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What McDonald's Latest Acquisition Means for Marketers Personalization has long been viewed as the purview of digitally native companies. Now McDonald's will use it to upsell at the counter.

By Karl Wirth Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

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McDonald's recently announced that it is acquiring personalization software vendor Dynamic Yield, for a reported $300 million or more. This "supersized" deal took many of us who pay attention to the personalization space by surprise. But the underlying message behind the deal shouldn't surprise anyone: personalization matters. It's undoubtedly worth investing in.

Ultimately, I think this move is a wake-up call for businesses across industries. "Lettuce" now explore what this means for marketers in this article (and I promise, no more puns).

Related: Customers Flee for a Reason. You Need to Give Them Reasons to Stay.

A good customer experience puts personalization at the center.

The customer experience (CX) is essential for every business in any industry. None of us have a business without customers. If they are not happy with the experience they receive, it is easier than ever for them to take their business elsewhere. And focusing on the customer experience pays off. According to a study by Watermark Consulting, companies that lead in CX outperformed the S&P Index by 45 points, while outperforming companies that lag in CX by 76 points.

McDonald's acquired Dynamic Yield to improve its customer experience. This was a somewhat unusual move, as a cheaper option would certainly have been to license the software rather than purchase the whole company. Nevertheless, McDonald's plans to use the new technology to transform its drive-thru experience, as well as improve its in-store kiosks and mobile app. The idea is that the technology will recommend menu items in the moment to pair with a person's order, part of which McDonald's says it has already tested over the last year. In other words, it plans to use Dynamic Yield to personalize the way it communicates with customers across channels -- to interact with them in a more relevant way.

For years, personalization was seen as something only large, digitally native companies could do. It became synonymous with companies like Amazon and Spotify. Personalization could be seen primarily on websites or in simple ways across emails and digital ads.

But McDonald's is not a digital native. The first McDonald's restaurant opened in the 1940s. Since then, most consumers have interacted with McDonald's in person at one of its physical restaurants. And yet, McDonald's still finds personalization technology so important that it decided to spend $300 million to acquire it.

The implications of this are clear. Personalization is integral to any customer experience, no matter where that experience takes place.

Related: Chick-fil-A Makes More Per Restaurant Than McDonald's, Starbucks and Subway Combined … and It's Closed on Sundays

What a good personalized experience looks like.

A good personalized experience occurs when a company, in each moment, understands you as a person, decides what the best experience for you would be, and responds with relevance. Let's break this down.

First, understanding is critical. You can't respond with a relevant, personalized experience if you don't know anything about the person you're interacting with. That understanding can come from a variety of places: a person's location, his demographics (for B2C) or firmographics (for B2B), his behavior and actions across different channels, the products he has purchased or articles he has read, his loyalty program status, and much more depending on the business and its customers. The more data you can bring together into a single customer profile, the better. All of it comes together to create a clear and complete picture of his attributes, preferences and intentions.

That understanding can be used to help you decide what experience is relevant to him. "Experience" can refer to any interaction across channels: websites, mobile apps, email campaigns, digital advertising, even person-to-person communication such as in call centers, through online chat, or in a store or a branch location, and, in McDonald's case, at the drive-thru. You can decide which products to recommend, messages to display, emails to send, promotions to offer, etc.

Finally, you have to actually respond with that selected experience in a specific channel in the very moment the person is interacting with you.

This is what McDonald's is planning to do with its latest acquisition. It is planning to understand what each person is interested in ordering based on a number of factors such as the weather or what he has started to order, decide in the moment what menu options are relevant to that person, and respond with those options in a seamless way.

And with such a large price tag, McDonald's is making it clear that this type of experience is essential to its customer experience. It is placing personalization at the center of its CX strategy.

Related: 5 Mistakes That Mess up Your Customer Experience Strategy

Final thoughts

It's time to ask: To what lengths is your organization going to understand your customers and respond to them with individual relevance? McDonald's acquisition shows us that forward-looking companies are prioritizing personalization and putting it at the very center of their CX strategy — even those you might not expect. It shows us that personalization is not just about a single digital channel like a company's website or email campaigns. It can truly be integrated anywhere.

Use McDonald's as your inspiration to improve your customer experience and think bigger about personalization.

Karl Wirth

CEO and Co-Founder of Evergage

Karl Wirth is co-founder and CEO of Evergage. He co-authored One-to-One Personalization in the Age of Machine Learning. He is passionate about helping companies deliver maximally relevant 1:1 experiences and works closely with clients to drive measurable results from personalization.

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