The benefits of personalization in ecommerce

Conventional marketing wisdom speaks about the “4 Ps” that shape, drive, and ultimately determine marketing success: product, price, place, and promotion. While these pillars remain important, on today’s $6.9 trillion USD ecommerce landscape there is another “P” that is perhaps more vital and valuable than anything else: personalization. Consider these astonishing numbers:

Consider these astonishing numbers:

• 90% of customers rate personalization as “appealing”.
• 80% of customers are more likely a purchase from a brand that offers them personalized communications and experiences.
• 66% of customers will not purchase anything from a brand if they feel that they are getting a generic “one-size-fits-all” approach.

Clearly, ecommerce personalization matters — and now more than ever. Highlights McKinsey’s Next in Personalization 2021 Report: “The surge in online interactions since the onset of the pandemic escalated expectations — giving consumers more exposure to the personalization practices of ecommerce leaders and raising the bar for everyone else.”

While there are many benefits of personalization in ecommerce, seven in particular stand out as being the most important:

1. Increased sales and profits

Delivering personalized customer experiences has the potential to drive significant, and in some cases dramatic, increases in retention, sales, and profits:

• Brands that deliver outstanding customer personalization generate 40 percent higher revenues compared to brands that do not excel in this area.
• Brands that focus their personalized messaging on helping customers at various touchpoints on the end-to-end customer journey can expect 16 percent more impact on commercial outcomes compared to brands that do not.
• 90 percent of leading marketers say that personalization contributes significantly to business profitability.

What’s more, ecommerce personalization is not just beneficial for low-price leaders and other brands that aim to compete primarily on price. Upmarket, premium, specialized, and “aspirational” brands with a price floor that is typically above others in the marketplace can also realize substantial gains.

About 77% of customers will knowingly and happily pay more for a relevant product or service if they feel that the ecommerce experience is personalized, and they are engaged as unique individuals.

2. Increased customer loyalty and lifetime value

Whether they are selling hotel rooms or hot sauce, ecommerce brands know that in the long run the difference between thriving and struggling is less determined by first-time customers and more determined by loyal customers and repeat purchases:

• 15% of a brand’s most loyal customers account for 55%-70% of its total sales.
• 57% of customers  spend more on brands to which they are loyal.
• returning customers spend 67% more than new customers.

Personalization can help brands keep loyal and profitable customers on their roster, and thwart aggressive attempts by competitors to lure them away. Roughly 60% of customers say they become repeat buyers after a personalized shopping experience with their past purchases.

3. More relevant and better-performing recommendations

Ecommerce personalization powered by AI-based recommendation engines allows brands to anticipate what customers are searching for or are interested in, and provide tailored suggestions in real-time:

• 71% of customers prefer targeted advertising vs. generic advertising.
• 63% of customers are positively influenced by personalized product recommendations on product pages or landing pages.
• 35% of what customers purchase on Amazon is driven by recommendations.
• 10% to 30% of overall ecommerce revenues come from product recommendations.

Furthermore, relevant recommendations do not just have the potential to increase the number of transactions. They can also increase the amount that customers choose to purchase. Approximately 54% of brands say that product recommendations function as the key driver of a higher average order value.

4. More relevant and better-performing calls-to-action (CTA)

Ecommerce personalization takes CTA impact to a whole new level. Research has found that personalized CTAs that speak directly to a customer’s problems and goals perform an astonishing 202% better than generic one-size-fits-all CTAs.

5. Increased time-on-site

Research has found that a mere five minutes is the average time that customers spend on an ecommerce site. Personalized messaging, product recommendations, and content can all help customers stick around for longer — and increase the chances they will make a purchase; if not during that visit, then in the near future.

As Salesforce points out: “The more time [customers] spend on your site, the higher the chance they will contact you, complete a conversion, or return to your site.”

6. Improved search engine optimization (SEO) and search rankings

As we highlighted a moment ago, effective personalization has the potential to significantly increase customer time on-site. This is a key metric that search engine algorithms take into consideration when determining how to rank multiple sites that are competing for the same keyword (i.e., search term).

The financial value of climbing the search engine ladder should not be underestimated. Consider that:

• 68.7% of all clicks go to the top three organic search results.
• The top organic search result is 10x more likely to get a click than the result in 10th place.
• The top organic search result gets an average of 19x more clicks than the top paid search result.

Of course, time on site is not the only thing that search engines assess and calculate. For instance, there is a whole universe of off-page strategies and tactics that enter into the equation. However, time on site is a major factor.

As KissMetrics.com notes: “Time-on-site is the best metric for determining how useful visitors find your entire ecommerce website, instead of just focusing on one page. It answers questions like: how long do they spend online shopping before purchasing a product? Are they reading multiple articles from the blog entries?”

7. Reduced cart abandonment

Cart abandonment leads to a whopping $18 billion USD a year in lost sales. Currently, cart abandonment rates hover around 70% and can be significantly higher in some sectors like fashion, automotive, travel, and tourism.

Online stores can collect and apply everything they know about their customers, and use this intelligence to deliver personalized email marketing automation campaigns that invite and/or incentives them to complete their purchase (either on the same visit through pop-up notifications and other elements or after they leave if they are a known customer and their email address is in the database).

There are two core mechanisms — namely micro-conversions, and micro-interactions — that help ecommerce brands engage (or re-engage) with customers, and usher them forward on the customer journey.

Below, we summarize what these are and how they work:

Micro-conversions

The simplest way to grasp micro-conversions is to see them as a trade: brands offer something interesting, relevant, and valuable to customers, and in turn, customers share some identifying information about themselves — typically their name and email address. These offerings can include things like brochures, datasheets (suitable for more technical items like electronics), and ebooks. It can also include access to “gated” members-only content like videos and infographics.
 
Successful micro-conversions do not just help brands know who their customers are and how to get in touch with them. It also gives them clues into what they are looking for, and where they are positioned along the customer journey. For example, a customer who subscribes to a newsletter or downloads a brochure is probably at or near the beginning of the journey, while a customer who signs up for a demo or consultation is likely in the middle (or possibly near the end) of the journey. These insights can be leveraged to craft and deliver dynamic content and other communications that drive customer engagement, and ultimately boost sales. 

Micro-interactions

Micro-interactions help brands learn about their customers by tracking their actions and behaviors as they navigate a site. For example, a customer who reads testimonials about a product can be presented with pop-up notifications featuring customer reviews of that same product. Or, customers who watch a demo or explainer video can be presented with a special limited-time offer. Unlike micro-conversions, micro-interactions do not involve any direct engagement with a customer (e.g., filling out a form). Data is gleaned from a customer’s browsing behavior.
 
When effectively designed and deployed, both micro-conversions and micro-interactions help brands learn more about the most important people in their universe — their customers! — and provide them with more personalized user experiences that unleash the benefits we discussed earlier.

The following table highlights some examples of ecommerce personalization featuring a customer in search of a new laptop:

Here are some general guidelines and advice for getting started with your ecommerce personalization strategy:

• Build an ecommerce personalization “dream team” consisting of the following roles: content marketer, ecommerce specialist, digital analyst, IT representative, marketing technologist, experience architect, digital strategist, and technology partner. Foster collaboration, alignment, and efficiency across all team members (and the groups that they represent) to prevent silos.
   
• Start your personalization efforts with a simple strategic objectives framework to visualize how digital goals drive marketing objectives and in turn impact ecommerce business objectives. It is very important to anchor the framework to one, two, or at most three strategic themes. More than that and it will be very difficult (if not impossible) to allocate and manage resources efficiently and avoid diluting the brand.
   
• Assign points (sometimes called engagement value) to determine and rank the impact of specific digital goals. For example, a customer who subscribes to receive monthly promotional email campaigns might generate 10 points, while a customer who adds a product to their shopping cart might generate 75 points.
   
  In this way, point generation becomes a valuable key performance indicator (KPI) that is not supported by traditional website analytics, but delivers a much more accurate measure of customer behavior. It also helps measure return on marketing investment (ROMI) and identify the personalization tactics, strategies, and campaigns that have the biggest impact for the least cost.
   
• Build and organize customer segments from your customer base to drive ecommerce personalization. Segmentation can be determined by variables such as location (IP geotargeting), online and offline campaigns triggered, referrer (channel), date and time, personal data like search keywords (this data source is especially valuable when driven by AI-powered on-site search), device (e.g., desktop, smartphone, tablet), asset downloaded (e.g., ebook, whitepaper, checklist), actions (e.g., requesting a pricelist, scheduling a demo), and integrations with other systems (e.g. CRM, apps, commerce, POS, PIM, ERP, social media interaction, etc.).
   
• Build a Digital Relevancy Map. This establishes a structure that provides each customer segment with engaging, relevant content and personalized experiences that nurture them toward a purchase and help online retailers increase conversions.
   
• The early stages of the ecommerce personalization journey can be exciting and energizing — but also stressful, as decision-makers within and beyond the marketing team need validation that progress is being made and things are headed in the right direction.
   
  As such, it is both pragmatically and politically wise to generate support and excitement by benchmarking key metrics. Conduct A/B testing with personalized and non-personalized content to prove the impact of the overall initiative. Use quantitative customer data to turn doubters into backers!

The ecommerce landscape is relentlessly and furiously competitive. Yet ecommerce stores that set themselves apart from the crowd are not necessarily those with the lowest prices, largest selections, or fastest fulfillment. Rather, their marketing strategy focuses on consistently making their customers feel special and valued — whether they are brand new on the scene or have been on the roster for years.

Ecommerce personalization is the bridge that connects brands with individual customers across the end-to-end customer journey, and unleashes a suite of benefits that do not just move the needle when it comes to customer satisfaction, competitive advantage, and ongoing growth: they completely change the game!

Launch a guided demo of Sitecore Personalize, which empowers you to deliver tailored experiences across every touchpoint, ensuring a seamless and engaging journey for every customer need.