Why Personalization Is Set To Explode


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Personalization techniques are now essential for success in both B2C and B2B e-commerce. This post will describe the need for personalization, explore how personalization approaches have evolved, and share recommendations for implementation that help avoid common pitfalls.

As the amount of spending via e-commerce channels continues to increase, the landscape has become more competitive than ever. E-commerce giants such as Amazon and Walmart have advanced the state of the art in their battle for customers and share of wallet. New entrants, including venture-backed startups, aggressively target niche markets. For firms engaged in e-commerce, the need to break through the noise, deliver exceptional customer experiences, and optimize revenue has never been greater.

What’s Driving Personalization?

Personalization techniques that tailor the content, offers, promotions, and experiences for visitors help firms achieve these goals and are now considered essential. Without a doubt, e-commerce has moved from a “one size fits all” to a “one size fits one” approach and static websites are no longer enough. There are four major forces driving the adoption and advancement of personalization.

Customers expect a great experience.

Many firms recognize that the experience their customers have as they interact with them is more important that ever. Customers expect simple, easy, and personalized e-commerce experiences. And, if a site fails to deliver that experience, an alternative is simply a click away. People are also more likely to share their experiences, both positive and negative, with others via social media.

Customer behavior has changed dramatically in recent years.

With the adoption of new technologies, customer shopping behavior has shifted significantly. Customers are now much more likely to browse and research an item in a physical store but eventually purchase the item online. And, the opposite is also true. Customers research online, but purchase in a physical store. Mobile and social technologies have increased the number of touch points most firms have with their customers. Regardless of the interaction channel, customers expect a seamless, consistent experience.

The volume, velocity and variety of data available are all increasing.

According to IBM, 90 percent of the data in the world today was created in the last 2 years alone. Firms have access to more data than ever before. This includes their own first party data, such as information about their customers stored in their CRM system, as well as third party data they purchase from others, such as customer demographic data, past purchases, and web browsing history. Firms engaged in e-commerce are very interested in how to best use this data to increase value.

Firms seek new ways to increase e-commerce revenue.

As the e-commerce landscape becomes more competitive, firms are exploring new ways to optimize their e-commerce revenue. Personalization techniques have proved very effective at increasing conversion rates, average transaction size, and customer loyalty. By 2018, Gartner predicts that B2B firms with effective personalization with outsell their competitors without this capability by 30 percent. According to a study conducted by Cisco, 70 percent of the largest segment of online consumers said that a personalized shopping experience would lead them to increase their purchases.

The Evolution of Personalization Techniques

Personalization techniques include a broad variety of technologies and processes that tailor content for visitors based on their characteristics, behaviors, and interactions. Personalization includes techniques such as segmentation, A/B and multivariate testing, product recommendations, and behavioral targeting. Over the years, behavioral targeting techniques have evolved considerably. Behavioral targeting uses information about a visitor’s past and current activity to customize content.

The first type of behavioral targeting techniques to come into general use were rules-based. With this approach, business rules are defined in advance and optimized over time through a manual, trial and error process. Rules-based techniques have a few limitations. They operate on segments of visitors but don’t customize content for each individual visitor. They are also resource intensive and require ongoing investment to define, test and refine the rulesets.

As behavioral targeting techniques evolved, a new type of approach, based on algorithms rather than rules, began to emerge. These techniques became know as automated or algorithm-based targeting. With automated targeting, software is used to automatically identify micro segments of visitors and evolve statistical models that increase in effectiveness over time. Automated approaches can improve over time—without manual human intervention—and they can find patterns that humans may not be able to detect.

Personalization Best Practices

When embarking on a effort to introduce or improve personalization techniques, there are several best practices to keep in mind in order to avoid common pitfalls. Personalization can be very effective in improving customer experience and increasing revenue. However, effective implementation as well as ongoing management and monitoring are crucial.

Tie investments in personalization to business objectives.

It is very important to define the success metrics for personalization and to measure and monitor against Key Performance Indicators (KPIs) on an ongoing basis.

Don’t surprise visitors with how they are being targeted.

Make sure that personalization techniques aren’t overly aggressive. This is can be the difference between what visitors perceive as an exceptional, tailored experience from one they may perceive as creepy. Keep in mind that most customers don’t mind the use of their past purchases with your firm or stated preferences in customizing content. However, many people are less comfortable with the use of their web browsing history or social media updates.

Actively measure and monitor personalization processes.

All personalization processes should be constantly managed and monitored. Care must be taken to make sure that personalization techniques continue to improve customer experience and sales. This is especially true for automated behavioral targeting techniques where the statical models driving customization are always evolving.

Take an iterative, agile approach to personalization.

The best approach to personalization involves experimentation. Through ongoing test and learn cycles new customized content, promotions, pricing, and products can be explored to determine what leads to improvements.

The Road Ahead

Personalization techniques have evolved over the years and become more sophisticated as available data, personalization technologies, customer expectations and e-commerce competition have all increased. Personalization is now an essential technology component for success in e-commerce and one that can have a significant impact on customer experience and sales. Firms should consider the types of personalization techniques available and evaluate whether rules-based or automated behavioral targeting techniques are appropriate. They should adopt an ongoing, test-and-learn approach to personalization that leads to continuos improvement. And, finally, they must keep customer expectations of privacy in mind to ensure a positive customer experience.

Photo copyright: alphaspirit / 123RF Stock Photo

Republished with author's permission from original post.

Dave Birckhead
Dave is the Global Head of Marketing Technology at Spotify. He has worked with numerous Fortune 500 companies to bring about marketing technology solutions that optimize business performance, accelerate innovation and enhance marketing. You can find Dave on Twitter, LinkedIn and Google Plus.


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