instructions. It solves a real problem since many people cannot find their precise shade in a box at the drugstore, and salon visits for premium custom color can be cost prohibitive as well as inconvenient.
Persona Vitamins takes personalization to the next level with its drug-nutrient interaction identification to mitigate risky consequences that a consumer may have while taking supplements and prescription meds. Its new portal, Persona Vitamin Packs Pro, allows medical professionals to create or review vitamin and supplement recommendations for their patients.
Habit Personalized Nutrition is based on “systems biology,” which, according to the company, means it’s a step ahead of DNA-only diets. The testing process includes a microbiome test, DNA test, blood biomarkers analysis (how your body responds to specific nutrients), a metabolic challenge shake, and other measures to find a customer’s ideal ratio of macronutrients (carbs, fats, and proteins).
As personalization becomes more commonplace, it will become based on a more comprehensive set of core competencies. Brands will need expertise in AI, diagnostics, and their consumer vertical. Moreover, companies will get more concerned with the accuracy of their personalization. This will involve improving quality and types of data, incorporating claims testing, and awareness of the latest research and technology.
Brands and retailers will initially spend on improving data architecture in order to increase bottom-of-funnel online sales, but then it will expand to improve the company across personalized product lines. As costs decrease, diagnostics and their data move from static, one-time analyses to longitudinal data. 3D imaging, SkinScanner by FitSkin, and microbiome testing will become more commonplace for skincare and dramatically increase accuracy for consumers.
Personalization isn’t a trend. It’s here to stay and help consumers. The future winners will be determined by marketers’ understanding of how to use AI, diagnostics, and comprehensive customer data to identify and solve customers’ real pain points, and how they communicate the value offered to consumers. Personalization that accurately guides consumers to the right product will lead to high revenue. There is a huge opportunity to establish category leadership by combining commerce, content, and expertise. The expertise and service that come with a product are as important as the product itself, and that is the essence of personalization.