Ecommerce personalization: benefits, challenges, and how to implement
It’s no secret that when online shoppers get a personalized experience, they’re happier. A majority of consumers now expect personalization and may get frustrated when they don’t get it.
If your ecommerce site can provide effective personalization, there’s a good chance you’ll be on your way to higher order values, stronger conversion, and a better return on investment. “Companies that grow faster drive 40 percent more of their revenue from personalization than their slower-growing counterparts,” according to McKinsey & Co.
The benefits of ecommerce personalization are striking, and if you have an online store, this technology is well worth considering. In this brief guide, we’ll share how you can apply some best practices to get quick wins.
What is ecommerce personalization?
Ecommerce personalization is creating online shopping sessions tailored to an individual’s needs based on insightful data about their behavior, past purchases, and preferences. A retailer can personalize multiple aspects of an individual’s user experience, including:
“Everyone is concerned with conversions and revenue, but respecting the customer is equally important since it drives customer satisfaction, positive reviews, loyalty, and LTV,” says Lou Ebling, sales director at Algolia. “Personalizing the online experience, meaning that you provide each customer with their relevant results in as few keystrokes as possible, shows that you really care about them.”
Personalized experiences naturally lead to customer loyalty, improved customer engagement, and higher conversion. Algolia client Huckberry realized a 9.4% increase in website revenue related to AI ecommerce personalization. Another retailer, Honest Brew, improved its click-through rates and conversion by fine-tuning its ecommerce personalization based on shoppers’ preferences for beer style, volume, and price, as in this example:
Benefits of ecommerce personalization
For new visitors to your site and returning visitors alike, whether you’re just launching an ecommerce site or you’ve been running one for a while, personalization can dramatically improve your KPIs.
Typical results of ecommerce personalization include:
Happier shoppers
When prospective customers get personalized content in a gratifying user experience that reflects their browsing behavior and shopping habits, they feel taken care of and valued, and likely curious about suggested add-ons on the checkout page.
Higher order values
Knowing exactly what to recommend based on previous purchases, for instance, speaks volumes to a potential customer. When you offer ecommerce personalization in the form of, for instance, tailored discount bundle recommendations, you can improve your cross-selling and upselling returns. Ecommerce personalization statistics show increases in the average order value for 98% of retailers by up to 12%.
Stronger conversions
When you provide a more engaging customer journey in the form of a personalized experience, you’re likely going to see better conversion.
More repeat buying
When relevant content and personalized recommendations improve shopper satisfaction, repeat purchases naturally follow.
A better return on investment
Compared with old-school mass-marketing email campaigns, such as relying on demographics to target hit-or-miss content to a broad customer base, personalized marketing tactics are so much smarter. With the right tools, you can economically and quickly set up near-real-time personalization and begin improving your ROI and freeing up team members for higher-level projects.
Ecommerce personalization examples
Case studies from the likes of Amazon and other online retailers attest to the power of ecommerce store personalization. Here are three ecommerce customer stories about succeeding with personalization:
Staples (Canada)
Decathlon Singapore
Your Surprise
Challenges of implementing ecommerce personalization
Implementing ecommerce personalization typically requires swerving around a few potholes. As you’re considering putting this technology in place, here are five challenges you may encounter:
Keeping user data current
Ecommerce data is at the heart of building a strong personalization foundation, as shown in this Gartner AI maturity model:
Personalization algorithms rely on data being accurate. Inaccurate customer data, such as information reflecting someone’s past preferences, can negatively impact the user experience and reduce conversion. But in 2023, half of the respondents in a global survey said the acquisition of precise data for personalization was an ongoing challenge for them.
To keep your input data as current as possible, you can track it across multiple sources and make sure the tracking implementation is correct. For example, you wouldn’t want to introduce tracking errors by not classifying purchases as add to carts, as that would inaccurately influence the machine learning model.
Personalizing effectively
Modern AI-aided techniques make customers feel like you understand them. B2C site managers consider AI-informed personalization critical, and 86% of B2B organizations are likely to select a solution with AI capabilities to help them drive ecommerce sales.
Based on your data, you can provide customized content and personalized results across omnichannel interactions. Using machine-learning-aided algorithms to analyze large datasets means you can fine tune and present relevant suggestions in near real time. Without reorganizing your marketing strategies, AI personalization can start giving your shoppers the rewarding experiences they expect.
Being transparent about data collection
Adhering to privacy regulations while also getting enough of the right data can be a daunting tightrope: one slip-up could compromise a strong connection you’ve established with customers.
For shoppers who may be on the fence about data being collected at various touchpoints, you can be transparent about how you’re collecting data and planning to use their info. You’ve probably seen how websites do this on the landing page; it can’t be unseen and provides an easy way to opt out.
Integrating with your systems
Implementing personalization features often requires integrating multiple systems and platforms, such as a customer relationship management (CRM) system, a content management system (CMS), and an ecommerce platform. Seamless integration and interoperability between these components is not a given. Addressing integration issues is easiest if you can consider how your user experience will be impacted at all levels.
Building from scratch
Is it better to build personalization functionality into your ecommerce store or choose an existing solution? According to our Ecommerce Site Search Trends 2023 report, more than half of those developing search
in-house recognized that they couldn’t evolve it fast enough. By selecting a SaaS offering for personalization, you can implement fast, plus get continual updates and new functionality without disruptions.
Being able to scale
As your ecommerce site grows, its data volume increases and can get more complex, making personalized experiences at scale potentially more challenging to deliver. How can you steer clear of this quagmire? Break down your data silos and leverage machine learning to support bigger datasets and more complexity, and choose a personalization solution that can easily scale with your site as your business takes off.
Learn how Algolia can help you automatically implement high-performing personalization solutions.
Is personalization worth the investment?
Would adding ecommerce personalization to your site make a substantive difference in your metrics?
In addition to budget, whether it’s suitable depends on your target audience’s needs, whether your competitors are using personalization, whether you have enough relevant data, and whether you have team members available to oversee your personalization campaigns.
If you offer a variety of products catering to shoppers in different demographics or who have distinctly different preferences, personalization could definitely move the needle.
You might also want to use personalization in a limited way on your site, maximizing the potential of a particular feature. For instance, you could:
Generally, there are two types of data you’ll want to gather: zero party and first party.
Zero-party data
With the recent changes to protect consumers’ private data, how’s a website team to gather enough information for personalizing? It must be provided voluntarily.
Conceived by Forrester, zero-party data is shopper-supplied “explicit” information, which includes buying preferences and how shoppers would like to be recognized when they’re on a website. For example, your home page can invite shoppers to supply an email address in exchange for a discount:
Recommended by LinkedIn
The advantages of collecting zero-party data for personalization include:
Some shoppers find questionnaires attractive because they want you to be able to help them. That means one way to start gathering zero-party data is by offering shoppers short optional quizzes.
Let’s say your site sells gourmet grocery items. Your quiz could be about the shopper’s preferred snacks, and with the input provided, you could immediately start adjusting their search results to reflect their strongest snacking preferences.
Another technique for gathering this type of information: provide thumb-up and thumb-down buttons that shoppers can click to reinforce or deprioritize your stored preferences for them.
First-party data
When a shopper “opts in” on a website, they’re agreeing to be monitored to supplant your personalization efforts. As they’re looking around, your software can observe where they go, their browsing activity on a product page, abandoned carts, whether they’re open to upselling, what items they put on their wish list, how much they spend at checkout, and their purchase history. Then you’re ready to analyze and provide gratifying shopping journeys.
Getting buy-in for an ecommerce personalization strategy
If you’re convinced that personalization would be the best thing for your site but you’re not C-Suite, how can you convince your higher-ups that investing in this technology is the way to go? Here are some tips:
How to start personalizing
OK, you’ve weighed the pros and cons of adding personalization to your site and you’re ready to start in a limited fashion and see how it goes. What’s next?
Collect and analyze data
As it would be with a brick-and-mortar retail sales process, before you can implement personalization, you must know your shoppers. Through collecting data, amass everything you can know about your visitors’ interests, preferences, and attitudes. The more complete each user profile, the better their searching, browsing, and discovery experiences could be.
Encourage opting-in
Remember how people feel more comfortable sharing data when you explicitly invite them to do it? Create well-crafted marketing messages that offer incentives for new shoppers to allow you to collect their personal data. That not only makes your job easier, it keeps you in compliance with data privacy laws.
Start small
It’s prudent to begin trying out personalization in a heavily controlled way. Choose a metric that’s close to your bottom line, like checkouts, active carts, or conversion, and monitor how it changes with personalization.
Go omnichannel
If you can apply personalization to multiple channels, you’ll create a personalized shopping experience that stays consistent for your shoppers, whether they’re on your site or elsewhere.
Refine and scale
The personalization roll-out process amounts to learning and adjusting, then doing it some more. It’s all about making optimization tweaks, and then, when things start humming along, comfortably scaling up.
The advantages of partnering
While you could certainly build a personalization solution from the ground up with an army of developers, it would be a long and arduous process.
Many companies find that taking advantage of a prebuilt solution proves to be the more successful strategy and delivers quick benefits. “Online search and personalization is really difficult — there is no panacea in the marketplace,” says Ebling. “But finding the right partner, one that’s singularly focused on search and respecting your customer, and that has addressed these challenges many times before, will provide great value to you and your customers.”
Personalization solution options
What personalization engine and personalization platforms are available for your ecommerce site?
Algolia
Algolia is an industry-leading, customizable search and discovery tool. Its AI Personalization equips merchandisers and developers with the ability to present each online visitor with precisely tailored content, leveraging comprehensive insights from their behavior, preferences, feedback, and attributes — even in cases where no explicit information has been shared.
This translates into enhanced performance throughout the user journey, delivering unique, individualized experiences while streamlining both setup and ongoing optimization efforts, saving considerable time and effort.
Bloomreach
Bloomreach functions as a digital ecommerce experience platform (DXP) with an emphasis on marketing automation, product discovery, and CMSes. Compared with Algolia, it’s more broadly focused,
Coveo
Coveo typically targets large enterprises that need a comprehensive search platform with advanced features and integration. It offers prebuilt packaged connectors for indexing and federated search to providers including Salesforce and Adobe.
Dynamic Yield
Dynamic Yield, marketed as “Experience OS”, is focused on creating great digital customer experiences. It can also be integrated with Algolia.
Google Retail Discovery
Google Retail Discovery, a retail-specific search solution and an add-on to Google Cloud, is targeted to Google’s existing tech-savvy customers for enterprise search.
What should you consider?
How do you decide which vendor would be best for meeting your personalization needs? With your site-model requirements and budget in mind, look at each platform’s strengths; you’ll start to get a feel for what would be the most efficient way of using personalization to improve your customer satisfaction.
Do you have enough of the right type of data?
TThe more shopper intent data you can collect, the more accurately you can then understand your users’ needs and provide personalization that hits home for them. With a sufficient amount of customer data, such as details related to preferences, browsing history, and purchase decisions, you can create personalization that drives engagement, revenue, retention, and brand loyalty.
Does it leverage AI?
AI-powered personalization leverages neural networks to identify relationships among customers, content, and data, as well as connections between people’s interests and search queries. That means you can deliver more accurately tailored results than traditional rule-based solutions can produce.
How easy is it to use?
You should be able to integrate personalization software with your ecommerce site functionality without issues. That means being supplied with all the interfaces and tools for setting up and monitoring shoppers’ personalized experiences.
Does it come with analytics?
With personalization, merchandising analytics can make all the difference. You want a tool that lets you easily keep track of all your performance metrics, observe trends, and generate any “Aha” moments that can guide your team’s next moves.
Can you curate on the fly?
To target shoppers effectively, you want to be able to show dynamic content (information updated in real time) such as product recommendations and promotional banners.
Can you do A/B testing?
You want to be able to test two versions of personalization tactics and measure the impact on your conversion rate and other KPIs.
Is it transparent?
Do you know why certain products were recommended? Or why search results were personalized in a certain way? A personalization solution should offer transparency so you can understand the results and how to modify or improve them.
Is it scalable?
Planning to go big with your ecommerce business? You want a solution that can seamlessly accommodate increasing data and site traffic.
Personalizing with Algolia
Want to increase your ecommerce site conversion rate, maybe dramatically? Ready to create personalized experiences for shoppers that could jump-start your ROI?
At Algolia, we know high-revenue goals are firmly within reach: our customers who’ve adopted personalized search and discovery have seen their conversion increase by up to 50%.
Check out how easy it is to set up ecommerce personalization with a demo of Algolia. We look forward to hearing about your needs and we’d love to help you meet your goals.