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Feb 1, 2007
Personalization techniques can not only help an online retailer get more customers, it can also build loyalty and add to tickets by cross selling and getting more shoppers to trade up. One example is, "Laurie," a personal shopping assistant at the Casual Male XL website.
Laurie, which was in development for two years, guides a customer through his own online store. She knows the shopper's exact sizes, fashion preferences, dislikes, and what is already in his wardrobe.
The website uses online video to allow customers to see Laurie and talk with her. She works 24 hours a day, seven days a week and was developed by David Levin, president and CEO of Casual Male Retail Group Inc., and his staff of tech, merchandising and marketing personnel.
"Personalization moves you away from scattershot methods for retaining customers and can help boost sales," according to Levin. He believes that online merchants must begin personalizing their websites.
To do so, however, "You must understand individual customers through their shopping and buying habits and their needs and wants, and then cater to them." Casual Male XL, for example, doesn't pitch suits to a man who never wears one.
But if a study of a customer's buying habits shows that he likes a certain brand or type of casual shirt, the company emails him when a shipment of that product arrives. Then, when the prospect goes to the website, he sees a display of that shipment immediately.
Levin is not alone in predicting that increased personalization is a must. Without gaining a deeper understanding of individual customers' preferences and shopping behavior, these experts contend, online merchants will have trouble getting a larger share of each shopper's wallet.
Calling personalization, "a new necessity," for online merchants, Tamara Mendelsohn, a consumer market analyst for Forrester Research, says it has become important because the online battleground has shifted from price and product to customer experience. "Retailers that do personalization first will immediately have a leg up on their competitors," she says.
"Making the customer experience more relevant increases the likelihood of customers returning. While it will give retailer early adaptors a competitive advantage, it will soon become a must, for online sales success, she suggests.
Personalization utilizes information technology to draw conclusions based on a customer's shopping experiences and purchasing data. Equipped with that information, personalization technology automatically creates a unique eCommerce website experience or a highly targeted email message for individual consumers.
Among the more obvious ways it works now is displaying a person's name and preferred product categories on the website when a shopper returns and logs in. It can also enable personal networking at the website. And it can show what the shopper is likely to find of interest.
Beyond that, it can also enable the customer to play an active role, such as answer questionnaires, create or participate in blogs, develop a top 10 wish list; all of which help the merchant understand the customer even better.
Netflix Inc., the online DVD rental company, addresses subscribers by name on the page, guides a visitor to units he or she is likely to find interesting, and tells why particular titles are being recommended. It also offers social networking by letting subscribers provide their own reviews and look at what their online virtual friends are watching and talking about.
The Netflix technology is called Cinematch, and it predicts that a certain subscriber will enjoy a new movie based on browsing behavior, rental history, and the number of stars the subscriber has given similar films.
The subscriber that gave, "Goodfellas," five stars, for instance, will not be directed to, "Steel Magnolias," or, "Fried Green Tomatoes." This customer is more likely to be steered toward one or more of The Godfather series.
"Retailers can create more meaningful relationships with customers through relevancy," says Mendelsohn. "In other words, when a merchant decides on something to say, customers will listen. That translates into higher click through rates on email campaigns and increased attention from the merchant's customer base. Quite simply, relevancy translates into more business and loyalty."
Yet the arguments for personalization depend on what one defines as personal, according to W. Gregory Dowling, a senior analyst at Jupiter Research. "When we ask consumers what is going to make them purchase again from a retail store, we do not see a huge percent saying personalization is what they need," he says. In one of this company's surveys, just five percent of respondents said personalized email would make them buy more from an online merchant, he notes.
"In many people's minds, personalization has meant tangible things like having the ability to recognize an individual customer and welcome her back by name," Dowling says. "But helping people find the right products and make decisions is essential to successful eCommerce transactions."
He adds that such things as previously viewed products or the display of merchandise that is likely to be of interest, which is managed behind the scenes, will assist consumers in making the right decision. Of the 95 percent of shoppers in the Jupiter Research study who did not believe personalized emails would make a difference in their shopping decisions, Dowling concludes, "Many have been fooled."
In actuality, Jupiter Research found that highly segmented and targeted emails can lead to conversion rates that are 80 percent higher than emails that are not well targeted.
"So personalization seems to be flying under some customers' radars," he says. "Today's customers are hung up on fast shipping and promotions, more than on understanding the technology behind targeted emails."
An increase in personalization will translate into an increase in frequency of customer visits, according to Craig Smith, founder and managing director of Trinity Insight LLC, a research firm that specializes in web user experience. "This is where online merchants will see the highest impact of personalization."
"Shoppers will realize that the retailer has a site that specifically meets their needs. Consequently, measuring return visits and the percentage of revenue by return customers will gauge the stickiness of the site, based on the enhanced user experience," he concludes.This article was edited from a story in Internet Retailer magazine.
Topic: Business Strategies
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