You know those holiday gift lists populating the media right now — e.g., top 10 gifts for dad, the kids and so on? In an ideal world, shoppers would be presented with the most perfect, on-target gift suggestions for all of their recipients every time they visited an e-commerce site. While retailers aren't quite at the point where they can read shoppers’ minds and extract items their loved ones will swoon over as soon as they come to their website, the process of personalizing the shopping experience, particularly during the holidays, can be much better.
The problem is the way most retailers conduct personalization. They rely too heavily on past purchases and customer profile data. They personalize based on what the shopper has done in the past and not what they're doing in the moment. This approach usually fails when people are holiday shopping because they're making purchases for others, so any past shopping histories or personal profile data has no relevance. Holiday shopping is the antithesis of personalization. If you're a shoe nut and make lots of shoe purchases, that data can’t help a retailer personalize the shopping experience when you shift to shopping for sports equipment for your kids.
The holiday shopping season is the toughest time of the year to get personalization right, but it’s also the season that offers the biggest monetary rewards if you can figure out this challenge. There are signs that this scenario will change, making it easier for retailers to connect shoppers to the products they actually want at the moment they're browsing your site. Here are three ways I see personalization maturing in 2012:
1. Growing interest in intent-based personalization: Consumers show up at a website with an intent to purchase something, and this intent isn't necessarily reflected in their past buying habits or profile. Most purchases during the holiday shopping season aren't actually going to the person who’s doing the shopping, so old-school methods of personalization really don’t work.
A better approach to targeting holiday shoppers is to consider what they're doing in real time, then build the shopping experience around those actions. You can tell a lot about what visitors’ interests are by their search terms, where they hover on the site and for how long, and other so-called “intent cues.” Outdoor gear retailer Altrec.com adopted an intent-based personalization approach for its site since its customers’ shopping habits often didn’t match up with past experience. For example, a customer who bought a bathing suit in June may come back in November to buy ski parkas. Altrec.com has been able to boost its conversion rate by 450 percent using an intent-based personalization system.
2. Increased focus on scaling across touchpoints: Even just a few years ago shoppers would interact with online retailers through only a couple of touchpoints: websites and perhaps email. Today, the number of touchpoints has exploded, encompassing chat, mobile apps, tablets, social networks and so on. For personalization to succeed in 2012, it must provide consistent recommendations across all touchpoints in order to have impact on a consumer. If an electronics retailer's customer sees a message about Xbox games on her iPhone and refrigerators in email messages, neither promotion will likely resonate.
3. Mobile, social and local conversations continue and mature: There's rich data available from shoppers using mobile and social channels as well as location-aware services, but there's still work to be done in terms of harnessing this data’s power. For instance, as more and more people log into Facebook as they shop across several websites, new personalization opportunities for retailers will form around the social graph.
In 2012, personalization providers and retailers will need to figure out how to mine the social graph for meaningful signals and then integrate that data with information about the shopper’s intent. Localization also figures into this process — i.e., how a consumer’s location can help retailers improve personalized offers. Expect to see more experimentation and sophisticated thinking on how retailers can leverage these channels and their data to make online experiences more relevant to shoppers.
The holiday season throws a harsh spotlight on the challenges retailers face in creating truly personal and relevant shopping experiences for their customers. A year from now, given advances in personalization technology, retailers will no doubt be doing a better job of delighting their customers.
Dr. Scott Brave is co-founder and chief technology officer of Baynote, a provider of e-ommerce personalization solutions. Scott can be reached at brave@baynote.com.