Think you know your customers? You’re wrong

The majority of consumers think brands don’t understand them as individuals. However, a similar percentage of digital marketers are confident that they have a holistic view of their customers. What gives?

angry customer 2
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Digital marketers know it's their job to personalize the customer experience using new marketing tech tools and customer data. Heck, even consumers say they're willing to give up personal and geographic information to trusted brands in exchange for better service.

So why are marketers failing?

And they are failing: Four out of five U.S. consumers don't believe the average brand understands them as an individual, according to an Econsultancy and IBM study. Yet a similar percentage of marketers say they have a holistic view of individual customers and segments across interactions and channels. This perception-reality gap is startling, especially considering that just about every marketer has jumped on the customer journey bandwagon.

[ Related: Digital Marketers must own the customer lifecycle ]

With emerging marketing technology tools and customer data, digital marketers want to learn more about the target customer and personalize the customer experience. They want to act as customer guides, from brand discovery to the many online interactions to sales conversion to customer loyalty and advocacy.

Why are online customers abandoning you?

This perception-reality gap might end the customer journey before it really starts. It might even have a nasty effect on sales: IBM says marketers' lack of customer understanding may explain why the online shopping cart abandonment rate continues to rise, reaching 72.9 percent in February 2015. Moreover, Econsultancy found that half of consumers changed providers in the last 12 months, with poor customer experience being a major cause.

[ Related: 6 Must-have mobile apps for digital marketers ]

Many theories attempt to explain the perception-reality gap, a prominent one being paralysis by analysis. Marketers have become swamped by the sheer amount of customer data suddenly available to them from a myriad of sources, both internal and external. They have to separate data into three buckets: clean data that provides customer insights, dirty data that must be scrubbed before it can be used, and black data that ends up being useless.

"They're data hoarders," says Jay Henderson, director of strategy at IBM ExperienceOne. "Enamored by the idea of all this data they've collected, marketers aren't even in a position to analyze."

[Related: What is data-driven marketing?]

Another theory is that marketers are placing their bets on cheap and easily measurable ways to reach customers instead of personalization. An example of this is sending out bulk emails and working to improve the tiny open rate by a few percentage points, rather than personalizing emails along the customer lifecycle. After all, the shotgun approach is much cheaper than the sniper approach.

Privacy concerns? Nah

On the upside, Econsultancy exposed a myth about customer personalization -- that is, companies will feel the wrath from consumers concerned about privacy and personal data collection.

A whopping 72 percent of consumers said they would share their geographic data, and 61 percent said they would share personally identifiable information, with a brand they trust. The numbers slide to 38 percent and 37 percent, respectively, for average brands. It's an important finding, because location and identity are cornerstones for providing a personalized customer experience.

"The fundamental thinking behind digital marketing has shifted," says Stefan Tornquist, vice president of research for the Americas at Econsultancy, adding, "The real challenge is providing the right experience for the right person at a time that's right for them."

This story, "Think you know your customers? You’re wrong" was originally published by CIO.

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