In an increasingly competitive and consumer-centric market, personalization has become an essential tool to win and retain customers. In this scenario, companies such as Netflix and Spotify have become global references, using artificial intelligence (AI) to offer unique and personalized experiences to millions of users.
Personalization was critical to the success of these platforms, transforming the user experience from passive to active, creating a deeper connection with the content offered. Data 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 on the “ tabBecause you liked..” or “We think you'll like this”. At Netflix, over 80% of watched shows are discovered through its custom recommendation system.This not only increases engagement, but also significantly reduces the unsubscribe rate.
For Spotify, personalization goes beyond simply suggesting music.The platform, a pioneer in creating unique experiences with the playlists “Discoveries of the” Week and “Radar of News”, made these lists essential for discovering new artists and keeping users engaged, attracting millions of listeners.This personalization helped Spotify reach more than 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 most likely to please”, analyzes data and innovation expert and MBA professor at Getulio Vargas Foundation (FGV), Kenneth Correa.
Impact on user retention
Personalization and recommendations have a direct impact on user retention. Netflix estimates that its recommendation system saves more than US$ 1 billion per year in customer retention costs.Spotify, with its custom features, encourages regular use and reduces migration to competing services.
“A 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 Correa.
What can these entertainment giants teach other companies about personalization and recommendation?
Lessons on personalization and recommendation using AI
Lesson 1: Knowing your customers deeply and using these insights to create personalized experiences can be a powerful competitive differentiator, regardless of the industry.
Lesson 2: Effective personalization goes beyond simply recommending products, creating a holistic experience that continuously adapts to user preferences and behaviors, using data from multiple 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 is not 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, tuning, 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 offered, thus creating a much more sophisticated level of customization.
Lesson 8: When implementing AI systems for personalization, it is crucial to consider not only the technical effectiveness but also the broader ethical and social implications of their technologies.
Lesson 9: Personalization, when implemented well, creates a virtuous cycle of customer understanding and service improvement, leading to greater customer satisfaction and loyalty.
Companies from a variety of industries can apply these valuable lessons to create deeper and longer lasting connections with their customers.“By investing in personalization and recommendation, using AI in an ethical and effective way, it is possible to transform the user experience and achieve a significant competitive advantage”, says Correa.
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.“O the future belongs to companies that know how to personalize their offerings and experiences, creating real and meaningful value for each and every customer”.