Putting Personalization To The Test

How personal is the online experience of a user of your site? How convinced are you of its effectiveness? Let’s take a quick test.

The purpose of this quick test is to cut through the hype surrounding web personalization and show you the potential economic benefits. But just to make it easy for you, here are the answers right up front:

  1. $34 divided by 5 = $6.80.
  2. 3 times more often.
  3. 10 % to 30% on average vs. 2% to 4% on average.
  4. 300%.

And here are the questions:

  1. What does it cost to sell to an existing web customer versus the cost to acquire a new web customer?
  2. How often did users with personalized pages visit the Excite web site, versus users who did not have personalized pages?
  3. What were the increased response rates from Music Boulevard’s (N2K) personalized recommendation trial, versus response rates from the rest of the Music Boulevard site?
  4. What is the return on investment (ROI) for personalization after 12 months according to a Jupiter Communications research study of 25 top online commerce sites?

Can you imagine a cheaper cost per customer acquisition. In all likelihood no. Boston Consulting Group (BCG) estimates that it costs $34 to acquire a new online customer on average. If it is five times more expensive to acquire a new customer, then reducing your average sales and marketing cost by $27.20 per customer to $6.80 per customer will help your bottom line considerably.

Now add the increased repeat traffic of three times as often (or more) because customers have found that personalization to be extremely valuable. And when personalization is really working, you will see increased response rates to your online offers, because they are relevant to the user. The bottom line is that personalization features on your web can really drive loyalty — reducing costs and increasing profitability.

According to a Jupiter Communications survey of 25 top online merchants last year, 40 percent say they have begun to provide personalized features on their web sites. And 93 percent of the survey participants said they plan to feature personalization on their sites within a year. Looks like personalization may become a standard feature for most web sites.

What’s Your Preference?

There are choices when it comes to putting personalization on your web site. Some are simple and can be done at relatively low cost. And then there are the fully integrated big-ticket personalized services sites like American Airlines provide. In our book Internet World Guide to One-To-One Web Marketing, we put together some basic guidelines for you to use when determining if personalization makes sense and what types of personalization models to implement.

“Most web sites can be personalized. If your business model fits into the following categories, then adding personalization will help you serve your online customer more efficiently and effectively:

  • One product/service geared to more than one target market
  • One target market and several products/services
  • More than one target market and several products/services

Web site personalization can act as a matchmaker between users and your offerings. It can provide users with rapid solutions to their information-gathering needs.”

There are several different web personalization models available, including:

  • Personalized web experience — The user’s experience itself can be personalized on-the-fly based on the user’s profile and their real-time click stream. Basically, these web pages, or parts of pages, are highly dynamic and change during the user’s experience.
  • Personalized Information — Every one of your customers can create their own special and unique version of your web site. Or you can provide personalized recommendations based on a user’s unique profile. (This has been the most common form of personalization.)
  • Personalized Service — At an additional level of sophistication, you can connect users with personalized customer service for both selling and supporting the customer. These systems can be totally automated or can be a hybrid system that also involves human beings. Dell Computer’s order tracking system is an example of an automated personalized service system. An example of a hybrid system is connecting the buyer with an expert customer representative who can make highly personalized recommendations, which are facilitate by the web and/or email.
  • Personalized Community — Targeted online communities or discussion forums based on particular interests or needs. These can be built for both business-to-consumer and business-to-business markets. For example, if you are a clothing retailer, you can have several targeted discussion forums within the women’s clothing section based on several categories including work formal, work casual, casual, formal/party, accessories, shoes, etc.
  • Personalized Cross-Selling/Upselling — Presenting unique recommendations as users are adding items to their shopping cart, or in an “after-marketing” fashion when a bill is presented or in future email or direct mail communications.
  • Personalized Auctions — This wasn’t a prevalent application when we were writing the book, but it is now an explosive market. It is a optimum personalization service where customers get the right product at the right price.

B+ But Improving

I am continually impressed with what personalization can do on the web. But, I would like to see a few things improved before I give it a perfect score. Personalization is still a new technology and many sites are just scratching the surface of its capabilities. When personalization can span all the steps in the selling and support process, then things will be ticking.

Many sites have implemented the selling steps. But what happens when you confirm the order and present the bill — are you carrying the unique profiles through the order processing system?

What if an online customer needs to call into customer service — does the customer service agent have their online profile and transaction information in their system? What about your direct marketing department, does it have access to these profiles? Personalization will pack a powerful punch when it is fully integrated with other databases and systems.

According to Steve Larsen, vice president of marketing and business development at Net Perceptions, “Personalization is in a nascent time. It has a lot of impressive capabilities that have not been taken advantage of at this time. One trend among our customers is that they are looking for the ability to use personalization across multiple customer touch points, what we call ‘walk, talk, click.’ Our customers from traditional retail want to be able to sell to and help online customers no matter how they contact them — web, phone or retail outlet.”

More Hurdles To Clear

Privacy remains another hurdle to that perfect score. I’ll spare you my ranting, but sites must lower the barrier on getting online customers to participate in web personalization features in order to realize the benefits. The 10th GVU WWW User Survey revealed web user’s “Terms and Conditions for Revealing Demographic Information.”

The question asked, “I would give demographic information to a web site ” Here are the results:

  • If a statement was provided regarding what information was being collected (56.5%)
  • If a statement was provided regarding how the information was going to be used (73.1%)
  • In exchange for access to the pages on the web site (23.3%)
  • In exchange for a small discount at the web site’s store or on their products (24.4%)
  • In exchange for some value-added service (e.g., notification of events, etc.) (31%)
  • If the data would only be used in aggregate form (i.e., not on an individual basis) (56.1%)
  • I would not give any the site any demographic information (8.8%)
  • Under other terms and conditions (20.4%)

So when it comes to web personalization, there are ROI expectations for both marketer and customer.

Next Week: Personalization techniques for selling more advertising.

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