The Power of Product Recommendations

By Julie Knudson | Posted July 27, 2015

Product recommendations—in one form or another—are nearly as old as ecommerce itself. Some of the largest retailers have used them for more than 15 years, and many dedicate a significant amount of Web page real estate to products they believe customers will love but just haven't stumbled across yet.

However, even with years of product recommendations experience behind them, some businesses may not always use them to their fullest potential. The good news: small ecommerce business owners can resolve many sales funnel issues simply by improving the product recommendations they offer their customers.

According to the recent Ecommerce Quarterly report released by marketing and optimization firm Monetate, average bounce rates have risen nearly 6 percentage points year-over-year. Couple that with a drop rate shown in the same report of 2.5 percent year-over-year in average order value, and it's clear that small businesses should look closely at how they can use product recommendations to better engage customers.

Product Recommendations, Bounce Rates, and Average Order Values

Bounce rate refers to customers who visit a product page—and may even load one or more items into their shopping cart—but then leave the site without buying anything. Part of the problem may be that customers haven't found exactly what they want. "Product recommendations, used in the right way, help people find the right products," explains Brett Bair, Monetate's senior director of digital marketing.

Relevant recommendations are one way e-tailers can help connect customers with products that tickle their fancy and that won't be left behind. In today's data-centric environment it's a process that requires greater sophistication than may have sufficed a few years ago. The bar is simply higher.

ecommerce product recommendations

"Customers expect you to be a little bit more mindful, because they're sharing so much more data," says Bair. Fortunately, the upside is that leveraging all that customer information to improve product recommendations offers great opportunities to reduce bounce rates.

Along with climbing bounce rates, businesses are also seeing a drop in average order values. Paul Kaye, managing director at Strands Retail, a personalization and recommendation solutions provider, says that a good product recommendation engine can help tackle sagging order values. The reasons are basic but powerful.

"The retailer instantly shows their customers more than just one item on a page," Kaye explains. Product recommendations occupying the right real estate on a retailer's site "increases the chance of customers seeing see something similar to the product they searched on," says Kaye. He notes that the chance improves five- or six-fold.

Giving customers access to the product they were searching for increases the likelihood that person will continue through the sales funnel rather than bouncing back to the search engine.

A Better Approach to Product Recommendations

It's not uncommon for retailers to merchandise manually, a strategy that may not offer the best results. Kaye says it's a skill with a difficult learning curve and could actually result in small businesses leaving money on the table. He likens it to placing a product on an end cap, a popular vehicle used in brick-and-mortar stores to move more merchandise.

"That product is going to move more often," Kaye explains, adding, "But here's the unanswered question; how do we put something else in its place that could have sold better?" Rather than manually select products to show customers, he says a product recommendation engine maximizes the process. "A good system knows what products really belong on a specific Web page."

As a small business fine tunes its product recommendation strategy, the right platform can offer a more granular approach. "For example, you can put best-selling products in front of new customers, and for people that return to the site on a regular basis, you can introduce some of the new things they may not have seen the last time they were on the website," says Bair.

Some of the smallest businesses may do something like this already, but it's an art form that's often difficult to sustain as your business grows and the number of products you offer increases. Product recommendation tools "can help you do it in a scalable way," says Bair.

Julie Knudson is a freelance writer whose articles have appeared in technology magazines including BizTech, Processor, and For The Record. She has covered technology issues for publications in other industries, from foodservice to insurance, and she also writes a recurring column in Integrated Systems Contractor magazine.

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