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Everyone wants to feel like a VIP.
Successful brick-and-mortar retail businesses make an effort to provide personalized customer service. They learn their customers’ names. They know their favorite brands and preferences. The best associates are keen observers. They see what customers pay attention to and what they pick up. They remember what they ask about and what they linger on. Knowing their product line backward and forward, they make on-the-spot recommendations that build relationships and boost conversions.
Those personalization efforts make a substantial difference to customer engagement, customer loyalty, conversation rates, and order volumes.
AI personalization lets ecommerce sites deliver a similar personalized experience across online touchpoints. It’s the strongest tool in your search arsenal for keeping site visitors satisfied, engaged, and returning.
This eBook is a primer on AI-enabled personalization for ecommerce. We explain what AI personalization is, how and where to use it, and why it’s a worthwhile investment. AI is a remarkable tool that is most effective in accelerating and automating sales when fine-tuned by your own team who know your business best. To that end, we’ve outlined what you need to consider when developing an AI personalization strategy that reinforces your connection to your customers and meets your high-profitability goals.
Ecommerce personalization is the process of tailoring the customer journey to an individual visitor’s needs and preferences.
When a customer arrives at an ecommerce site to search for an item or browse products and services, each interaction is customized to that specific individual. Search results reflect their interests or search history. Page attributes are shuffled to match their preferences or shopping habits. Instead of running a one-size-fits-all promotion, each product recommendation and cross-sell is tailored for that customer.
You’re probably familiar with these personalization efforts:
While ecommerce personalization is defined by how it shapes the customer journey, it’s also an important business strategy that supports revenue growth. In other words, the personal touch pays.
McKinsey research shows that websites investing in personalization earn 40% more revenue than those that don’t. No longer a site “extra,” online shoppers have come to expect personalized interactions. That personalized greeting on a favorite website, those “just for you” product suggestions, that pop-up reminder to select products with free shipping, and so on — the sum of these personalized touches have become the pathway to ecommerce success.
To understand how personalized experiences are crafted, we need to lift the hood on personalization tools. Here’s how it works:
The approach isn’t only applicable to ecommerce search. User profiles and attributes can also be used to personalize autocomplete for any type of online discovery, making search faster, smoother and more intuitive by anticipating what site visitors are looking for from the very first keystroke.
Browsing and discovery have personalization potential as well:
Marketers rely on detailed demographic and geographic information to target content to customer segments. Ecommerce personalization works similarly, but the sophistication of AI can derive far deeper insights from more granular information.
Consider a physically active, 75-year-old grandmother who’s on the hunt for athletic socks and running shoes. If a sales strategy focuses on age group exclusively, she may be shown diabetic compression socks and orthotics instead of the snazzy kicks she bought last time.
AI-enabled personalization tracks shopping behavior and assigns your customers into segments based on common demographics, geographic locations, attitudes, behaviors, and other attributes, rather than classifying them into overly generalized groups. User profiles give you a finely tuned picture of each customer’s interests, preferences, and needs. They level up your marketing game so you never risk losing an order or alienating a long-standing customer.
Ecommerce sites need data to start personalization. To uphold data privacy regulations, that data needs to be provided voluntarily. Zero-party data is information shoppers are explicitly asked to supply via:
A bookstore site can poll site visitors about literary genres to learn what categories the customer prefers. This data can be leveraged to reinforce or deprioritize items and make relevant title suggestions. Zero-party data is free, reliable, and transparently gathered, which is reassuring for everyone.
86% of American consumers are concerned about how companies use their personal data.
First-party data is derived from interactions on digital touchpoints. When a customer “opts in” to cookies on an ecommerce site or app, they consent to monitoring to support personalization and for better site performance. This data comprises:
Personalization software observes where customers go, tracks their browsing activity, records their search terms, and knows their purchase history. Fed into an AI-enabled personalization platform, this data can be analyzed to craft highly satisfying — and profitable — shopping experiences.
A 2023 KPMG survey revealed that 86% of American consumers are concerned about how companies use their personal data. Forty percent don’t trust companies to use their information ethically. To keep customer trust:
When a site or app “knows you,” it’s meaningful and memorable. If an ecommerce grocery store leverages your purchase history to suggest a new “limited edition” flavor from your go-to potato chip brand, an upsell opportunity becomes a special invitation. It feels like first dibs on an exclusive product drop.
Personalization’s predictive power forges a deep and lasting customer connection. The uplift in customer engagement and loyalty encourages purchasing, brings customers back, drives progress on critical KPIs, and justifies ROI. In fact, research shows that companies using advanced personalization are seeing a $20 return for every dollar spent.
Ecommerce retailers use AI-enabled personalization to:
People want to be recognized for who they are and remembered for what makes them unique. In one survey, 45% of respondents said they’d leave a site due to a lack of personalization. To keep users engaged, deliver a seamless, VIP experience that meets their needs and respects their time. Ecommerce retailers that harness AI-enabled tools to deliver a personalized experience will reap the rewards.
The “AI” aspect of AI-enabled personalization is incredibly powerful, but it’s not magic. Marketing and developer teams that use AI-powered tools successfully know there’s an art to the science of machine learning.
AI-enabled personalization is a hybrid approach that relies on both technology and people, combining your organization’s technology tools with expertise and merchandising savvy. Applying it effectively to maximize customer lifetime value (CLV) requires continuous fine-tuning and optimization.
In other words, you can’t set it and forget it. To ensure ROI from a business perspective, you need to harmonize your infrastructure and capabilities, data sources, and personalization approach across search, browse, and discovery.
Other challenges with AI-enabled personalization include:
Before deciding to implement AI-enabled personalization, consider these questions:
Personalization might not be suitable for every scenario. Ecommerce businesses that benefit most from AI-enabled personalization have large catalogs and offer products to shoppers across demographics with varied and distinct preferences. If your audience or product range is extremely narrow, personalization might not make a huge difference to your bottom line.
For most retailers, however, it’s worth exploring. Customers are leaving sites that don’t personalize, but businesses that use it well are seeing substantial ROI.
One option to start with is to use personalization in a limited way to maximize one part of the search, browse, or discovery experience. For instance, personalize search result rankings or the checkout process, with upsell and cross-sell suggestions.
In fact, starting small is a great way to see whether AI-enabled personalization is right for you. Choose a single KPI (order value, active carts, conversion rate) and measure its improvement. If that’s a success, you can scale up your efforts to other KPIs.
Customers are leaving sites that don’t personalize, but businesses that use it well are seeing substantial ROI.
If you’ve decided that AI-enabled personalization is right for you, the next big question is: Should you develop it from scratch?
Building search and personalization-related functionality is time-consuming and ever-evolving. Our Ecommerce Site Search Trends 2023 report showed that more than half of companies surveyed couldn’t keep up with building their solution in-house. Our 2024 report showed 61% of respondents are increasing their investment in search to enable customers to find what they’re looking for more quickly. Partnering with a SaaS platform like Algolia that offers combined search and personalization capabilities can be a simpler and more cost effective route.
Algolia AI Personalization blends the best of AI with full merchandising control. Your teams can optimize personalization for search, browse, and discovery from easy-to-use dashboards in the Merchandising Studio or the API. Get started quickly by leveraging user profile data and calculating attributes automatically, then follow up with manual refinements and optimizations based on what you’ve learned. Algolia’s all-in-one solution with pre-built integrations helps you connect easily with different data sources, yielding the 360° view you need to maximize your site’s personalization potential:
With enhanced performance and industry-leading search and discovery capability, Algolia AI Personalization has the comprehensive set of tools and features merchandisers need to make informed decisions to enhance the customer experience and grow revenue.
With customers craving the personal touch, it’s time to harness the power of personalization. Embark on your AI-enabled personalization journey with the world leader in AI Search. Algolia processes 1.7 trillion searches per year for 17,000+ organizations across the globe. Our high-availability platform delivers responses to search queries in less than 20 milliseconds. For near-real-time product search and discovery, Algolia is the best choice. With speed and capability, Algolia AI Personalization is able to provide lightning fast, up-to-date results that satisfy customers and grow your revenue.
Our end-to-end AI Personalization platform provides merchandiser and developer teams the comprehensive tools, APIs, and dashboards they need to build exceptional customized experiences. With more clicks and conversions, top ecommerce sites improved profitability:
Ready to start moving the dial on your critical KPIs?
Start your AI-enabled personalization journey with Algolia.
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