April 2, 2014, 1:30 PM

Sponsored Special Report: The personalization messages that resonate

Yesterday's personalization methods won't work in today's mobile and multichannel retail world.

It's a given that online retailers sell more when they present a web site visitor products and content tailored to her interests. And most determine those interests by tracking what a shopper sees and buys. Not so long ago, that was the state of the art of personalization. Today, it's not enough.

That's because consumers use the Internet differently than they did just a few years ago. They spend a tremendous amount of time on social networks and on news and entertainment sites, all opportunities to personalize content off of a retailer's site. More data means savvy e-retailers can personalize content even for a shopper who has never visited the retailer's site. And all retailers must adapt to the reality that consumers are not just going online via computers. In fact, a majority of the time they spend on retail sites today is on smartphones or tablets, according to comScore Inc.

In short, retailers have to rethink their personalization strategies in light of evolving consumer preferences and behaviors in order to present content that is timely and relevant today, and in the future.

"Retailers can strive to achieve a complete understanding of their shoppers' needs, but until they can predict how these needs will change, they'll be stuck perpetually chasing the optimal customer experience," says Timothy Paskowski, platform evangelist at HiConversion, a provider of e-commerce optimization solutions. "The future of personalization is not about understanding why consumers respond a certain way today—it's all about anticipating what their reactions will be tomorrow."

Retailers will have a tough time anticipating what type of products or offers a consumer may want to see in the future, let alone in the present, until they segment their audience based on offline attributes, such as behavioral or demographic data. Once these target audiences are defined, retailers can dig deeper to prioritize which consumers they want to target first, such as repeat customers.

For example, a sporting goods retailer may identify repeat customers who purchase baseball equipment every spring. The retailer can then send those customers an e-mail in mid-February reminding them that baseball season is coming with an incentive for early-bird purchases. Should one of these shoppers visit the retailer's site, the retailer can show him banner ads promoting baseball equipment.

Retailers can manage a cross-channel marketing campaign like this through a third-party ad network, which can also show the consumer the ad on other web sites. The ad network can retarget the shopper in a privacy-friendly manner online using the retailer's offline segmentation, anonymized as a segment code, to reach the consumer online. When the shopper visits sites within the ad network, the segment code notifies the network administrator to show him a designated ad.

"A big factor in successful personalization is clearly defining the target audience and confining marketing efforts to that audience," says Paul McConville, senior vice president of sales for Neustar Inc., a provider of real-time information and analytics. "Mixing in other targets dilutes the effectiveness of the personalization campaign."

Always have a Plan B

For instance, there are times when the marketing department comes up with a campaign that it believes is squarely aimed at the target audience—but customers don't respond. For that reason it is important that retailers closely monitor how targeted customers respond, and for them to be ready to adjust if a campaign is not working.

"If the marketing message or ad is underperforming for a certain group, it can be temporarily pulled and replaced with a variation that works better for that target audience," Paskowski says. "Retailers should develop several versions of their content or experience, and be prepared to move to the next one if they are not getting the kind of response they expected."

Alternatively, when retailers hit on a personalization program that consumers respond to, they should present that ad or message more frequently to the target audience, experts say.

One of the biggest challenges retailers face in personalization is engaging first-time visitors. Testing different products and offers while tracking how first-time visitors respond can help retailers identify how to customize what newcomers see on a retail web site.

HiConversion recently conducted a personalization campaign for a retailer targeting both first-time and repeat shoppers. This campaign segmented new visitors into two groups based on whether their search engine keyword matched one of two potential product categories. The retailer then displayed to visitors in each segment banner ads related to the product category that it predicted would best match their interests.

Whichever offer the new visitor clicked on was the offer consistently shown throughout his digital experience. If the new visitor did not click on the first offer, he saw a new banner ad. HiConversion repeated the process until all the banner ads being tested were exhausted or until the shopper completed a transaction or bounced.

HiConversion segmented returning customers based on purchase history rather than keyword, and displayed different offers using the same methodology.

The technique, known as behavioral targeting, serves personalized content based on how each customer navigates through his shopping experience.

"Not only did this campaign produce measurable lifts to revenue, it also shed light onto the unique journey that each visitor takes on his own path to conversion, and gave the retailer a better understanding of which offers are most important to each customer class," Paskowski says.

Another option for connecting with first-time buyers is to match their demographic data with the characteristics of consumers who buy specific products. Neustar, for example, identified the characteristics of computer users by product category, such as laptop and tablet computers, for computer maker Lenovo. When a consumer matching one of 172 customer segments identified by Neustar visits Lenovo.com, the site displayed products known to appeal to consumers who fall into that segment.

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