During the late 1990s, when the online commerce movement was in itsinfancy, the notion of adding personalization capabilities to one’s Website was a logical extension to the basic concept of online transactions. The premise was simple enough: prompt customers to enter some basic information about their general demographics or personal preferences, or track such information through Web cookies, in order to create a profile that would allow you to create offers and campaigns that met the needs of each customer.
On the surface, it seemed reasonable that personalization would be abuilding block upon which e-commerce innovation would take place. But afunny thing happened along the way to that goal.
Today, the online commerce market has reached a level of maturity thatcan be seen both in the myriad industries in which it can be found — retail,travel and hospitality, media and entertainment, etc. — as well as therevenue numbers it produces. Online retail sales in the United Statessoared past US$100 billion in 2003, an increase of 38 percent from theprevious year, and were followed by sales of US$33 billion in the firstquarter of 2004.
Victim of Misconceptions
Meanwhile, the functionality of transactional Web sites is evolvingfrom the static sites of the 1990s. Sites today are striving to becomedynamic, interactive platforms that cater to the full customerexperience and are part of multi-channel business strategies thatintegrate the online channel with the physical retail locations or printcatalogues.
However, personalization has fallen victim to a number ofmisconceptions that have cast it in a less positive light, almost to thepoint of becoming e-commerce’s four-letter word. This creates a paradoxbecause, by its very nature, personalization should be the cornerstoneof an e-commerce strategy. It is only through the collection andanalysis of customer data that a truly robust online customer experiencecan be created, one that mirrors the offline experience in terms ofservice and satisfaction.
Such antipathy also creates a dangerous precedent because, despite therelative maturity of the technology, to assume that every company with acommerce element to its business has its online house in order would benaive. The fact is that, while some major brand-name retailers haveblazed the path in the online commerce market, there are scores ofcompanies, both small and large, that are just dipping their proverbialtoe in the e-commerce water and could be misguided by preconceptions inthe market.
Consider these five myths of personalization.
In order for personalization to work, you need to get users tolog in or register, and you need to track reams of information. Obviously, if you are able to have a customer log in, you will generally end up knowing more than you would from the anonymous user, but the truth of the matter is that even the smallest level of insight can result in the critical increases in conversion rates that one is seeking with any commerce site.
Through the use of a persistent customerexperience, for instance, vendors do not even need to rely on theinformation ventured by a logged-in user. Rather, this information canbe gleaned simply by tracking the activity that takes place during a Websession or series of sessions. From there, the information can beleveraged by the marketing department to create campaigns and offersbased on the preferences or habits shown during these sessions.
Likewise, the issue of information tracking has been mitigated over timeas scalability has increased and customer experience platforms haveallowed marketers to partner with their IT departments to buildscenarios — event and rules-based actions tied to business goals –that serve as triggers based on the actions of the users during theirWeb session.
Systems that do personalization are clunky, expensive and slowand can be supplemented by standard databases not geared toward customer experience. Personalization was never meant to be a stand-alone technology, but rather a contextual one that functions inside a guided customer experience platform.
The biggest pitfalls that vendors have fallen into over the years that have led to these types of misconceptions have occurred when robust consumer-facing personalization capabilities have been tied to overtaxed backend systems.
It’s possible to overcome these obstacles with the proper amount of time, effort and IT resources, but in all likelihood you would simply end up with an infrastructure that mirrors the persistent customer experience platform being discussed here.
Personalization is really about a number of fuzzy, unproventechniques that can ultimately leave you with privacy issues. These areimportant issues.
The fact is that, like any market, there have beenalternative or fringe technologies such as neural networks or inferenceengines that have flamed out on further inspection. Unfortunately, theattention that these technologies garner during their hype cycle hastypically clouded the picture for the vendors that are performingcausal, rules-based personalization that targets content based strictlyon profile.
Similarly, privacy issues have subsided over time as onlinecommerce has become more generally accepted and encryption technologyhas allowed transactions to become fully secure. From a personalizationstandpoint, the key for vendors is to be smart about their techniquesand careful to make the value proposition clear to the customer.
Cookies, for example, can be incredibly useful, but they must be used inan overt manner with obvious benefit to the user, and users must begiven the option to reject them.
Personalization and Customization
Personalization equals unique customization, meaning that mymarketing department will need to come up with as many offers as thereare people. This stems from a period in time when pundits and analystswere hyping the concept of “1-to-1 marketing” and the theories that masscustomization was really the only way to reach users in a personalmanner via the online channel.
What was missed during this period wasthat personalization is as much about segmentation as anything else. Inessence, a customer is being personally serviced, but in all likelihood,he or she fits into one or more of a defined number of customer segments– already identified by the marketing department.
Companies that havethe greatest level of success here are those that identify first thevery horizontal needs of their customers and then are able to createthese segments with a greater degree of specificity.
There is no way to test what works in a cost-effective andscientific manner, and ROI for personalization is difficult to prove.
Thetesting issue was one that challenged personalization technology for along time, but recent innovations in analytics technology, particularlyin the area of A/B, or split-testing, have provided marketing departmentswith the ability to measure the effectiveness of numerous campaignssimultaneously.
These advances make it easier to create formulas formeasuring ROI (that is, conversion rates) and revenue growth in a moresegmented fashion rather than attempting to assess them at theenterprise level.
Avoiding the Myths
Chances are that if you have begun to realize the benefits of the onlinechannel, then you are likely benefiting from personalizationcapabilities somewhere in your architecture.
No matter where you are interms of the evolution of your channel, however, subscribing to themyths described here could ultimately close you off to techniques andmethods that lead to another “P” word — profits.
Robert Brazile is vice president and general manager of commerceproducts for ATG. He can be reached at email@example.com.