Article

Five ways to personalize the e-commerce experience

Enhancing the online experience with personalization can yield higher conversion rates and build trust and loyalty.

April 17, 2011

As rapidly as today’s retail environment continues to evolve, it is also increasingly complex and exceptionally competitive. Contributing to this complexity are the multiple paths to purchase for the customer. While this might sound exciting, the reality is that many retailers are struggling to understand how to effectively and consistently engage their customers across channels -- from digital to brick-and-mortar -- in a manner that builds long-term customer loyalty and delivers a sustained return on marketing spend.

As new consumer channels emerge and merge, it is important to understand how the shopper experience evolves along with it. Retailers continue to add value and differentiation in the form of digital features both in-store and online. Within this context, retailers should not lose sight of their guiding light: the needs and wants of the customer. It is more important than ever to know who your loyal customers are, what they care about and how they want to hear from you and to align the organization to serve this customer across marketing silos and channels.

E-commerce is growing in popularity faster than any other channel and according to eMarketer, sales will reach $188 billion in the U.S. this year. Although most purchases are still made in-store, a recent study found that over half of U.S. smartphone users report they are more likely to purchase from retailers with mobile websites. In fact, today’s path to purchase is often blurred:

• Did the customer research the product online and then purchase in-store?
• Did they see the product in-store and then follow the brand on Facebook?
• Did they use a mobile app in-store to find a promotion?

The growth of e-commerce has been fueled largely by the potential of mobile commerce. Still in its infancy, m-commerce is projected to reach $4.9 billion in the U.S. in 2011. While this channel is booming, the stakes are high for retailers. A recent study conducted by Harris Interactive found that 84 percent of U.S. adults who used mobile for an online transaction were disappointed in their shopping experience. Further, 63 percent of those surveyed indicated that they would be less likely to buy from the same company in other channels as a result of their negative experience.

Today’s consumer has higher expectations and shops differently. They expect greater value, more relevance and access to information, culminating in a better customer experience. Additionally, while many retailers have adopted customer-centric strategies for improving the shopper experience in-store, the same strategies need to be integrated within the organization and across channels so that relevant dialogue to each customer is consistently delivered in the manner that they prefer. In the e-commerce environment, delivering a positive and personalized customer experience must be a priority for retailers. Retailers must measure and understand the results as a critical component for informing digital strategy.

Creating a personalized experience online

Personalization is increasingly becoming a key competitive strategy. In November of 2010, Terry Lundgren, Macy’s CEO, announced the retailer would distribute 30,000 versions of a single catalog in an effort to provide personalized content. Google is building personalization into their algorithms, recently launching unique search engine results based on a user’s search history. Enhancing the customer experience online with personalization will yield higher conversion rates and build trust and loyalty overtime.

There are five elements on which a retailer should focus to provide a personalized e-commerce experience:

1. Relevant Content

If online shoppers struggle to find the items they want, they are more likely to abandon the purchase. This missed opportunity highlights more than a lost transaction; it also damages the reputation of the retailer for the customer who is then more likely to try again online, somewhere else. Leveraging shopper insights from purchase history, price point paid, social connections, websites visited and search terms should help to inform content delivered; such as promotional offers, advertising and preferences for relevant product recommendations.

2. Provide the Customer Tools

Personalization is becoming easier with the help of mobile devices, website features and apps that allow customers to share their identity, location and preferences directly with a retailer.

Best Buy emerged as a front-runner in mobile integration when they launched a mobile app in 2009 offering mobile only specials. Just two years later, apps are more sophisticated and personalized in the quest to deliver a seamless, relevant and convenient customer experience across channels. Today, the Best Buy app allows customers to receive personalized recommendations and shopping lists based on their location and purchase history in addition to managing favorites and carts. To be successful, personalized shopping lists should allow the shopper to easily engage directly with the retailer and enable user feedback by giving the customer control over the content. Just as a user can give a "thumbs up or down" on their Pandora playlists, retailers need to positively engage the customer in personalization in an effort to more accurately understand preferences.

3. Real-time Matters

At dunnhumby, we have found that analyzing actual purchase history is a sound technique for understanding a customer’s product preferences and providing relevant offers. However, in categories such as consumer durables, electronics and apparel, the product dynamics -- including longer purchase cycles and higher price points -- require more robust targeting approaches. For example, if a customer has recently purchased a television, then sending an offer to buy another television is not a relevant communication and, thus, not a good marketing investment. In the online space, retailers should leverage real-time clickstream data to deliver customer content and offers. If a person is searching for information on televisions or visiting electronic sites, then sending a targeted offer immediately about a television is a better approach.

4. Social Media Elements

While social networking sites have yet to prove their long-term commerce value, social media can inspire an enhanced form of loyalty. Social media gives brand ambassadors a voice and allows users to share recommendations, provide a brand with increased exposure and connect "like" minds. For retailers it is a forum to further personalize the brand and retail experience, listen to and connect with customers, behaviorally target and drive sales online or offline. For example, Gap’s StyleMixer app let users browse offerings and experiment with clothing combinations to create an outfit that can be shared with friends on Facebook and Twitter. Gap also uses its Facebook page to inform followers about flash sales and local discounts.

5. Analysis is Fundamental

While brick-and-mortar customer data has been studied and applied for decades, the analysis of clickstream data is still in its formative years. E-commerce benefits from this wealth of knowledge in the brick-and-mortar space, yet its potential is significantly greater because mobile devices and online interactions generate access to substantially more data. While data sources in the non-digital space remain "claimed awareness" or interest at one end and the eventual purchase at the other, there is little access to individualized data in between the awareness and the purchase that could give marketers insight into the shopper’s decision process.

Digital data fills in those significant gaps within the path to purchase by shedding light on purchase decision influencers as well as (through browsing and search) alternative products that were considered and then rejected. Further, digital has the potential to capture this data for a large percentage of the entire universe of shoppers and not just a limited panel. This data should be used to help companies make better online decisions by creating a comprehensive view of the shopper, their behavior and what motivates them to buy.

The rapid growth of e-commerce will continue to generate significant change in the retail industry and enable new customer touchpoints along the path to purchase. It will be vital for retailers to adopt consistent customer-centric strategies across channels, integrating the in-store and online experience with the goal of understanding their customers better than anyone else. An even greater challenge is to reorganize the business so that beyond "clicks and bricks," the customer remains at the center of business decisions and measurement. Within e-commerce, customers will continue to demand a relevant and personalized online experience and retailers that are able deliver and exceed that expectation are ideally positioned to become category leaders.

John LaRocca is vice president of Insights at dunnhumbyUSA, responsible for innovation, talent development and best practices in the initiation and delivery of analytical solutions for dunnhumby’s loyalty programs. Andrea Brown is vice president of media and marketing at dunnhumbyUSA, responsible for the development of custom research products that measure marketing and media effectiveness. (Photo by M C Morgan)