February 28, 2005, 12:00 AM

Personalization Plus

Online personalization gets new respect from retailers finally ready to harness its multi-channel potential.

Of all the excesses and unrealized promises of the early dot-com days, one that stands out is personalization technology. Its promise of the mid- to late-`90s suited the Internet euphoria of the day--that the ubiquitous nature of the web combined with reactive technology would produce a form of one-to-one retailing that would keep customers coming back for more through customized marketing and merchandising.

But promising too much too fast, before retailers truly had the infrastructure, the capital or the expertise to carry it through, personalization landed in the equivalent of the desktop trash can. "The role of the web in helping customers got a black eye with personalization`s unmet expectations years ago," says Sam Taylor, senior vice president of online stores and marketing for Best Buy Co. Inc.

But as technology and business expertise have grown, Taylor and other e-commerce experts are seeing personalization in a new light. "Personalization is back to being a successful tool in the online space," says Jay Shaffer, general manager of gifting services at Wine.com, where a new personalization strategy helped uncork gift-giving as the source for 70% of sales in the fourth quarter of 2004.

Rather than lost in a trash bin, experts say, personalization has been lingering in a recycle bin, now re-emerging as a tool that will not only improve retail e-commerce, but change the face of retailing itself.

"The whole paradigm of how the web works will change," says Dave Towers, vice president of e-commerce at apparel company Liz Claiborne Inc. Instead of the web offering a personalized experience in a simple reaction to how someone shops, he adds, it will become more proactive through personalization that extends through multiple pieces of technology as well as through multiple selling channels. "The whole notion of the Internet being just reactive will change to proactive and flip retail 100%," Towers says.

Retailers have little choice but to get on with the new age of personalization, Taylor warns. "Customers want us to know who they are and recommend products," he says.

Adds Towers: "The real win we`re striving for is to have customers think of us as the source for solving their shopping problems and as their preferred if not only source. That`s the end game we`re looking for."

But no one`s saying that reaching that point will be easy.

48% of retailers place personalization high on their list of technologies they`ll concentrate on this year, making it the third most-frequently cited category, according to a study released this year by consultants BearingPoint Inc. and the National Retail Federation, "Horizons: Benchmarks for 2004, Forecasts for 2005."

Still frustrating

But the same study found that personalization still frustrates retailers, who placed it among their lowest capabilities, scoring it 2.4 on a scale of 1 to 5.

Nonetheless, many retailers say they are encouraged by the new promises of personalization even if they haven`t figured how, or to what degree of sophistication, they`ll implement it.

"Personalization is a huge opportunity for us," says Jared Tanner, director of e-commerce and online services for Golfsmith International Holdings Inc., a multi-channel retailer with more than 45 stores which recently began to build up its web channel.

Although personalization technology itself is becoming more useful as retailers increase their expertise in using it, retailers need to start out with clear goals, experts say. "For some companies, personalization didn`t take off early on because people weren`t sure how they wanted to use it," says Scott Todaro, director of retail industry and product marketing at personalization technology company Art Technology Group. "Now in many second-generation rollouts, they do it right, with a greater consensus. You need to create a strategy, think about what you want as the end game of personalization--to increase customer loyalty, increase sales or lower customer service costs."

Even in a multi-channel organization, the web plays the central role in personalization. "In a multi-channel environment, the web team needs to be the ringleader to manage, on an ongoing basis, those business rules in coordination with merchandising," says Matt Corey, vice president of marketing for Golfsmith.

10 definitions

Because the first chore of the marketer is to decide which personalization method is best to meet a company`s goals, there is no one-size-fits-all strategy, experts say. "If you ask 10 people to define personalization, you`ll get 10 answers," says Ruud Van Hilton, global director of business consulting services for BroadVision Inc., one of the pioneers in personalization technology. That`s not necessarily bad, he adds, because retailers need to create an approach that is right for them. "It`s what personalization is all about--different ways to make it easier for customers to do business with you," Van Hilton says.

Best Buy, for example, is taking a multi-channel approach to personalization by exploring multiple merchandising strategies in 67 stores, each of which focuses on two of five customer segments: suburban mom, family man on a budget, higher-income male, early adopter of technology products and small business owner. Lessons learned in how to market to these segments will help in devising ways to offer more personalized shopping online, Taylor says, adding that the web will support a long-term customer segmentation strategy.

At Golfsmith, which recently relaunched Golfsmith.com, personalization presents a great way to determine which of its many varieties of golfing equipment online customers are likely to buy, Tanner says.

But before diving into what Tanner and others call "black box" personalization--or technology that relies on cookies and complex mathematical formulas to record, analyze and predict consumer behavior--Golfsmith will start out with a simpler version of personalization, relying on consumer surveys to find out what shoppers want to see in e-mail marketing messages and on web pages.

"Golfers play one type of ball but not another, one type of club but not another, and they`re either right-handed or left-handed," Tanner says. "Instead of guessing what somebody might like based on their and other customers` shopping experience, I`d like to ask them what they want by inviting them to build their own profile."

The right approach

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