A simplified view on personalization is this: A user who showed interest for X or tends to buy products from Y, or belongs to the customer segment A is treated that way for his/her next visits or touchpoints and likely in parallel for behavioral targeting. This approach is somewhat similar to social media bubbles. They are constantly preaching to the converted, or feeding and re-feeding one bubble endlessly. We all know this is stupid, sometimes even dangerous, but after all effective. Further, it can be expensive when targeting the already converted or simply uninterested users.
Marketing lives a lot in persona-thinking. This is a long time approved model which helps a lot to direct the right message to a target group. User profiling is more or less derived from there. However, when it comes to a single and concrete situation on which a decision must be made, it misses an important point: “How are you today?” A question like this is basically the starting point for any human conversation. The answer to this question helps a lot to understand the very customer situation and mood, regardless of the customer background in terms of purchase history, customer segment, demographics, etc. Much more important is the situation. The same user is driven by his/her very situation, depending on the time of the day, the device type, the region etc.. The same person is acting and reacting very differently in different situations.
A great customer experience must not reflect all historical behaviors and all user details in order to serve well. It needs to fit to the moment and the actual desire. Why should a sales person in a store know a bunch of personal information (yes, it is!) about you just to help you finding the right jeans?
Personalization in e-commerce
Personalization in e-commerce is much about which product is displayed first or how an overview is sorted, what recommendations are made and best-guessing (basically betting on) what is relevant to the user at that very moment. Personalization of the user experience on your own website or in your own online shop does not require spending advertising money. It is also less fraudulent by default.
It is possible to automate personalization very accurately. Yet, for this you do not need to build user profiles by collecting any possible personal information just to better guess if red or blue is the favorite color.
Apparently, you have all the data and knowledge to do that on your own. You have the data of the situation.