E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
When Dana Lemke of Olathe, Kan., shops in a traditional store, she likes to look at things, touch them, and talk to a salesperson about how they are made. Getting folks like her to buy things online is a challenge. So when her husband, Marc, opened a Web store that sells bird feeders and nesting boxes for every kind of landscape, he knew the site needed advanced technical features that would make customers feel like they were getting the kind of personal attention his wife seeks out.
He turned to personalization software-applications that enable merchants to create individual customer profiles or customized shopping experiences. People who visit backyardnature.com can access a personalized gift selector that asks them a series of detailed questions about where they live, their level of bird watching interest and the type of birds they would like to attract. Armed with specific answers, the selector uses a simple rules-based logic program to search a database of the store’s products and suggest the best bird feeder for the customer to buy. “Customers can ask questions and get a result,” Lemke says. “That is real interactive and personalized.”
With the number of Web stores already exceeding 15,000 and competition for the attention of online shoppers heating up, Lemke is among the growing number of Internet retailers using personalization software to zero in on consumers and customize their online purchasing experiences. He incorporated personalization software when he launched his site last fall. But more commonly, retailers who already have transaction-enabled sites are adding personalization applications as they refine their Internet selling plans.
For instance, toysmart.com Inc. (formerly Holt Educational Outlet) added software to its Web store that tracks which shopping category a customer is clicking on, determines which products they are interested in, searches the company’s inventory of 20,000 toys and suggests other items the person might want to seek out. Since its installation, toysmart.com has added more than 100,000 customer profiles to its marketing database, which has helped drive up orders to as many as 1,000 per day. “Personalization gives us a sense of the type of product customers want,” says Michael Boldezar, Internet manager, toysmart.com, Waltham, Mass. “We can make what they are interested in readily available.”
Now that interest in Internet customer tracking is catching on, retailers are implementing many different types of personalization, including electronic dialog, suggestive selling, targeted advertising, and e-mail marketing programs. The customized software isn’t cheap-costs to add various personalization applications to a Web site range from $45,000 to $300,000, with monthly support costs of $2,000 to $20,000. But Web retailers are willing to spend that money because they believe the software helps them connect directly-if not personally- with Internet shoppers.
“Within the next year, every Web site will have some form of personalization, even if the site just remembers your credit card number and address without you having to type it in,” says James McQuivey, senior analyst, Forrester Research Inc., Cambridge, Mass.
The concept of personalization is touching all Internet categories. Individual search engine functions such as MyYahoo! allow users to customize the information they see when they sign onto the Internet. And retailers find the idea of using personalization technologies to improve their customers’ online experiences an especially good fit.
“A lot of sites are just getting to the point where they have their product catalog up, they have transaction capabilities and now they need an effective solution for customer service,” says Chuck Williams, chief executive officer, Brightware Inc., a Novato, Calif., personalization application development company. “Personalization deals with that, and it’s critical.” Personalization technologies are needed to help consumers sort through the vast amounts of data available online.
At Amazon.com, consumers have access to thousands of items. And the need to give customers the titles they want when they want them is turning Amazon.com into a big user of personalization applications. The site recommends books based on what customers have purchased in the past, suggests titles attuned to their likes and dislikes and notifies people by e-mail of new book releases in categories they choose.
“Selling on the Internet becomes a question of how you help people find exactly what they want,” explains an Amazon.com spokesman. “A lot of times people come to the site and just know that they want a mystery or something to read on the plane. So we’ve developed a number of things to personalize it. It’s not unlike in the old days when people went to the corner clothing store and the tailor already knew that they liked blue pinstripe suits. He could say, ‘Hey, I’ve got a new blue-striped suit I want to show you.’”
Comparing shopping online to a time when most retailers knew their customers on a first-name basis may seem a bit odd. But even though the Internet is a mass medium, it offers the potential to make one-to-one connections, just like that corner store relationship, says Stephen G. Kanzler, vice president, marketing, Andromedia Inc., a San Francisco personalization software company.
Web sites can recognize individual visitors when they enter a site and move around within it-and that’s a boon to marketers. “For the first time in a mass medium, we have the ability to record what consumers do, how they behave and what they buy,” Kanzler says.
The idea driving personalization software development is to take information gathered about consumers and use it to tailor Web pages to suit them, so that every person sees what’s most relevant to them. Retailers gather information about consumers in two ways.
The first is by asking them specific questions, says David B. Pakman, vice president of strategic development, CDnow/N2K Inc. (the merged entity of the two online music stores, with headquarters in Fort Washington, Pa., and New York). Last November N2K launched My Music Boulevard, a service that creates unique Web pages for customers who sign up, giving them information on their favorite recording artists and genres. About 100,000 people have registered so far, and the personalization program is now part of CDnow/N2K’s merged technology platform.