Mastering E-Commerce: Everything You Need to Know About Personalization

Sep 28, 2023 11:00:00 AM
18 min read

Person thinking and writing on various sticky notes. Online businesses are constantly striving to find ways to cultivate customer loyalty, increase revenue, and distinguish themselves from the competition. For many, these goals have led them directly to the best thing to happen to e-commerce since mobile shoppers and digital wallets—and that’s personalization.

2023 has truly been the year of personalization, so it’s no surprise people have grown accustomed to experiencing it in every facet of their lives, including online shopping. These days, most digital consumers can’t conceive an e-commerce site without some level of personalization.

But despite 89% of businesses already investing in some sort of personalization, only 22% of customers feel like they’re actually getting a tailored shopping experience. While these numbers differ greatly, there is one thing both e-tailers and e-shoppers can agree on: Personalization isn’t just a catchphrase or a trend; it’s a “must-have” for any business looking to delight their customers and give their conversions a boost.

Two hands clasping each other. Why is this game-changing strategy so important to an e-commerce store’s bottom line? Keep reading as we navigate through personalization benefits and best practices, and shed light on the pivotal role artificial intelligence (AI) has in propelling personalized experiences to new heights.

 

What is e-commerce personalization?

Confused person with spiked hair, holding hands out as though they're shrugging.

E-commerce personalization is the practice of tailoring online shopping experiences to the preferences and behaviors of each customer. This can be achieved using techniques and technology, such as data analytics, machine learning algorithms, and customer segmentation.

When implementing personalization into your digital commerce strategy, it’s important to remember the four Rs: 

  1. Recognition and understanding of which user and/or audience segments you’re targeting;
  2. Relevance between the user’s interests and needs;
  3. Responsiveness in when and where you provide relevant content in the user’s journey; and
  4. Results that are consistently measured and adjusted for maximum effectiveness (more on this later).

ourstory_6@2xBy prioritizing these four Rs, you’ll be able to create increasingly personalized experiences for your customers, leading to happier customers and higher conversions. You’ll also want to utilize the data you collect to determine the best way to inject personalization into your content. Here are some of the most popular approaches:

  • Personalization based on the product(s) being viewed
  • Personalization based on products and categories searched
  • Personalization based on purchase history
  • Personalization based on search history
  • Personalization based on the user’s location
  • Personalization based on what’s in the user’s cart
  • Personalization based on what’s on the user’s wish list or favorites list
  • Personalization based on traffic sources, such as direct traffic, paid advertising, or social media

What are some approaches to personalization? 

Prescriptive personalization and adaptive personalization are two distinct methods for tailoring the e-commerce experience. Let’s take a closer look at each of them.

1. Prescriptive E-commerce Personalization

Illustration of a magnifying glass. Also known as the “rule-based’ method, prescriptive personalization provides shoppers with content that is customized to their specific interests and needs. This approach typically relies on historical user data, like purchase history, to suggest products a customer may find appealing. Putting prescriptive personalization into practice involves specifying rules that determine which content should be presented to different site visitors.

For instance, a home furnishing store may create a rule like, “If customer A is interested in a couch, display the matching chair and ottoman.” These rules can be based on whatever type of customer data you’re collecting, such as browser history or user behavior. You can also craft more intricate personalization rules by adding more parameters. Continuing from our last example, “If customer B is interested in a couch AND located in the United States, then offer free shipping for items in this category.” As you can see, this rule creates a more personalized shopping experience because it targets a smaller customer segment than the previous rule.

2. Adaptive E-commerce PersonalizationPerson with computer chip brain. An exclamation mark is seen next to them, as though they've had an idea.

Unlike prescriptive personalization, adaptive personalization is an automated approach that continually adapts and customizes the customer experience in real-time based on the shopper's interactions with the platform. In other words, it automatically adjusts its own rules and uses the most relevant one(s) for each visitor.

Most businesses employ adaptive personalization through machine learning to continually improve their performance, which requires access to some fairly intricate e-commerce software. One of the reasons it’s so powerful is that it can create and test new versions of recommendations, based on your specific objectives. So, if you’re interested in increasing your average order value, the software can quickly learn which combinations of products will work best to upsell or cross-sell for each visitor.

Check out the list below for a closer comparison of the two. Unsure which one is the best fit to help you fulfill your e-commerce goals? Don’t worry – these two approaches can be (and often are) used together for a more comprehensive personalized shopping experience.

 

Prescriptive Personalization

Adaptive Personalization

Primary Method:

Follows a static set of rules or protocols to make recommendations or decisions regarding what content or products to display to a user Relies on real-time data and machine learning algorithms to understand a customer’s preferences as they interact with the e-commerce platform

Approach:

Fixed, predefined rules that do not adapt to changing user behaviors Learns from interactions and adjusts recommendations automatically

E-Commerce Objectives:

  • Drive sales
  • Increase conversion rates
  • Enhance user engagement
  • Provide a deeper level of personalization
  • Create a more flexible user experience
  • Improve user satisfaction

Complexity:

Less intricate than adaptive personalization Recognizes detailed patterns in user behavior

Scalability:

  • Easier to implement and manage than adaptive personalization
  • More suitable for smaller e-commerce operations
  • Requires more resources and proficiency in ML + AI
  • More compatible with larger e-commerce platforms

Advantages:

  • Predictable and controlled
  • Effectively aligns with business goals
  • Privacy-friendly
  • Dynamic and responsive
  • Deeper level of personalization
  • Uncover patterns and correlations in user data

Disadvantages:

  • Lower level of personalization
  • May not capture the full complexity of a user's preferences and behavior
  • Higher level of maintenance
  • Requires a significant amount of data and computational resources
  • Requires more upfront investment of time and resources
  • Higher risk of privacy concerns

Related: How to Make Instant, Data-Driven, Business Decisions

Why is personalization so important?

E-commerce personalization is a valuable tool for businesses and their customers for several reasons. Here's a breakdown of some key advantages for each:

Benefits for the Business

Person smiling and giving thumbs up to a computer. The computer is displaying a thumbs up on the screen in return.

Greater Brand Loyalty and Retention: 66% of consumers say their loyalty is impacted by how well a company understands their individual needs. Personalization helps you build a deeper connection with your customers by providing them with the experiences they want.

Increased Sales and Conversions: Tailoring products and content that resonates with the interests and buying history of your customers can go a long way. In fact, it’s why 80% of consumers are more likely to complete an online purchase.  

Deeper Customer Insights: Right now, 76% of businesses are using real-time
behavioral data for their personalization efforts. Not only does this let you understand your customers better, but it also helps you achieve more of your e-commerce goals – from refining your marketing strategies to improving the overall user experience.

Competitive Advantage: If your online store doesn’t align with your customers’ needs, 50% won’t hesitate to jump ship and look elsewhere. (Source: InMoment) By offering personalization—especially hyper-personalized experiences—you’ll gain a competitive edge that sets you apart from other brands.

cart - emptyReduced Cart Abandonment: E-commerce businesses lose as much as $18 billion in sales every year because of abandoned shopping carts. Personalization reduces cart abandonment for e-commerce businesses by addressing key pain points in the customer's journey, such as a lack of incentive during checkout. The result is re-engaged customers who are willing to complete their purchases.

Higher Average Order Value (AOV): Did you know the average order value globally these last 12 months is just under $110? Personalization encourages shoppers to explore additional products or add-ons, resulting in larger order values by offering relevant complementary products or higher-value upsells.

Decreased Marketing Spend: Personalization reduces marketing spend by allocating resources more efficiently. By leveraging behavioral insights, you’ll be able to target your marketing efforts specifically to individuals who are most likely to convert. This will help you minimize wasted ad spend and focus your budget on high-impact strategies instead.

Illustration of an open cardboard box.Better Inventory Management: The average level of inventory accuracy in US retail operations is only 63%, leading to stockouts and unhappy customers. By analyzing data-driven insights into customer preferences and behaviors, you can predict demand patterns more accurately to lower the likelihood of shortages or overages. You’ll also be able to help customers explore a wider range of products, reducing the burden of keeping up with popular items.

Benefits for the Customer

Enhanced Customer Experience: The entire purpose of personalization is to improve the interactions shoppers have with your brand. Studies show that 71% of consumers become frustrated when a business doesn’t offer personalized experiences. When you take the time to understand each of your customer’s individual needs, you create a more satisfying shopping experience that increases the likelihood of them making a purchase.

Illustration of a green arrow pointing upwards. Increased Engagement: When customers receive personalized offers, recommendations, and other content, they feel a stronger connection with the brand. Considering that 72% of shoppers only engage with personalized messaging, this is a great way to keep them coming back to your e-commerce platforms.

Time Efficiency: Personalization can save online shoppers plenty of time by reducing the need to browse through numerous pages or categories. Instead, they’ll be able to receive products that are directly relevant to their interests through your e-commerce platforms, via personalized email notifications, and even through your advertising efforts.

Relevant Content and Recommendations: By analyzing a customer's behavioral data, you can present products that align with their preferences. You’ll also be able to offer targeted discounts and highlight user-generated reviews to enhance the perception that your brand understands each customer's unique preferences.

Curious shopper looking through magnifying glass.Advanced Product Discovery: E-commerce stores often have a ton of product SKUs to navigate through, which can make it challenging for shoppers to discover items they resonate with. Personalization leverages their historical interactions and preferences to introduce them to relevant and potentially unknown items. This introduces customers to a broader range of products that they might not have found otherwise.

Cross-Device Consistency: Nearly all Americans (98% to be exact) switch between multiple devices each day. Personalization enhances the cross-channel shopping experience for e-commerce customers by providing a consistent shopping experience across different platforms. This allows your customers to seamlessly transition between devices, like their laptops, tablets, and mobile phones, without losing their personalized preferences.

Greater Trust and Security: Did you know that 70% of consumers are okay with sharing their first-party data for a more personalized experience? (Source: Twilio Segment) That’s because when personalization is done safely and honestly, it builds trust with your customers. As a result, they’ll be more likely to engage with your content, complete their orders, and return to your online store over and over again.

Reduced Decision Fatigue: Shoppers don’t want to sift through an endless variety of options. Personalization helps customers make swifter choices by presenting them with a curated selection of products that can significantly expedite their decision-making process.

chatbubbleBetter Customer Support: Personalization can extend to customer support by making it easier to address specific inquiries and offer immediate and targeted assistance. This leads to quicker issue resolution, less customer frustration, and increased efficiency. What’s more, 90% of customers are willing to spend more when personalized customer services are provided.

How can personalization be used?

Let’s take a look at some of the most effective personalization strategies to add to your e-commerce arsenal.  (Hint: For optimum results, a combination of these should be used.)

Intelligent Product Recommendations  

One of the most effective ways to personalize an e-commerce experience is by providing personalized product recommendations. A study by Invesp found that 45% of digital shoppers are more likely to shop on a site that offers personalized recommendations. These tailored suggestions help customers find items they are more likely to purchase, based on information like location, purchase history, and browsing behavior. 

Mobile shopper being served a pop-up. Recommendations can be displayed on the homepage, search results page, product pages, and email campaigns. Some common types of product recommendations include similar items, previously viewed Items, items frequently bought together (cross-selling), and upsell recommendations.

Personalized Website Content

Your e-commerce site is the face of your brand for many of your customers. It’s also the perfect place to inject some of this personalization we keep talking about. 94% of businesses experience a rise in conversion rates after personalizing their websites. Dynamic content can create a more compelling shopping experience and should be applied to key locations on your website, including: 

  • Homepage banners
  • Product pages, including descriptions
  • Product categories
  • Checkout or shopping cart page
  • Exit-intent pop-ups

We Think Youll Love These - Product Recommendation Modal - Universal Site

Targeted Email Campaigns  

Personalized email marketing campaigns are an indispensable tool for e-commerce stores because they resonate with customers more than generic emails do. It’s true – on average, they have a 29% higher open rate and 41% higher click rate than non-personalized emails.

Two letters traveling through the air. Use these campaigns to offer special discounts or promotions, promote new products, and remind users about products left in their shopping carts. You can even segment your email list to cater to different customer groups.

Real-time Assistance

According to Zendesk, over half of online consumers say brands treat customer service as an afterthought. Fortunately, online support has really amped up these past couple of years, with more and more businesses relying on live chats and AI-powered chatbots to provide personalized assistance to their customers. These tools are great because they can recognize a user's preferences and previous interactions to address inquiries more efficiently.

Custom Search Results

With one-third of shoppers getting frustrated over irrelevant search results, improving your website's search functionality to provide more relevant results seems like a no-brain solution.

Start by creating a more cohesive personalized experience for both search and category pages. This can be achieved by Implementing a smart search engine that provides personalized search results and suggestions as shoppers type in their questions. Don’t forget to take advantage of all the customer data you’ve collected, like past purchases, and browsing history, to personalize search results even more.

Todays Top Searches - Universal Site

Tailored Discounts and Offers

Did you know that 43% of consumers leave items in their cart hoping to receive personalized discounts? With the help of AI technology, e-tailers can analyze the purchase history, behavior patterns, and preferences of customers to offer targeted promotions and discounts that are tailored specifically for each customer. These offers can be delivered through email, push notifications, or in-app messages to drive higher engagement and conversion rates.

Dynamic Pricing

Illustration of a coin. Dynamic pricing uses AI to analyze data and determine the optimal amount to charge for your products. This allows e-commerce brands to set prices based on user history, inventory levels, and demand. By adopting this model, you’ll be able to provide personalized pricing that matches each customer's willingness to pay, helping improve customer satisfaction and loyalty.

Customer Loyalty Programs

Much like personalization, loyalty programs have really taken off this past year, with over 70% of shoppers belonging to at least one loyalty reward program. Personalize your reward and loyalty programs through offers, discounts, and other incentives that are based on each user’s purchase history and engagement with your brand. You can also use personalized communications, such as personalized emails or in-app messages, to inform customers about their loyalty status, available rewards, and how to maximize their benefits.

Social Media Retargeting

When a shopper exits your e-commerce site, that doesn’t mean they’re gone forever. Retargeting these individuals on social media can capture their interest again. Social networks like Facebook, TikTok, and Instagram, can track your customers’ behaviors and distribute ad content on their platforms. This helps create highly personalized ads for increased engagement and click-throughs.

Feedback and Reviews  

Person pondering an idea while writing on a piece of paper. A dotted line moves from them, to a lightbulb, to the paper, as though to suggest an idea.Customers love reading reviews almost as much as they love personalization. The average consumer reads 10 reviews before trusting a business. By employing user-generated content (UGC) such as customer ratings and detailed product reviews, you’ll be helping more of your customers make informed decisions about the items they buy.

You can even personalize the shopper experience to highlight the reviews or ratings that are most likely to resonate with each customer. This results in less returns and more trust in your brand. To obtain more UGC, personalize your communications and incentives to encourage customers to share reviews, ratings, and photos of their purchases.

How do AI and machine learning power personalization? 

AI and machine learning play a pivotal role in powering e-commerce personalization. Besides collecting and analyzing vast amounts of data to understand customer behavior, these technologies can make personalized recommendations, curate content, optimize marketing efforts, and even predict future user needs. 

Person smiling as though satisfied, with arms crossedThink about this technology as an ally. A reliable machine learning personalization partner will help you get closer to your entire digital goals so that you can continually grow and move forward with confidence in your e-commerce initiatives. That’s why it’s imperative you select one that is backed by a team of experts who care about your personalization goals as much as you do.

 

What are some personalization best practices?

Make the most out of your personalization strategies by following these nine best practices:

1. Choosing the Right Tools

Selecting the best personalization technology for your e-commerce site can feel overwhelming. When choosing an AI platform (like Granify) for your personalization efforts, here are some key factors to consider:

  • What do you want to achieve with this tool?
  • How long will it take to set up (and does that fit within your timelines)?
  • Can it deliver for anonymous users?
  • Does it offer automated segmentation capabilities?
  • Is it scalable?
  • Will it protect my customer’s data?

2. Collecting User Data

In order to deliver personalized experiences, you’re going to need information about your customers’ behaviors, preferences, and interests—all while respecting privacy regulations and customer consent.

Illustration of three different server stacks plugged in an outlet. Start by collecting relevant first-party data, including website interactions, purchase history, location, demographics, and other personal data points that can help you create personalized shopping experiences. Data tracking tools like analytics platforms and customer relationship management (CRM) systems are helpful for gathering and storing this type of data.

3. Customer Profiling and Segmentation

To enhance the customer experience (and increase conversions), segment your users into specific groups based on common characteristics or behaviors, such as age, location, occupation, new visitors, returning shoppers, high-value customers, and so on. This will allow you to target audiences that are more likely to convert while reducing unnecessary marketing spend on those that won’t.

4. Performance Monitoring

mag_glassRegularly monitoring the performance of your personalization efforts will help you measure the impact of your efforts more precisely. Keep your eyes on key performance indicators (KPIs) related to personalization, such as click-through rates, conversion rates, and average order value.

5. Testing and Optimization

Personalization is an ongoing process that requires continual testing and optimization. Conduct A/B tests frequently to assess the impact of your personalized strategies. This will allow you to identify which personalization tactics are working, which aren’t, and what’s needed to maximize your ROI.

6. Balancing  the ‘Creep’ Factor

There’s such a thing as over-personalization, and it doesn’t land well with shoppers. Over 50% of consumers have experienced creepy engagement tactics. Avoid making your customers uncomfortable by striking a balance between delivering the personalization they want and respecting their privacy.

7.  Privacy and Data Protection

Floating illustration of a lock.While the majority of online shoppers expect personalization, 48% only want it if their data is secure (Source: Segment). To build trust with your customers, make sure to prioritize data privacy and always obtain clear user consent when collecting data.

If you’re partnering with a personalization provider, make sure you understand what data they’ll be using, and how they protect it (Granify does not collect any Personally Identifiable Information (PII) to ensure shopper security.)

8. Cross-Channel Personalization

For a consistent user experience, your e-commerce personalization should extend across the many touch points you have with your shoppers, including your website, email, social media, and even your in-store experience, if you have a brick-and-mortar. 

And don’t forget about your mobile app either. The number of active mobile shoppers in the US is expected to surpass 187 million by 2024. That’s a lot of people to keep engaged over their mobile devices.

9. Adapting to Changing Preferences

Customer tastes and behaviors are always evolving, so update your personalization models and tactics regularly to stay relevant. For example, 67% of Gen Z shoppers enjoy the feeling of adding a little something extra to their online shopping cart when they’re checking out, whereas traditionally, e-tailers would have avoided adding additional recommendations during the checkout process. (Source: Chain Store Age)

Key Takeaways

Person using binoculars surrounded by projected e-commerce insights behind them. Personalization is a necessary tool that boosts sales, increases customer satisfaction, and provides valuable data insights that help e-commerce businesses remain competitive in a crowded online marketplace. At the end of the day, it all comes down to putting your customers first. From tailored product recommendations to individualized promotions and user-generated content, the possibilities are infinite.

By applying the strategies and best practices summarized in this article, you’ll be able to create memorable shopping experiences that will keep your customers coming back for more. Just remember, personalization isn’t just a trend. It’s the future of e-commerce, and it’s here to stay.


Your Partner for Powerful Personalization

Illustration of a rocket ship taking off.

When it comes to e-commerce personalization, Granify’s prowess is unmatched. Our innovative machine-learning technology (backed by a decade of shopper insights) delivers tailored shopping experiences that not only enhance conversion rates but also foster lasting customer relationships. Connect with us today to learn more about how you can elevate your personalization game and see immediate results.

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