In an increasingly competitive and consumer-centric market, personalization has become an essential tool for acquiring and retaining customers. In this scenario, companies like Netflix and Spotify have become global benchmarks, using artificial intelligence (AI) to offer unique and personalized experiences to millions of users.
Personalization has been fundamental to the success of these platforms. It transforms the user experience from passive to active, creating a deeper connection with the content offered. Data from Outgrow reveals that 90% of consumers prefer brands that offer personalized experiences and are 40% more likely to view recommended items based on information shared with the brand.
You've probably watched Netflix movies or series because they were in the "Because you liked..." or "We think you'll like this" tab. On Netflix, more than 80% of the shows watched are discovered through its personalized recommendation system. This not only increases engagement but also significantly reduces subscription cancellation rates.
For Spotify, personalization goes beyond simply suggesting music. The platform, a pioneer in creating unique experiences with playlists like "Discover Weekly" and "Release Radar," has made these lists essential for discovering new artists and keeping users engaged, attracting millions of listeners. This personalization helped Spotify reach over 205 million premium subscribers in 2023.
“This personalized approach not only improves customer satisfaction, but also optimizes the use of platform resources, directing users to content that is more likely to appeal to them,” analyzes Kenneth Corrêa, data and innovation expert and MBA professor at Fundação Getúlio Vargas (FGV).
Impact on user retention
Personalization and recommendations have a direct impact on user retention. Netflix estimates that its recommendation system saves over $1 billion per year in customer retention costs. Spotify, with its personalized features, encourages regular use and reduces migration to competing services.
“Personalization creates a sense of added value and a long-term relationship with users, making the service increasingly valuable and difficult to replace,” says Kenneth Corrêa.
What can these entertainment giants teach other companies about personalization and recommendation?
Lessons on personalization and recommendation using AI.
Lesson 1: Deeply understanding your customers and using those insights to create personalized experiences can be a powerful competitive advantage, regardless of the industry.
Lesson 2: Effective personalization goes beyond simply recommending products. It's about creating a holistic experience that continuously adapts to user preferences and behaviors, using data from diverse sources to make decisions at all levels of the business.
Lesson 3: Combining different AI techniques can create a much more robust and accurate recommendation system, capable of understanding subtle nuances in user preferences.
Lesson 4: Investing in personalization isn't just about improving the user experience in the short term, but about building a long-term relationship that makes the service increasingly valuable and difficult to replace.
Lesson 5 : While powerful, AI-based recommendation systems require ongoing monitoring, adjustment, and ethical considerations to be truly effective and reliable.
Lesson 6: Data collection must go beyond the obvious. It is the combination of detailed data on user behavior with contextual analysis that allows you to create truly personalized experiences and inform strategic business decisions.
Lesson 7: Machine learning can be used not only to analyze user data, but also to deeply understand the product or service itself, thus creating a much more sophisticated level of personalization.
Lesson 8: When implementing AI systems for personalization, it is crucial to consider not only technical effectiveness, but also the broader ethical and social implications of your technologies.
Lesson 9: Personalization, when well implemented, creates a virtuous cycle of understanding the customer and improving service, leading to greater customer satisfaction and loyalty.
Companies across various sectors can apply these valuable lessons to create deeper and more lasting connections with their customers. "By investing in personalization and recommendations, using AI ethically and effectively, it's possible to transform the user experience and achieve a significant competitive advantage," states Corrêa.
According to the expert, personalization is not just a passing trend, but a powerful strategy that, when well implemented, can lead to greater customer satisfaction, better retention, and sustained growth. "The future belongs to companies that know how to personalize their offerings and experiences, creating real and meaningful value for each customer," he concludes.
