Most online retailers would agree that personalization is a vital tool for increasing engagement (and, ultimately, sales) with customers. Yet many retailers continue to miss out on opportunities to use the wealth of data they’re collecting about site visitors to improve a customer’s or prospect’s online shopping experience.
Some have yet to advance beyond Personalization 101 – the “welcome back” message that displays to returning visitors. Others have erred on the other side of the spectrum: investing significant resources in sophisticated segmentation models in an attempt to target every shopper with precisely the right offer at the right time, based on the customer’s site activity, profile information, past purchase behavior, or numerous other criteria.
The problem with the latter approach is that many of the prospects being targeted simply don’t deliver the returns to justify such a heavy investment in personalization tactics. In other words, those prospects don’t buy enough stuff. What’s the point, really, of taking the time to meticulously create five different shopper personas if only two of these types really move the sales needle?
When Segmenting, Follow the 80/20 Rule
A more efficient way exists for online retailers to develop richer, more personalized experiences for digital shoppers that optimize acquisition and conversion rates. This approach is based less on retailers’ existing assumptions about customer segments and more on the dynamic data coursing through a Web site that, properly leveraged, can help online retailers zero in on the one or two core customer segments that drive the bulk of their online sales. Call it the 80/20 rule of e-commerce, where 20 percent of your customers account for 80 percent of your sales.
By focusing personalization efforts on that most valuable 20 percent (or 10, or 30 – your mileage may vary), retailers can maximize online sales and profits while developing a core base of loyal customers that will continue to purchase products (and recommend them to their family and friends). Such an effort requires close coordination between merchandising and marketing, so that promotions and site functionality are tuned to get your best customers to that “right item at the right time” promised land.
For successful online retailers, personalization is not about trying to serve every possible shopping option on the home page. It’s about using a data-driven approach to understand your most valuable customers and serve content and offers accordingly, and using analytics to constantly guide those decisions.
Next: Collecting the right data.
