A number of recent studies have shown how critical it is for e-tailers to attract the right customers — consumers who will establish a lasting and profitable relationship with a company.
It is the repeat customers who, in the end, cost far less for the e-tailer to attract and who will make larger purchases on repeat visits. The financial markets have shown their awareness this year of the importance of sustained customer relationships in the online marketing business model.
In addition, certain customer segments, such as those primarily attracted by convenience and brand, can be responsible for far more profitable sales than other segments.
A recent study by Bain & Co., Boston, and Mainspring, Cambridge, MA, also showed that customers who are segmented according to the advertising medium that drew them to an e-tailer’s Web site could be expected to have different spending patterns. The most profitable customers buying groceries online, for example, were far more likely to have heard of the site through direct mail, word-of-mouth or television/radio, whereas those who learned of the site through a banner advertisement or e-mail from the retailer were far less profitable customers.
One great plus of online retailing is that so much market research can be automatically accessed and applied in the course of a customer visit. A number of sophisticated personalization technologies are now available that can help e-business marketers use information about their most valued customers.
There is no substitute for a sound marketing strategy and a skillfully built business model, but there also is no substitute for sophisticated insight into customer behavior that is now possible with the proper application of personalization technology. Analysts agree that the e-tail sites that will succeed are those that provide superior service by automatically accessing and intelligently applying a customer’s unique preferences based on prior interactions.
Personalization, the combined use of technology and customer information to tailor electronic commerce interactions to individual customers, allows marketers to:
• Better serve customers by anticipating needs.
• Make interactions efficient and satisfying for both parties.
• Build relationships that encourage customers to return for subsequent purchases.
How does a company select and implement a personalization technology? Constructing a personalization strategy is a lot like putting a puzzle together; it’s complex, made up of different pieces and sometimes the easiest way to start is by focusing on individual pieces and sections rather than by looking at the whole picture.
With so many pieces to this personalization puzzle, companies often try to find a solution before even knowing what the big picture looks like. They forget to look at these initiatives from the customer’s perspective. They forget to answer very important questions such as: Who are my customers? What are the needs of my customers? How does one customer differ from the next?
Start by establishing a clear set of goals for your business, identifying the desired results for the customers and keeping in mind that your success depends as much on those as on the technology you choose to get there. It’s important to remember that the technical requirements to achieve your personalization goals require a number of different components, often from a number of different vendors.
Choosing the Right Tools
The earliest stages of the industry saw individual technologies jockeying to be positioned as full-solution companies. Today, the trend is convergence, with companies forming strategic partnerships or acquiring technologies to add missing components to form a more well-rounded personalization solution. The technologies to accomplish personalization goals include:
• Recommendation engines, which include collaborative filtering and neural nets technology, define your customer through the use of behavioral implicit data and user-solicited explicit data. These engines create user profiles from information gleaned from the prior e-commerce experiences of an individual customer and from the behavior of other customers. From these patterns, they can produce for the business a projection of a customer’s future buying behavior. This enables the business to match the customer with the right products, content, advertising and/or people, in real time during a customer’s Web site visit.
• Rules-based engines allow Web designers to customize content or products on a site determined by a pre-defined set of rules based on relationships inferred from site analytic tools. For example, if product A is purchased by a customer, then show product B at this sale price because they are related. In the past, these if/then statements that rules-based engines rely on required a lot of attention by designers and marketers. Today, rule-builder engines can assist in developing and maintaining product and content relationships.
• Profiling, which aggregates data culled from multiple Web sites, allows an online session to be tailored before a potential customer even identifies himself or places an order. Without the business knowing the identity of the site visitor, the business’s profiling application can know about this visitor’s interests and needs. Based on identification information automatically supplied to the business when the visitor arrives on a site, the site is configured to appeal to the buying habits of that customer. This previously obtained information from other sites is provided without access to the customer’s identity.
• Human personalization — data conferencing or live chat — allows the traditional effectiveness of a call center now transferred to the Web. The customer service representative has an opportunity to engage the user live, proactively or reactively, to assist in answering questions or giving direction at a time when the customer is most receptive.
Personalization Beyond the Web
Analytical tools offer marketers and site designers instant feedback on campaign and site performance. For the purposes of personalization, segmenting users by online behavior helps identify the most valuable customers and leads to initiatives for customer retention and migrating lesser-value clients to valuable ones. Personalization offers marketers the benefits of mass marketing coupled with customizing the follow-ad or message to individuals based on their user profile. The obvious benefit is a targeted, relevant message with a higher probability of conversion.
Personalization initiatives also integrate with customer relationship management for cohesive customer experience over multiple touch points of an organization. All parties in the marketing organization should have access to the same customer information so that the customer experience is consistent throughout.
These technologies and approaches are complementary, and rarely will one be sufficient for achieving personalization goals. When used together within a solid marketing strategy, they will allow you to connect much more effectively with each individual customer.
• Travis Stel is chairman of the education committee at the Personalization Consortium, Wakefield, MA, an international advocacy group. Reach him at [email protected]