Mind-boggling facts about personalization in ecommerce

One small act of kindness can make your whole week. All it takes is a store clerk taking their time to help you, or a support agent showing that they care about your problem. Suddenly, life is good for a moment.

That’s the power of great service, and a key component of it is personalization. But you can’t just add a {{FIRST_NAME}} tag to messages and call it a day.

To achieve great personalization, you need to figure out a viable way to perform acts of kindness for all of your customers. It’s not a trivial challenge, but with modern technology and support from AI this goal is easier to achieve than ever before.

And it’s a great goal to aim for, because personalization can impact your business in so many ways that it’s honestly shocking. 

How personalization improves key ecommerce metrics

Personalization almost seems like a cheat code considering how many aspects of your business it can influence. 

McKinsey has shown that companies which get personalization right can expect results such as:

• 50% reduction in acquisition costs,
• up to 15% greater revenues,
• up to 30% better marketing spend efficiency.

Salesforce found that great service, of which personalization is a key element, keeps customers coming back:

• 72% consumers say they will remain loyal to companies that deliver faster service, 
• 65% say they will stay loyal if the company offers a more personalized experience,
• 52% of consumers will not make a repeat purchase after experiencing poor quality service. 

In one study that concluded in 2024, researchers followed a multi-year personalization initiative at an e-commerce company in the UK. Compared to pre-personalization benchmarks, they found that personalization had a strong positive effect on key ecommerce metrics like:

• click-through rates, 
• conversion rates, 
• revenue per visitor,
• customer lifetime value.

Another study, this time from 2019, found that AI-powered personalization can generate results such as:

• 19% click-through rate increase,
• 25% more site visits, 
• 14% greater add-to-cart rates for new customers and 11% for return customers,
• 14% boost in order completion,
• 18% conversion gains for sites with extensive AI personalization, and 8% for those with minimal personalization. 

And that was traditional AI-powered personalization, mostly data-driven recommendations and promotions. What about the impact of the latest breakthrough in the industry, generative AI? 

Accenture found that companies which apply generative AI to customer-related initiatives can expect 25% higher revenue after 5 years compared to companies that only use AI to boost productivity. In other words – if you want to grow revenue long term, use generative AI for personalization.

What makes generative AI so great when it comes to interacting with customers? AI agents powered by generative AI are more human-like than ever. Researchers call this capability ‘anthropomorphism’.

As one study from 2023 has shown, anthropomorphism significantly and positively affects perceived product personalization. 

How personalization in ecommerce works

Customer churn is one of the worst enemies of a growing ecommerce business. Every purchase is an opportunity to impress your customers and convince them to return to your store. That’s how you build loyalty.

Personalization and loyalty are closely linked. A team of researchers has analyzed all literature on this topic from the last two decades. Their analysis of 20 years of research provided irrefutable proof that personalization leads to increased customer loyalty. 

One of the reasons for this might be that personalization simply makes life easier for customers. A study published in the Psychology & Marketing journal found that when content and products are personalized based on customer preferences, they experience less fatigue and a smaller cognitive load. 

Every little decision we make during the day takes away our energy. When you point your customers towards a product that perfectly meets their needs, they decide faster and the buying process takes less effort. 

All in all, personalization improves the customer experience (CX), which leads to greater loyalty. And it’s been proven that better CX in omnichannel retailing positively affects word of mouth and repurchase intention. 

The loyalty loop

Personalized experiences drive customer loyalty, which in turn increases customer lifetime value. Here's how it works:

• Personalized experiences lead to higher customer satisfaction
• Satisfied customers are more likely to make repeat purchases
• Repeat customers provide more data, enabling even better personalization
• This improved personalization further enhances the customer experience
• The cycle continues, increasing customer loyalty and lifetime value

This is why personalization isn’t just about immediate sales, but about building long-term customer relationships that drive sustained revenue growth. It’s a self-reinforcing loop.

Personalization mistakes to avoid

Beware of personalized pricing

Consumers appreciate personalization, but not every kind of it. 

Personalized dynamic pricing involves setting different prices for consumers based on their data. While it can boost profits, customers see it as an unfair tactic.

Managers are reluctant to implement it and rightfully so. It’s been proven to have a negative effect on customer loyalty. 

It goes against the main idea of personalization, which is to be kind and show your customers that you care about them. Personalized dynamic pricing only shows that you care about their wallets.

The personalization paradox

Gartner has found that 71% of B2C customers and 86% of B2B customers expect companies to be well-informed about their personal information during a service interaction.

But what about privacy? Aren’t customers increasingly unwilling to share their data?

That depends on one key factor – the benefits they can get in return for providing you with their personal information. You need to reward them by providing improved, personalized service. 

It’s a balancing act between the data you collect and the personalization you can provide in return. This is called the personalization-privacy paradox. It’s so important that it has been identified as one of the key themes in research on personalization. 

It’s time to get the loyalty loop rolling

A little bit of kindness can go a long way. A whole lot of kindness, offered to all of your customers at scale, can be your secret weapon to sustain healthy long-term growth.

Not sure how to implement it? We might have a few ideas. Reach out and let’s have a conversation.