E-commerce Link : Get Personal
Deliver relevant, personalized content and offers to increase lifetime customer value
August 2009 By Ken Burke
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MarketLive recently researched more than 100 online retailers to evaluate different approaches to increase lifetime customer value. The research looked at tactics such as search engine marketing, sophisticated segmentation and personalization, personalized site experiences, and relevant, targeted offers.
The research shows many merchants are still in “batch and blast” mode—delivering the same site experience and marketing messages to every shopper. The result is lower conversion rates for each campaign. And while relevant and timely messaging and offers are proven to improve overall business performance, segmentation and personalization of marketing efforts are not only tricky, they can be time-consuming for small marketing staffs.
However, by taking a few initial steps to segment customers and target them with offers tuned to their interests, retailers can increase sales. For one MarketLive merchant, implementing advanced segmentation and personalized recommendations as part of its e-mail marketing campaigns produced impressive results:
- 166 percent improvement in clickthroughs and
- 26 percent increase in average order value.
Online Personalization
Personalization is a well-established term in direct marketing. However, there’s greater immediacy and complexity when implementing personalization tactics online. Online retailers are able to capture and track unique customer behavior patterns. This, coupled with customer profiles and purchase histories, allows merchants to dynamically offer highly relevant products to customers within appropriate time frames.
As an example, for a customer who recently purchased running shoes from a sporting goods site, the merchant can send an event-triggered e-mail seven days after the purchase, personalized with product upsell recommendations from the specific shoe brand. Upon subsequent visits back to the site, the merchant can dynamically display upcoming discounts or specials on a broader selection of popular running apparel. Research shows this personalization approach can increase total revenue by as much as 15 percent—even at the most basic level.
While it’s easy to identify potential benefits of targeting and personalization, retailers routinely cite expertise and resource constraints as hindrances to their ability to deliver more real-time, relevant offers and messaging to shoppers. Personalization engines, intelligent e-mail packages and relevant site content can help.
Customer Segmentation Delivers Relevant Content
Let’s look at a hypothetical merchandising director at a midsized apparel retailer who is working on next month’s marketing strategy. Last month, the director sent a standard e-mail to all customers in the company’s database. The message was titled, “Hot New Summer Looks.” While this resulted in a short-term boost in site visits, the resulting sales were disappointing.
For most merchants, the first step to improving results is to divide customers into specific, well-defined segments. After using a customer segmentation engine, the merchandising director now has a list of three segments: 1) price-sensitive shoppers who tend to buy discounted items; 2) browsers who have never bought; and 3) loyal customers who tend to buy the latest merchandise at full price.
The next step is to design and develop e-mail messages that will resonate with each group. For example, the message for price-sensitive shoppers could inform them about the coming month’s sale items. For browsers, offering a special discount for first-time shoppers would be appropriate. And for loyal customers, giving them an exclusive sneak peek at the latest merchandise would make them feel appreciated.
It is also important to fine-tune messages before distributing them. This can be done by developing variants of each main message and testing them with a subset of customers. For example, 10 percent of price-sensitive shoppers would receive a free shipping offer, while another 10 percent would receive a $10 savings off a purchase of $50 or more. The message that has the best test results would then be delivered to the remaining 80 percent of customers in that segment.
Additional segmentation can reinforce messages with a more relevant shopping experience. Customers from each segment should be dynamically taken to landing pages that best fit the e-mail offering.
Once the customer places an item in the shopping cart, recommendations should shift from cross-sells to upsells by offering products from related categories.
Targeted marketing can continue after the purchase by including personalized recommendations in the order confirmation e-mail. Or, if the customer abandoned the purchase, a message could be sent a few days later, highlighting the item and offering a limited-time discount. For customers who complete the order, follow-up offers can include time-sensitive related items.
For example, one retailer that sells garden seeds and equipment may offer tomato plants and early planting fertilizer in early spring. Four weeks into the growing cycle, the retailer can follow up with tomato cages, pruning tools and tomato-oriented fungicides.
Gaiam and Peruvian Connection See Results
By delivering relevant merchandising and content, Gaiam, a leading lifestyle media company, and Peruvian Connection, a leading seller of women’s apparel, have successfully increased the lifetime value of their customers.
For Gaiam, personalization across the path to purchase increased conversion rates by 10 percent in the first week over its manual recommendations. Revenues also increased by 15 percent.
Peruvian Connection uses product alerts to deliver information to customers who are most interested in receiving updates. With this approach, the company increased e-mail conversions by an impressive 350 percent.
Segmentation, personalization and dynamic merchandising are essential for success in retail e-commerce today. New tools make the transition to strategic targeting and merchandising easier, and will deliver meaningful results to retailers who adopt them.
Ken Burke is chairman, founder and chief evangelist of MarketLive Inc., an e-commerce technology services provider based in Petaluma, Calif. He can be reached at ken@mmlive.com, or visit www.marketlive.com/sitereview.
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