EBOOK
Get ahead of the Crowd WHY RETAILERS NEED TO BUILD A PERSONALIZATION STRATEGY THAT WORKS FOR THEM
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INTRODUCTION
Is your personalization strategy losing you money? Amazon has long been the shining light in the world of eCommerce. In 1999, Jeff Bezos rolled out crowd-based product recommendation technology on the Amazon website. The tool, which worked by looking at the behavior of all customers to discover popular and trending products, was the first step towards offering a unique storefront to every customer. But whilst Amazon has continually innovated their technology to look beyond the sum-ofall-customers, 1990’s technology still powers recommendations on an embarrassingly high number of websites.
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As Amazon and other forward-thinking retailers found, the crowd is not enough. The crowd is great for surfacing popular products, but customers want more than just “best sellers”. “People who bought this also bought” suggestions just don’t cut it anymore. Your customer wants unique, relevant experiences. And crowd recommendations just can’t provide that. It’s easy for your business to get left behind if you’re not taking advantage of the latest advances in technology - crowd recommendations could be costing you more than you realize.
In this eBook, you’ll learn why crowd recommendations may be losing you money and how testing paid off for online retailer American Soda, who grew revenue from their website recommendations by 175%. You’ll also find out the three steps that you must take to drive more revenue with personalized recommendations that will help you stand out from the crowd.
WHAT IS CROWD BASED PERSONALIZATION?
Don’t get lost in the crowd Crowd recommendations are just that a reflection of the masses. The technology looks at your existing data to work out the most popular products that were bought or browsed by all customers. These can take several forms, with the most common being:
Crowd recommendations are useful for introducing new customers to popular or trending products. But they don’t understand your customer. The valuable data they are giving you is generalised and aggregated: your customer’s data becomes lost in the crowd.
• BEST SELLERS: the most popular products purchased across the website.
Every time your customer returns to your website, recommendations become less and less relevant Customers who are continually presented with the same old best sellers will quickly click “back” - and they may never return.
• PEOPLE WHO BOUGHT THIS ALSO BOUGHT: products that were most commonly purchased by other customers along with another product.
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84% OF CONSUMERS WOULD NO LONGER BUY FROM A BUSINESS THAT DIDN’T TAKE INTO ACCOUNT THEIR PREFERENCES AND PURCHASE HISTORY
WHAT IS TRUE PERSONALIZATION?
This time, it’s personal. Innovative personalization takes recommendations to the next level. No longer do recommendations need to be based on your entire customer base. Instead, personalization acknowledges that each customer is an individual. Right from the first click, personalization learns your customer’s unique interests and preferences. It understands what your customer likes, accurately predicts what they will want and ensures every recommendation is personally relevant to each customer.
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Find out more about what personalization really means in our eBook – Why True Personalization is Critical to Your Business.
WHAT IS TRUE PERSONALIZATION?
Understanding true personalization Personalized websites are no longer static, irrelevant environments. Instead, your site instantly reacts to your customer’s shopping behavior to create a dynamic, persuasive experience.
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To understand your customer (and to recommend the right products), personalization uses four types of data: demographics, preferences, past behavior and real-time behavior. Personalized recommendations don’t simply reflect your customer’s individual preferences and interests, but they’re always relevant to what they’re doing right now. Personalization results in a seamless experience for your customer, full of helpful, timely and relevant surprises. Unlike crowd recommendations which can be overly-obvious, personalization is subtle, blending into the background.
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DEMOGRAPHICS
PREFERENCES
PAST BEHAVIOR
REAL-TIME BEHAVIOR
Your customer’s age, gender or location.
Data your customer has shared with you, like their favorite brand or their shopping interests
The products, pages and categories they have looked at or purchased in the past
The categories and products your customer is currently looking at or buying
CASE STUDY
CASE STUDY: American Soda take the taste test American Soda pride themselves on selling a range of American candy, food and drink to fans in the UK and Germany. It’s key that American Soda offer the best possible customer experience to retain and grow their strong, engaged customer community within their niche industry. To improve average order values, American Soda knew they had to improve the customer experience on their websites - but they weren’t sure what impact personalization would have on their revenue and other metrics.
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As part of a three-month split test, American Soda tested three types of customer experiences that contained either: 1. Personalized product recommendations 2. Crowd recommendations 3. No recommendations at all Every time a customer arrived on the website throughout the split-test period, they would experience the same type of recommendations. The conversions, revenues and sales generated by customers were then tracked for each group.
CASE STUDY
Even customers who saw no recommendations on the website bought and spent more than customers who saw crowd recommendations. The split-test results were conclusive. With a simple split test, American Soda grew sales, drove higher conversions, and found that personalized recommendations increased revenue from suggestions by an astounding 175%. However crowd-based recommendations (using both “best sellers” and “people who bought this also bought” suggestions) performed the worst – even compared to no recommendations at all. When presented with “best seller” crowd recommendations, customers clicked on the recommendations less. Whilst these types of suggestions may be helpful to new visitors, they provide little value to loyal, returning customers who expect more from their experience, who subsequently ignore the recommendations.
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This is emphasised by the impact of recommendations on overall sales, regardless of whether a customer used or looked at the recommendations. Crowd suggestions may have had a disruptive influence on the customer shopping journey - even customers who saw no recommendations on the website bought and spent more than customers who saw crowd recommendations. However, when recommendations were personalized – meaning they were relevant to each individual customer – engagement and conversions went through the roof.
175%
FOR AMERICAN SODA PERSONALIZED RECOMMENDATIONS GENERATED 175% MORE REVENUE THAN CROWD RECOMMENDATIONS
CASE STUDY
Customers who were presented with personalized recommendations engaged with the suggestions twice as often than when recommendations were based on the crowd. When personalized, using each customer’s brand and category preferences, recommendations generated 175% more revenue than when the recommendations were based on the collective behavior of all customers.
Personalized product suggestions led to a 5% increase in overall revenue, regardless of whether the customer clicked on or looked at the recommendations. This shows that unlike crowd-recommendations which caused a drop in overall revenue, personalized recommendations don’t present barriers which can get in the way of a purchase. Instead, customers subconsciously recognize the subtle, relevant environment – leading to more sales and a higher conversion rate. For example, a customer shopping with a brand whose experience is highly relevant may feel more comfortable and more trusting than when they are shopping with a brand that doesn’t provide a personal experience. PERSONALIZED PRODUCT SUGGESTIONS LED TO A 5% INCREASE IN OVERALL REVENUE
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STAND OUT FROM THE CROWD
Don’t be held back get your head out of the crowd As shown by American Soda’s results, if you’re relying on crowd recommendations to power “best sellers” or “people who bought this also bought” merchandising on your website, you could be missing out on revenue without even knowing it. And it’s not only revenue that you could be losing. The irrelevant experiences provided by crowd recommendations results in lower engagement while distracting and disrupting customers from their purchase journey. And a poor experience means your customer clicks away and goes to a competitor, never to return. You’ve lost a customer for life.
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STAND OUT FROM THE CROWD Crowd recommendations are incompatible with the future of retail. Customers are demanding unique, personal experiences from the brands they choose to deal with. 84% of consumers would no longer buy from a business that failed to take account of their preferences and purchasing history. It’s critical that retailers innovate, offer special experiences and stand out from the crowd.
AMERICAN SODA SNAPSHOT: Personalised Recommendations vs Crowd Based 3.4% Increase in conversion rate 5% Increase in total sales 45% Increase in direct sales 175% Increase in direct revenue 5% Increase in total revenue
STAND OUT FROM THE CROWD
HERE ARE SOME PRACTICAL STEPS TO FOLLOW THAT WILL HELP YOU SHAKE UP YOUR RECOMMENDATIONS GAME:
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EVALUATE WHERE YOU ARE NOW
CONSIDER WHAT YOU CAN DO WITH PERSONALIZATION
Identify what type of recommendations you’re using, and where they are. Map out your current customer journey, and look at the value your current recommendations are providing. Crowd recommendations, when used in the right places, can be valuable.
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What types of data can you understand about your customer, product or business that could be used to drive a more relevant, powerful experience? Understanding small, seemingly insignificant pieces of information about each unique customer could make a big difference to the way you can adapt their experience.
3. TEST, TEST AND TEST Unsurprisingly, testing is still not a part of the day-to-day eCommerce workload. But testing is the only way to decide whether designs, features, tools and services (whether developed in-house or from a third-party) actually make a difference. Take the metrics that matter to you (like revenue and conversion rate), but track others (like page speed and pages to purchase) that, if improved, will result in happier, loyal customers.
THI S E BOO K I S B R O U GH T TO YO U BY SMART FO CU S
The Internet of Everything is the macro-trend of connectedness that’s changing the way customers shop. With more than half of online visits and a third of eCommerce transactions now coming from mobile devices, mobile and proximity marketing are more important than ever. SmartFocus is the leader and innovator in contextualized and personalized messages. Our platform includes beacon technology that knows when your customer visits a physical store; real-time predictive recommendations generated at the precise moment they open your email or visit your site; and powerful insights that use smart analysis of Big Data to effortlessly generate a truly personal experience.
SmartFocus Lynton House 7-12 Tavistock Square London WC1H 9LT - United Kingdom Tel: +44 (0)20 7554 4500 Fax: +44 (0)20 7554 4501
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www.smartfocus.com