Is hyperpersonalization the future of advertising?

Despite the eventual deprecation of cookies, and new privacy regulations, companies forge ahead to create personalized experiences for consumers

If anything, these days it seems that with the deprecation of cookies and new privacy regulations, we’re moving away from understanding our customers on a deeper, omnichannel level. But that’s not the case. Consumers are familiar with all sorts of companies catering to their personal whims and interests–especially those with access to troves of first party data and increasingly, those using zero party data, too.Take Amazon’s personalized recommendations and “deals for you” on its app and website homepages. Or Netflix’s personalized movie and show picks on its own homescreen. Or Spotify’s generated playlists that use “music picked just for you.” Or the beauty industry’s foray into creating products made especially for each customer. 

Soon, the days of relying on third-party data will be behind us, and opt-in data sharing from users will increasingly be the norm. In an age where first-party data and increasingly, zero-party data (that is, info and preferences users share themselves) will have to make up the lions’ share of consumer data, it’s important that users willingly and eagerly provide their own preferences and opt-in to data sharing with a resounding yes. 

Consumers are comfortable with sharing data–to an extent

So the question remains – how much personalization do consumers want? And how much data sharing, whether first, zero, third or second party, are they comfortable with? 

In most cases, customers are comfortable sharing a certain amount of data, provided they get something–like personalized content or discounts–in return. In a 2022 study from CMO council and SAS, 81% said they’d be willing to share personal data if they received something of value in return. 

Sharing of zero party data–info on preferences that users proactively share with a company through surveys or building out a profile–is rooted in loyalty and trust, and often comes the more a user spends time with a brand. It also confirms their intent to purchase and interest in the company. Personalizing based on zero party data is foolproof–consumers willingly share preferences in the hopes of receiving personalized products or experiences.

Companies that personalize win on ROI, time and time again. Research from McKinsey shows that personalized experiences increase customer loyalty as well as gross sales–and companies with faster growth rates are the ones that personalize. 

According to a study from the Path to Purchase Institute this year, 53% of ad agency professionals worldwide believe increased personalization will “be the next frontier” in retail media. It ranks just after “shoppable video content” and above “omnichannel audience tracking.” 

AI in the future of personalization strategy

The future of hyperpersonalization combines first party data, zero party data, consumer opt-in, AI, and algorithmic processes to achieve the type of unique one-to-one marketing consumers expect and want. With generative AI and machine learning, companies can use the data they gather from consumers to provide their customers with deeply personalized one-to-one experiences. In fintech, for example, AI is used to analyze first-party data such as customer transactions which can then be used to offer personalized customer-centric recommendations and guidance.

In the beauty industry, AI-powered personalization is the breakout trend across brands. In one study, 72% of consumers were willing to pay more for customized cosmetic products. Take Ulta Beauty’s partnership with Haut.Ai, for example, which provides personalized skincare recommendations based on AI-driven skin analysis. Other beauty companies are embracing virtual try-on technology to recommend tailored products.

The grocery industry is also about to become hyperpersonalized. 87% of grocery executives believe so, according to a Deloitte study. Guided, personalized shopping and individualized experiences are going to be the future norm. And according to a Klarna report, over a quarter of US millennial and Gen Z consumers foresee a future where shopping will become so customized and predictive that they won’t have to do the shopping themselves at all–it’ll all be driven by AI.

The experience consumers want

Overwhelmingly, consumers are comfortable with sharing first-party data–as long as it’s with a brand they trust, and provided they receive a personalized experience in return. With the rise of generative AI and improvements in deep learning capabilities, growth in customer loyalty improving returns of zero party data, it seems a one-to-one strategy of personalized recommendations–like that exemplified by Spotify and Netflix, the beauty industry, the fintech industry, and other retailers–is here to stay, and likely to expand in years to come.

This is just the beginning of the future of hyperpersonalization.