“Personalisation” and “customisation” are two terms often used in marketing, to refer to ways in which customers are treated as individuals. In some cases, the two terms are treated as synonyms, which is wrong because, really, “personalisation” and “customisation” solve opposite problems. Here is an overview of the main differences.
In the case of personalisation, the problem is that there are too many options for the customers to choose from.
When faced with too much choice, customers may end up not buying at all because they can’t find something that is relevant for them, and/or they run out of time or energy to continue evaluating the various options. Even if they do, eventually, settle on one of the options, they may be dissatisfied because they will wonder if they made the right choice.
This is very typical of the online environment. For instance, there are numerous movies that we could choose to watch, from Netflix; many tunes that we could listen to, from Spotify; or many search results that we could look into, from a query on Google. However, this is not a problem in the online world, only. For instance, there are many meals that we could have on a night out, many places that we could travel to on holidays, and many financial products that we could invest in.
To overcome the problem of choice paralysis or choice dissatisfaction, the firm will limit the options presented to each customer to those that it thinks are the most relevant for that person. The firm does so, based on specific customer characteristics – e.g., demographics, location or previous behaviour.
That is, personalisation is, in essence, a problem of data analysis and management of the customer interface, in which the choice decisions are made by the firm.
In the case of customisation, the problem is that the options available do not meet the customers’ specific requirements.
If customers can’t find exactly what they are looking for, their willingness to pay will be lower (i.e., they are willing to pay less for the product than if it is exactly what they are looking for). Customers will also be less satisfied with the firm (and, thus be less loyal), because s/he feels that the firm either does not understand them, or does not value the customer enough to produce a solution that exactly meets their needs.
This problem could occur in terms of functional requirements, such as finding a size that fits us in all the right places. Or it could be in relation to hedonic requirements such as finding the clothes that best convey a certain image.
To offer customers the solutions that exactly meet their needs, the firm will increase the number of options available. Then, the firm can either assemble the choices for the customer, or let the customer assemble it themselves. For instance, Adidas will produce a pair of trainers based on the customer’s stated specifications. Alternatively, Philips lets customers change the colour of lighting in their house, depending on their mood.
That is, customisation is, in essence, a problem of product design and operations management, in which the choice decisions are made by the customer.
|Benefit for customer||Management function / skill||
Choice made by
|Personalisation||Decrease choice||Improve relevance and/or save time, by presenting the set of options that are the most relevant for the customer||Data analytics and user interface||Firm|
|Customisation||Increase choice||Express customer’s individuality and/or meet customer’s specific needs||Product design and operations||Customer|
We can see instances of both personalisation and customisation occurring in the same platform. For instance, Spotify personalises the music that it recommends to me; while I customise my playlists. But the bottom line is that the two activities have very different goals and purposes, and require very different skills.