What does ecommerce personalization actually mean?

What ecommerce personalization is assumed to mean vs. what it actually means can be pretty different.

Personalization? Oh yeah, it’s that cool, AI-driven thing everybody’s doing. It incorporates machine learning to improve the customer experience. You can just set it and forget it. Easy peasy and guaranteed to skyrocket your profits.

Not quite…it’s a little more complex. And the way it’s defined depends on whom you ask.

What does ecommerce personalization mean?

If you want a definition from the perspectives of different roles, you’re likely to hear slightly different emphasis.

  • To digital marketing folks, ecommerce personalization means doing technically savvy research on users, creating very specific targeting based on things like demographics and purchase history, implementing personalization features like product recommendations and personalized messaging in emails, crossing your fingers, and then raking in the bucks.
  • To online shoppers, it means fun times buying stuff on the Internet and enjoying how well sites “know” you and cater to your whims, anticipating what you want in product discovery from the minute you arrive for your online shopping adventure until checkout, a process that leads to even more online retail therapy and money spent.
  • To companies that want better customer engagement and higher revenue, it means you must create a personalized shopping experience just to keep up with what other prominent  sites (especially Amazon) are doing.

All of that sounds reasonable and valid. So what, then, is the actual, formal, official, best, definitive way to describe that thing known as ecommerce personalization?

Basically, it’s capturing data about what users do and buy on a website — their browsing behavior and browsing history — then using algorithm-crunched, AI-based insight to create a rewarding, relevant experience specifically tailored to their individual needs, thereby creating a satisfying customer journey and increasing sales.

Sounds straightforward but something still seems to be missing, doesn’t it? Like what does ecommerce personalization actually mean in terms of implementation?

What isn’t ecommerce personalization?

To clarify, let’s look at what personalization is not, which should help illuminate what it is.

What personalization isn’t: customization (by the user).

Personalization is not the same thing as voluntary customization. That’s just offering people the ability to make their experience on a site more uniquely their own through mechanisms like avatars and controlling how their screen appears. Customization is a step in the right direction, but one that’s not likely to get you very far in terms of conversion.

What personalization is: Your implementation of online retail features that make people feel delighted by your knowledge of them and what they want.

In short, personalization is all about knowing exactly what you can do to help your unique customer, and then going ahead and doing it.

  • What do they want?
  • What should you recommend to them?
  • How much are they willing to spend?
  • What kind of discounts should you offer them?
  • What else would make their experience on your site more enticing?
  • What’s it going to take for them to finally get around to clicking Buy?

What personalization isn’t: a cinch to get right in terms of strategy; a guaranteed way to drastically increase conversion and bump up your online store revenue without really lifting a finger.

What personalization is: potentially challenging in some ways to implement, plus utterly dependent on good web content and an already solid user experience for generating tangible results.

So who does ecommerce personalization the right way?

Amazon strikes again

When you think of personalization, you probably think immediately of Amazon.com. Every time you go on there, you see your personalized homepage that’s been compiled based on the latest and greatest AI data like what you’ve browsed lately, similar products, and everything you’ve bought over the years in case you ever want to reorder it.

They are always a step ahead of you — seemingly anticipating your desires for new products, excelling at cross-selling to you, strengthening your customer loyalty to them — as well as being leaps and bounds ahead of any and all competition you might deign to visit. And their deep dive in terms of personalization has paid off. For example, according to Forrester, compared with other online brands, conversions from Amazon’s recommendations are 60% higher.

So wouldn’t it be great to be just like Amazon and set up your own excellent site personalization and get amazing first-time (and beyond) results?

How tough could that be? All you have to do is collect all the right customer data to define your audiences and customer segments, personalize your content according to what people seem to want, test it to make sure you’re doing all the correct things, implement the right level of personalization, let it work its magic, and start raking in the revenue.

Yes, that’s essentially it! But as with other worthwhile endeavors, getting your site personalization tactics right is probably going to take some work.

What lies beneath?

What’s easily “viewable” in terms of successful personalization is actually just the tip of the personalization iceberg; a lot of preparation, monitoring, tweaking, and management is going on  underneath the water line.

Some of that activity is challenging. Some of the hurdles online retailers have faced with setting up effective site personalization include:

  • Not being able to collect enough of the right personal data about new customers
  • Having an excess of information about returning visitors
  • Needing to do some complicated math (e.g., figuring out statistical significance at the  one-to-one level)
  • Not being able to respond to collected data in real time in order to immediately craft the best customer experience
  • Still using legacy CMS and back-office systems that are blocking effective implementation of a personalization strategy

Does all of that seem a little daunting? It may explain why, despite all the proven benefits of personalization, many company managers lose interest when they realize what the personalization process actually entails, and they decide either consciously or through subconscious inertia to just soldier on with whatever web functionality they’ve got.

We know this happens at tons of companies. According to the Algolia 2021 Ecommerce Search Trends report, only 20% of retailers surveyed were completely prepared to offer a personalized experience, while 79% indicated that they weren’t ready yet.

So perhaps we need to start with some clarity about what a company would actually need to do, and highlight the fact that it’s indeed eminently doable. What does personalization mean in terms of the to-do list?

Lipstick on a pig: not a great strategy

What personalization isn’t: efficiently workable if your user experience is in sorry shape for your website visitors. Like if you don’t have high-quality product images, your marketing copy is unconvincing, your product pages are missing relevant information, or you have a bunch of items that appear in search results but are currently out of stock.

Lack of content relevancy generates 83% lower response rates in the average marketing campaign. In other words, personalization layered expertly on to a website that has unorganized, sloppy content is like putting lipstick on a pig. If your website isn’t providing a seamless, excellent experience for your shoppers, personalization won’t miraculously fix it or make a dent in your conversion rate or revenue one bit.

What personalization is: a potentially huge conversion and profit generator if your user experience is sound and your site content is optimized for conversion.

Algolia estimates that ecommerce sites can increase their conversion 30% by providing an exceptional user experience.

So breaking it down, what would it take to set up effective personalization and get impressive results?

How to actually succeed at personalization

The first — and maybe the most critical — phase is doing the prework: finding out exactly what your users want by collecting data on what they do or don’t do on or in relation to your site. Here are a few areas where you can collect that necessary shopper data:

  • While generating traffic to your site through avenues like social media (particularly in mobile apps), SEO-optimized advertising, and organic content (e.g., customer reviews). Who’s clicking through from which platforms?
  • From how people search and navigate on your site: do they use the search bar or discover items by browsing what’s in front of them
  • From people’s interactions, such as what they click on your product landing pages
  • From voluntarily entered personal information, such as clothing sizes and brand names
  • From what people put in their shopping carts and then either buy or abandon
  • From people’s responses to your email campaigns, such as for cart abandonment or upselling after a purchase

When you’ve collected enough data about what your site visitors are doing and you can intelligently analyze it, your user profiles start to come into focus. All of this information, gathered explicitly or implicitly from your shoppers, lets you definitively identify your target customers by a variety of indicators.

Only then, armed with your key data, can you use ecommerce personalization software to start appealing to your individual shoppers by showing them items they might like.

Applying best practices for the best outcomes

Ready to get started on phase 2? You can apply personalization best practices to substantively reflect each shopper’s needs and preferences, potentially increasing your average order value and much more. Here are some ecommerce personalization examples:

  • Make personalized product recommendations based on what people are browsing or buying. For instance, if they’re looking at desks, you could recommend a task chair to go with it.
  • Edit shopper navigation based on their previous buying and browsing activity. Did they just buy a stroller? Point them to other baby supplies.
  • Show people regionally or demographically aligned content in elements such as blog posts and banner ads.
  • Encourage people to write reviews. “Word of mouth,” even from strangers online, is powerful. Let genuine, positive user-generated content do your marketing heavy lifting.
  • Offer relevant discounts. For example, consider bundling a set of related items at a combo price or discounting an item that they keep buying (e.g., diapers).

A multidimensional reality

What personalization isn’t: one dimensional or single channel.

What personalization is: multidimensional and omnichannel.

About three-quarters of shoppers use more than one shopping channel (for instance, social media on mobile devices or going straight to the company’s ecommerce website) while looking to buy an item (Harvard Business Review). It pays to apply consistent personalization in every applicable channel, with every customer interaction, from the moment someone sets virtual foot on your site to any post-visit email marketing. When every touchpoint works seamlessly with the others, your personalization efforts are likely to impress your users.

What personalization isn’t: a one-size-fits-all solution.

What personalization is: most effective when customized just right for your business.

Different business objectives require different strategies. How big is your customer base…what’s your sales volume…which software do you want to use to roll out your personalization techniques? The answers to these questions will help you determine the most-pertinent ways to get the best bang for your buck.

Set and (don’t) forget

What personalization isn’t: set and forget.

What personalization is: an ongoing refinement project for your merchandising team.

For example, you can’t just plunk down a search bar and call it good. Well, you can, but if you don’t keep tabs on how it’s working, your ecommerce business results aren’t likely to be what you expect. According to Baymard Institute research, 61% of top-performing ecommerce sites have “below an acceptable search performance.” In addition, 15% of sites were found to have “broken” search-query-type performance.

You can personalize shoppers’ search results based on what they enter in the search box, as well as optimize the search results presented to certain targeted groups, tailoring what’s presented to, for instance, people interested in a particular line of shoes.

Depending on your ecommerce personalization strategy, personalizing search could also involve using custom ranking, dynamic re-ranking, and query suggestions to meet your customer needs.

How does ecommerce store search actually work?

With Algolia, you use a dashboard to configure the weighted importance of each event and facet. You can simulate and test your personalized content (A/B testing), then fine-tune to get everything just right.

For example, let’s say you have a website selling mini snacks. You run A/B testing to evaluate different personalization strategies for category page browsing and search results pages. Based on your loyal customers’ preferences for types of food items and price, you then adjust your strategy to improve your click-through rates.

Success actually

What personalization isn’t: easy to have in-house developers build and maintain.

What personalization is: relatively easy to implement if you team with the right personalization expert.

Let’s be real: setting up a truly effective personalized ecommerce experience is a complex proposition. But with the right ecommerce personalization tools, you increase the odds that what you do will work, and even work extremely well.

Algolia’s site-search personalization platform is ready to help you make conversion and revenue increases a dreamy reality. To see what successful website personalization would actually look like for your unique ecommerce site metrics, just tell us what you’d like to achieve. We’ll get you on your way to creating and confidently maintaining a personalization solution that leads directly to healthy conversion and revenue.

This article was updated on July 8, 2024

About the authorCatherine Dee

Catherine Dee

Search and Discovery writer

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