Amazon not only sold $2.5 billion worth of goods, it introduced Prime members to new services. How should rivals compete in 2017?
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.
Lemke 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 September. But more commonly, retailers who already have transaction-enabled Web pages 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 in real-time 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 installing personalization software, 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. "The best thing that personalization does is give 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 programs aren'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 say they are willing to spend big money on personalization applications because they believe the software helps them connect directly with Internet shoppers.
"Personalization is growing at a rapid pace," says James McQuivey, senior analyst, Forrester Research Inc., Cambridge, Mass. "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."
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 on to 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 on the Internet.
At Amazon.com, consumers have access to thousands of items-including every book in print. 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 is personalized in three ways. It recommends books to customers based on what they have purchased in the past, it suggests titles by asking them to enter their likes and dislikes, and it allows people to sign up for e-mail notification 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 to a time when most retailers knew their customers on a first-name basis to today when consumers are using computers and the Internet to buy from home 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 concept 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 their preferences and needs. Retailers gather information about consumers in two ways.