To Keep Customers Coming Back, Get Personal

As the economy continues to decline, retailers are fighting a fierce battle for a share of the consumer’s wallet. Every customer counts, but the loyal customers are particularly valuable, especially when your competitor is just a click away.

The Web gives consumers access to far more options than were available in pre-Internet days, but even with that explosion of choices, consumers don’t pick a different vendor every time they make a purchase. They often don’t pick the cheapest source either. That is, they have preferred merchants.

Not that they always buy from those merchants, but they prefer them, even when those merchants aren’t the cheapest. Price is just one metric, and it’s often not the most important thing to the consumer. Customer loyalty can be measured by a customer’s willingness to purchase from a retailer a second time, or their unwillingness to purchase from another retailer.

According to retail industry analyst studies, customer experience can have a profound effect on loyalty — particularly affecting repeat buying behavior. Recent studies have shown that improvements in the quality of customer experience can lead to an increase of millions of dollars in revenue for a large retailer.

What Makes Customers Happy?

So, the million dollar question, then, is what makes a “good customer experience?” Consumer reports show that it’s a shopping experience that is individualized, personalized, and centered around the customer.

Increasingly, shoppers expect a seamless cross-channel experience that provides the same in-store feeling, whether they’re online or off. In a brick-and-mortar store, merchants attain great customer service by acknowledging each individual shopper, helping them find what they want, answering their questions and providing a smooth checkout process. The same expectations exist for Internet retailers. Consumers value the convenience, time savings and ease they get from a more relevant, personalized interaction with a merchant. So online merchants are being forced to examine their methodologies and look to adopt the right technologies and business strategies to meet those consumer expectations for special treatment and as a result, drive sales.

A recent study by The E-tailing Group addressed the gap between consumer demand for a personalized experience online, and how merchants are addressing those demands. Data collected during the study reveals that a significant percentage of consumers not only welcome personalization, but expect online merchants to provide personalized experiences and product recommendations based on their shopping behavior.

The survey found that 77 percent of online shoppers make additional purchases when captivated by personalized cross-sell and up-sell recommendations. Therefore, not catering to consumers’ desires for a personalized shopping experience often results in missed opportunities for increased average order value.

When the Going Gets Tough, the Tough Get Personal

Retailers look to make between 20 and 50 percent of their yearly revenue during the holiday season alone. As a result of the bleak economy that surrounds this holiday season, retail sales are expected to suffer.

According to a study in The Wall Street Journal, after the financial market meltdown in September by BDO Seidman, chief marketing officers at leading U.S. retailers expect comparable store sales for the 2008 holiday season to decrease from last year by a drastic 2.7 percent. Holiday sales are expected to be the lowest they’ve been since 1991.

That creates a brutally competitive environment for retailers, and personalization provides a great competitive edge.

Benefits of Personalization

The bottom line is that communicating with your customers in a personalized manner helps you to increase online revenue. Personalization helps multiply lifetime customer value because customers want to visit more often and make more purchases, it helps to reactivate more former customers by communicating with them in a relevant way, and helps retailers gain valuable insight into their customers’ interests. More specifically, personalized recommendation marketing can boost sales 5 to 20 percent on average for online and multichannel retailers and increase average order value by 45 percent.

When thinking about how to personalize, the best tactic is to think like a consumer. Instead of thinking about how you can persuade the consumer to be loyal to the merchant, consider how you can improve the consumer experience. Forget about the Web for a while and think about a person-to-person experience. What would make you want to shop in a specific place? Again?

Make it easy to get to the items the consumer wants to see. Don’t make the consumer navigate through a bunch of intermediate steps. They want the products they’re looking for, and they want to find them quickly and easily. At the other end of the process, make checkout smooth and fast. Checkout should be done in one page or two, not five.

Provide useful information. The consumer is trying to make a decision — give them some confidence in their purchase. They want the product in context, with good descriptions. Provide background information so that the consumer can become smart about a product, category or brand they may not know well. They’ll want to know what other consumers thought, so make sure you have ratings and reviews, and make sure you go out of your way to actually get consumers to contribute reviews and ratings. “Be the first to write a review” is not helpful enough. Sending an e-mail requesting a review and recommending other products is a simple strategy to employ.

Know Your Customers

If the consumer has shopped with you before, remember the kinds of merchandise they like. Remember their favorite brands. Proactively e-mail them with relevant items when they come in or go on sale. That e-mail will bring the customer back for a look and just may move them to purchase. And if you make it easy to buy, you’ve just increased that consumer’s loyalty.

Make recommendations. Not just top sellers, not just what you’re trying to push or clear out. Know what each customer likes and recommend appropriate items. Do it when they are browsing a category to try to help them find just the right item for them. Do it again later in the process when they have picked an item to finish the outfit or round out their purchases.

Forget about the distraction of points, cards or “batch and blast e-mails.” Instead, focus on the essence of the relationship. Be relevant. Think about what the consumer wants, and you’ll end up getting what you want too.

For better or worse, we live in a consumer-centric society, where it is “all about me” and retailers must structure their business strategies accordingly. Personalization is a key element in meeting consumer expectations. Good customer service means personalized customer service, and that’s what brings the customer back, time and again.