Retailers shift their ad spending from TV, radio and print ads to digital ads.
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In January, Lands’ End licensed its front-end technology to QuickDog in exchange for a minority stake in the company. QuickDog plans to target the offering to Internet retailers in such markets as home furnishings, consumer electronics and toys. QuickDog’s personalization application can be licensed for $250,000 plus installation or leased for $100,000 annually.
The front-end technology developed by Lands’ End uses conjoint analysis, a mathematical process that assigns values to customer preferences and weighs them against the type of merchandise for which they are shopping, such as cost vs. features and functionality.
In the case of Land’s End, customer preferences, such as style, color and fabric, are compared against apparel features in the product category for which the customer is shopping. Product recommendations are based on the weight of each customer preference vs. the attributes of the product.
Lands’ End gathers customer preferences through an optional survey that asks customers to state their likes and dislikes about as many as six outfits. It pulls together additional information from purchase history and questions asked during each shopping session, such as the customer’s objective and whether the customer is shopping for a gift or for herself.
The program then builds rules around customer preferences so as to eliminate products with features that do not appeal to her preferences. Customers can create multiple profiles, such as for active wear or business casual. Each time a customer initiates a shopping experience online, the customer selects the profile she wishes to use during that session. Each profile is available to sales agents who accept orders for the Lands’ End catalog department.
The new software delivered a significant sales boost during the Christmas shopping season. Browse-to-buy ratios for consumers using Personal Shopper were 80% better than those who did not use the application. And customers who used Personal Shopper bought 30% more merchandise than non-users, according to QuickDog.
“If a profile does not exist, the sales agent can call up the customer’s purchase history, ask a couple of questions to eliminate anomalies and then use the scoring models to identify product most likely to interest the customer,” adds DeWolf. “The idea is to make it easier to shop in a subjective environment, just as an in-store sales representative does.”
Although other Internet retailers, such as SmarterKids.com and CornerHardware.com, have built the framework for their own personalization applications, they have been reluctant to roll the applications out across all their sales channels. The reason is that the jury is still out on whether the technology exists to effectively access customer profiles across multiple points of contact.
“Unifying customer data gathered across separate channels in a single warehouse and correctly tying that data to the right individual is an arduous process,” says David Provost, senior analyst for Waltham, Mass.-based Gomez Inc. “This concept is new thinking for online retailing and the technology behind it is still too young to tell if it is hitting the mark.”
Although no hard figures exist as to how many Internet retailers are testing the new generation of personalization software, anecdotal evidence suggests that the technology’s greenness is a major stumbling block.
SmarterKids’ Viard argues that attempting a systemwide implementation without proof that it will work as advertised can be a costly mistake.
SmarterKids has rigorously tested its personalization program using control groups to measure and improve performance since launching its site in November 1998. Initial test results revealed that the application was most effective when used as part of the site’s My Kids section where customers can shop for an individual child or a group of children, rather than in all sections. Other sections include the Family Resource Center and the Gift center.
Customers can set up a personal profile when they register at the site. The initial profile covers whether they typically shop for a child or group of children, such as a classroom, the learning style of the child or group and their educational goals. The program asks additional questions during subsequent visits to broaden the profile. A shopper must make several purchases before the site begins suggesting products.
To enhance the program’s capabilities, SmarterKids.com tapped Palo Alto, Calif.-based Responsys.com to provide backend personalization capabilities for e-mail campaigns and Quadstone, a Boston-based vendor of predictive marketing software, to supply data analysis tools.
“No two people shop the same way and trying to personalize the entire store is not easy,” says Viard. “We found it more effective to have one section of the store personalized.”
So far that business rule has paid off handsomely. The average ticket for customers who set up a personal profile is 13% higher than for those who do not. Seventy five percent of customers who set up a profile make a purchase and customers who set up a profile are 44% more likely to make a repeat purchase than those who do not.
Achieving those results has required the patience to track customer preferences and behavior over several visits before making a product recommendation. “It takes time to analyze data and recommend products based on the learning style and goals of the child,” he adds. “Customers want product suggestions they know will be of benefit, otherwise they wonder why the suggestion was made.”
CornerHardware also has developed the framework for its own personalization application without attempting to immediately extend it across its entire enterprise. The San Francisco-based Internet retailer has teamed with San Rafael-based Brightware to develop its Tool Advisor, which helps customers find the correct tool for their project based on the criteria they specify.
Rather than recommend only the most popular tool in a category, CornerHardware’s Tool Advisor will recommend other tools of the same type in that category. Pop-up windows containing information about the product category, such as an article comparing features of various products or a buyers guide, also appear.