If you've been in the e-commerce industry for a while, have an established site and are looking for ways to attract and keep more customers, like many other e-business owners you may have considered implementing personalization on your Web site. After all, for the past few years, it was touted as the panacea for low sales and low customer conversions.
Lured by the promises of improved customer loyalty, satisfaction and revenue, many online businesses have undertaken costly and resource intensive personalization initiatives, even though they have yet to prove their value.
A new report from Jupiter Research, a division of Jupitermedia Corp., (this site's parent company), is now confirming what many businesses have already realized: online personalization just isn't cost-effective.
According to the report, only 14 percent of consumers say that personalized offers or recommendations on e-commerce sites lead them to buy more often from online stores, and only 8 percent say that personalization increases their repeat visits.
Personalized sites were not just ineffective they were also expensive. Based on interviews with dozens of companies, the report "Beyond the Personalization Myth: Cost Effective Alternatives to Influence Intent" found that most sites that have deployed costly personalization tools have realized inadequate returns on their investments. Jupiter Research noted that operating a personalized Web site can cost more than four times that of a comparable dynamic site. When development and labor costs are factored in, the costs become exorbitant.
Desire and Intent
Jupiter Research defines personalization as "an automated approach to tailoring communications or interactions between a company and a specific segment or individual customer to drive revenue, customer satisfaction, or loyalty." It takes two forms: the message delivered by the company is customized according to customer attributes and inferred criteria, or customers are given the ability to refine or modify their messages and interactions with the company. For either form, the primary goal is to enrich the overall customer experience, thereby increasing customer satisfaction and consequently, spending. The problem, however, was that the customers apparently just didn't care for that kind of attention.
According to Jupiter Research, consumers seemed ambivalent to efforts by retailers to implement costly personalization tools. When asked which features would make them more likely to buy from a certain online store, the ability to customize a site or receive personalized offers or recommendations seemed of minor importance; only 4 percent and 14 percent, respectively, said it would influence their decision. In contrast, customers are more interested in site optimization: 37 percent cited optimized sites (quickly loading pages) as a reason to buy more often from a site, and 48 percent claimed easy navigation would be incentive to buy more often from a site.
An Action Plan for Small Businesses
Based on the inability to influence customer decisions, the high costs of implementation and low return on investment, Jupiter recommends that personalization initiatives not be a factor in a company's further technology purchases. According to the report, for every intended benefit tied to a personalization-related agenda, site managers can choose from many other tactics to achieve the same goals, at far lower cost.
Matthew Berk, research director at Jupiter Research, said small- to medium-sized businesses would be better off focusing cost-effective alternatives, i.e. the basics, and not on big technology. "Our industry has still not figured out what all the 'basics' are," Berk said. "But basic stuff is really hard to do. Businesses should focus on making investments in improving navigation, site clarity and product segmentation on their sites. E-mail also has great potential, it's proven to work and it's highly effective."
According to the report, the number one factor for consumer considering where to purchase a product online is ease of finding products. Therefore, another logical place to start would be for merchants to optimize their search features.
Other tactics recommended included cross-selling and bundling products on page sidebars or through contextual advertising.
Adapted from E-Commerce Guide.com.