Shopping experience

When does personalization make sense?

The most successful brands capture their customers’ attention and keep them coming back. One of the most effective ways to accomplish both is ecommerce personalization.

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The most successful online brands capture their customers’ attention and keep them coming back. One of the most effective ways to accomplish both is ecommerce personalization.

Personalization programs have shown 10-15 percent higher conversion rates and 20 percent higher customer satisfaction rates.

Customer satisfaction is particularly important since businesses that increase their retention by a mere 5 percent see profit increase between 25 and 95 percent

That type of sustainable growth is also the cheaper option for you as a retailer. Getting new customers is between 5 and 25 percent more expensive than retaining the current ones. Most customers agree that personalization is helpful in completing their purchase.

What is ecommerce personalization and how can it help?

An online storefront means multiple customers can be served at once, every day and anytime. 

The cost, however, is we loose on the human touch with our customers. Physical stores have sales clerks to guide each customer through their purchases. Without the sales clerks, online customers are presented with an infinite amount of products, options, and promotions. 

But too many choices are overwhelming, and we decide that the best decision is no decision. 

The paradox of choice. 

That’s exactly what happens to online customers.

Personalization is like having sales clerks in your online store. Based on each visitor’s buying and browsing history, the engine (typically powered by ML and AI algorithms) tries to predict what next product could be of interest to them. This reduces the number of choices available and simplifies purchasing decisions. 

It also explains why personalization is so effective at improving ecommerce conversion and sales. 

Everyone has seen the 'People who bought X also bought Y' carousel.

However, a true personalized experience goes far beyond this. It's the ability to automatically tailor the entire shopping experience for any visitor based on their interests and previous interactions.

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When do you need personalization?

Before you jump into implementing personalization, the first question you need to ask is if your store really needs it. While there is no doubt that personalization improves sales, not everyone will reap the same ROI. Below are factors to consider.

Number of products

Personalization really shines when the store has at least 100 unique SKUs across different product categories. This is when personalization is effective at reducing the paradox of choice. 

Amount of traffic

Personalization algorithms need good quality data to train. 

New websites do not have sufficient data for the algorithms to conclude meaningful relationships between products and each visitor. We recommend that your store has at least 10,000 sessions a month before implementing web personalization. 

Conversion rate

The next thing to look at is the current conversion rate (CVR).

In general, the industry CVR average for CVR is 0.5-1.5 percent depending on the nature of products sold, operating markets, and how many competitors/substitutes are available. If the conversion rate is on the low side (under 0.5 percent), there might be a more fundamental issue to resolve. 

Remember: personalization is not a cure for low conversion. 

It’s a booster for a well-functioning online store to sell more.

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