But losses mount for the home furnishings e-retailer that went public in October.
New technology lets Internet retailers know what customers are buying, and where.
As recently as 12 months ago, software that recommended products based on a customer’s shopping habits at a web site was considered exciting. Imagine keeping track of a customer’s buying habits electronically and using that information to pop up product recommendations the next time the customer came to the site.
Today-old news. As with just about every other business practice related to selling on the web, retailing’s embrace of multi-channel selling is washing away the old-meaning last year’s leading-edge processes.
Now retailers want to know what their customers are buying no matter how they shop-via the web, the telephone or in person-and vendors are responding with more sophisticated software that allows a retailer’s operating system and customer service reps constant access to customer behavior across all channels.
A customer that one week purchases cooking utensils online may view fine crystal during the next visit, then spend 10 minutes questioning a call center representative for information about the manufacturer and how the price and quality compare to other brands.
But since the first generation of personalization applications lack the ability to track and store the data from off-line customer interactions, they deliver only a partial picture of the customer’s shopping preferences. That can lead to product recommendations that entirely miss the mark, especially if sales agents working off-line channels make the recommendations.
“Customers who regularly patronize a retailer want to be recognized and treated with the same level of attention regardless of which channel they use to shop,” says Gerri Spieler, research director for Gartner Group Inc. of Stamford, Conn. “Personalization applications enable retailers to gather a lot of customer data, but it is how that data is used across all touch points that creates a repeat customer. Internet retailers do not make money on one-time customers.”
To address this problem, vendors of personalization software are touting next generation applications they claim are capable of gathering and sharing data across all sales channels.
The pot of gold at the end of this rainbow is to enable representatives in any sales channel to access a customer profile, then use that data to quickly close a sale by recommending products the customer is likely to buy or to create a cross-sell or up-sell opportunity.
Closing the sale
“A high percentage of consumers contact a call center need assistance in making a purchasing decision,” explains Craig DeWolf, vice president of marketing for QuickDog Inc., San Francisco-based personalization vendor. “Making a customer profile available to call center agents makes it easier to recommend products likely to appeal to the customer that can close the sale.”
It sounds great-and if it works, it will be great. But developers of such systems have a number of obstacles to overcome, not the least of which is the unproven nature of the concept. “The Internet retail industry is a long way from pulling customer information from all sales channels into a single data warehouse,” says Peter Hunt, president and CEO of CornerHardware.com, which is working with Brightware Inc. to develop a personalization system. “That may work from an engineering standpoint, but we don’t know with certainty that it works as advertised.”
But that uncertainty isn’t stopping vendors from developing more sophisticated systems or retailers from being willing to test them.
QuickDog, for instance, has teamed with Lands’ End to provide the back-end scoring algorithms for Lands’ End Personal Shopper application, which the Dodgeville, Wis.-based retailer launched last November. Unlike the previous generation of personalization applications that generated customer profiles for use only at the retailer’s web site, the new generation creates a 360-degree profile using data gathered from each online and off-line interaction with the customer. The information is stored in a central database and sales agents working in any channel can access and update the data.
Decisions vs. rules
As a result, when an in-store sales representative or call center agent services a frequent online shopper, the representative can use an Internet-capable personal digital assistant or personal computer to quickly call up the customer’s profile.
In a reverse scenario, brick-and-mortar retailers that have built customer profiles using purchase histories and customer responses to direct mail campaigns can push pop-up windows featuring product recommendations to their core customers as they venture online. The only hitch there is that the customer must first identify herself by entering a password logged when registering to use the site.
“There is a real need for consistent personalization platforms to drive a singular personalization effort,” says Donna Boyer, director of product marketing for San Francisco-based Personify Inc. “As this happens, customer data can be used to make better marketing and merchandising decisions, rather than just automating business rules.”
In addition to QuickDog and Personify, personalization vendors include Blue Martini Software, BroadVision Inc., E.piphany Inc. and Net Perceptions Inc. Personalization applications typically start at $100,000 and can cost more than $1 million. Most customer relationship management software vendors offer a personalization module, whether it is analytics based or a search engine capable of recommending products based on click stream patterns of the current shopping session.
With the drive to integrate personalization applications across all sales channels shifting into a higher gear, several Internet retailers are undertaking their own initiatives to create better personalization applications. Only later do they turn to CRM vendors to fine-tune the package. “A lot of personalization programs look elegant, but they tend to be cookie cutter applications that lack the features we need,” declares Richard Viard, senior vice president of research and development for SmarterKids.com, which developed a personalization application. “Most of the personalization applications need to be customized so why not build an application you know will fit your needs and is expandable.”
Lands’ End has been one of the more aggressive Internet retailers at attempting to create a homegrown personalization application that extends across its entire enterprise.