How Targeted Merchandising Can Work For You

The evolution of online advertising has seen the transition from banner ads to keyword association to actual user identification. Online advertising can use data such as IP addresses to localize ad placement, but it still relies mostly on keyword association where it connects items to keywords. It's no question that these methods have worked — Google AdWords is all the evidence you need. But is there an even better method of accelerating consumption? Enter the next advertising evolution: targeted merchandising.

Amazon.com was a pioneer in the online marketplace by introducing behavioral marketing, a concept akin to targeted merchandising. Amazon was able to tap into a cross-section of products (how what book you purchased could impact your product preference in electronics) to deliver new, highly relevant content. This method has two main benefits: First, Amazon can move more merchandise by placing relevant products in front of users. Second (and most important), users don't mind because they're discovering product options they're predisposed to want.

Targeted merchandising will only succeed if it's relevant to real-time trends. Behavior needs to be captured and analyzed in real time, and subsequently merchandise needs to be targeted in real time. Businesses need to have a comprehensive view of consumers, taking into account every aspect of their behavior, not just a narrow vertical. By using targeted merchandising, online retailers can dramatically increase the likelihood of increasing consumption while pleasing their customers. Here are some of the benefits of targeted merchandising:

• exposes customers to products and services that have a higher relevancy to their personal tastes;
• improves the overall shopping experience for visitors;
• improves conversion rates and average order values; and
• maximizes revenue and profitability from advertising spending.

Not every online business has Amazon’s infrastructure. But the question remains: How can businesses take advantage of targeted merchandising?

The solution lies in an emerging class of consumer-focused sites that are perfecting behavioral marketing services to serve as real-time aggregators and discovery engines. By working with social media sites that understand their users’ interests on an individual level, online retailers can often form connections where cross-promotion will lead to a new base of users.

When evaluating a potential discovery platform partner, consider websites that emphasize the following core values:

• Authenticity: Users’ activities are associated with real-world actions, which provide customized recommendations based on actual analysis of their personalities and are not perturbed by other influences.
• Relevance: The content shown to users strives to be relevant to their expressed personalities. The more sources a user has connected to the site, the more relevant the content.
• Privacy: Consumer data will never be accessible outside of the user’s explicit permission.

Advertising is still an effective form of communication, but targeted merchandising takes advertising a step further by creating a way to comprehensively compile user behavior so analytics can be applied to enable real-time discovery. This puts actual products directly in front of consumers who have been predetermined to have a relationship with the merchandise.

Giving people what they want is a great way to make your customers happy, and for you to move more product.

Edward Balassanian is president and CEO of Strings.com, a social tracking site that allows users to connect, aggregate and organize all of their online activity in a single stream. Edward can be reached at @ebalassanian.