Everything You Need to Know about Personalization

The Complete Guide to Personalization

Let’s get personal.

To turn your passive website visitors into active customers on your e-commerce site, you have to create a unique user experience for your buyers.

According to Forbes, 72% of online consumers only engage with personalized messages and 62% of online shoppers have shared that not having personalized messages would most certainly deter them from making a purchase.

In other words, customers want personalization.

A few years ago, receiving a personalized email or message from a brand seemed completely novel and revolutionary. But, today, it’s expected, wanted, and needed to keep up in the hyper-competitive digital world we live in.

Thanks to evolving technology (and its ability to gather enormous quantities of deeply personal information about users, their preferences, and past shopping behaviors), modern consumers expect businesses to know them. And they expect to be known for more than just their likes and dislikes.

Customers associate personalization with positive experiences and good customer service. Personalization is important as it proves to customers that the business cares about their needs, not just the revenue they bring.

Carefully and ethically gathering user data also allows businesses to carefully tailor user experiences to meet the needs of their customers at the right time and in the right way. Not only does this create a better experience for your shopper, but it also increases revenue, conversion rates, and average order value for your e-commerce.

Let’s break down all that you need to know about personalization in the e-commerce world: What is personalization, what are the benefits of it, the privacy concerns and best practices for your website that will help you take your online presence to the next level.

What is personalization?

Personalization is the process of creating a unique experience for each visitor that spends time on your website or app.

This technique is leveraged to offer relevant customer experiences according to their individual needs and desires at any given point during their user journey.

These efforts include tailoring specific landing pages and unique messages, presenting personalized recommendations, crafting individualized ads, and much more.

How do you gather data about customers to enhance their experience?

Each visitor’s preferences can be discovered by analyzing their behavior on your site, interactions with your business, and any other touchpoint with your brand.

One simple way to gather basic data about each user is to encourage an account sign-up on your website. Here you will have access to a small database filled with relevant factors such as their name, birthday, contact information, demographics, and past purchases.

What’s the goal of e-commerce personalization?

The goal of personalization should be to drive repeat business, build brand loyalty, increase engagement, and ultimately improve the user experience. Companies should learn what truly matters to the customer in order to create a more meaningful and engaging experience. A few examples include:

Curating product recommendations based on browsing behavior
Reaching out to unknown or first-time visitors with modal pop-ups and how-to guides
Sending personalized vouchers and emails on customers’ birthdays
Including a warm welcome message when users land on your page and adapting it depending on whether they’re new or returning ones

Why is it important for e-commerce brands to personalize user experiences?

Many companies oversimplify personalization.

There’s a big difference between providing a few personal touches and truly knowing what your customers want (and expect) your business to deliver. The companies that get personalization right are the ones that keep evolving their personalization efforts as they get to know the customer.

Personalization is the key to customer loyalty. When done well, personalization can drive repeat engagement over time because customers feel that the company knows (and makes an effort to provide) exactly what they are looking for. The more a user interacts with the brand, the more data the company can collect and utilize to create even better customer experiences.

But why is personalization important? Let’s find out:

Customers expect it

Customers have come to expect personalization. Online retailers like Amazon and entertainment platforms like Netflix have perfected the art of serving customers personalized recommendations and relevant offers. For many of us, personalization has become the norm. Customers have high expectations and aren’t comparing apples to apples anymore.

If your favorite pizza parlor app opens up with a gallery of your favorites ready to shop and a quick “Add to cart” button so that you can pop them into your cart right away, why can’t your favorite grocer do the same? Your customers are spoiled for choice and will always gravitate to the businesses that seem to know what they want (and are willing to give it to them).

Personalization drives exploration and engagement

The more we get to know other people (and vice versa), the warmer and happier we feel in their company. In the same way, customers gravitate toward the businesses that know them best.

The more closely a brand can mirror the tastes and personality of a customer back to them, the more engaged the customer will become. This makes them the obvious choice for consumers looking for their next purchase. If you optimize personalization, each customer will enjoy a unique, impactful interaction with your brand every time they visit the site, driving repeat business and increasing your revenue.

Personalization can fuel conversions

At its core, personalization is about relevance. It uses visitors’ data and machine learning to understand consumer preferences and matches new and existing products to each one’s tastes. By constantly learning about their customers and improving their ability to present them with tailored offers and messages, companies create relevant recommendations that increase the likelihood of conversion. After all, the more relevant your recommendations, the more likely customers are to purchase.

What is the difference between personalization and customization?

It’s common for even seasoned marketers to confuse personalization and customization. While the two concepts often go hand-in-hand, there are subtle differences that can help you distinguish them.

Customization revolves around allowing customers to modify a product or service to suit their particular tastes.

Think of how Vans lets customers customize their sneakers according to their unique preferences. Users can pick colors and styles from a template to create their own product, which the company produces.

In a nutshell, customization is controlled by the customer who takes the first step by stating their preferences upfront. The company then proceeds to provide them with the tools they can use to adjust an existing product, which is then produced or delivered according to their specifications.

Personalization, on the other hand, is a far more complex practice. It uses various methods to gain an understanding of what the (sometimes potential) customer wants, usually without them implicitly stating their preferences, so brands can market the right product to the right user at the right moment. Through a combination of artificial intelligence and segmentation, it works to identify and present relevant messages, offers, and content for each person.

All in all, in order to get the most out of both personalization and customization, it’s essential to understand how they both work and what each one can offer your brand.

How and where to implement personalization for e-commerce?

Personalization is a tricky subject and successful implementation has a number of difficult considerations. How will you implement personalized touches on your website? How will you test whether or not they are effective?

In most cases, brands should take advantage of both client- and server-side personalization since each approach has its own advantages and drawbacks.

While choosing a personalization strategy is all about what’s right for your business and what will enable you to deliver the right experience to your customers, some solutions offer the best of both worlds by connecting client-side insights with server-side data.

What is the difference between client-side and server-side personalization?

Client-side solutions operate in your customers’ browsers, while server-side tools operate on a server. Additionally, client-side solutions usually don’t require any coding skills, making it easier for marketing teams to implement. In contrast, server-side tools call for technical expertise and extensive coding to incorporate into your code and deploy.

These are the benefits of client-side personalization:

Client-side solutions are often designed to reduce the need for custom coding. Marketing teams can create and manage personalizations and experiments without assistance.
Client-side solutions are simple, efficient, and can be implemented quickly. They facilitate data collection and hypotheses can be tested in a matter of days.

These are the benefits of server-side personalization:

Server-side personalization is best deployed when a solution is code-heavy and requires data from external sources such as a customer data platform.
Server-side solutions require a more technical approach, which means your product or tech teams might have to take the lead.

Want to get started on optimizing your website? AB Tasty is a best-in-class optimization platform that helps you convert more customers by leveraging experimentation and personalization to create a richer digital experience – fast. Whether you want to make client-side or server-side solutions, AB Tasty can help you achieve the perfect digital experience with ease.

Which option is best?

The debate over which is best, client-side or server-side testing, often boils down to the fundamental question: Which is the best option for your company? While choosing the best approach will ultimately depend on your company’s needs, it’s entirely possible to have the best of both solutions.

Factbox: Definitions

Personalization

The process of producing individualized content and messages to create customer experiences that are tailored to each visitors’ unique needs and preferences. Personalization is made possible through robust data collection, analysis, and the use of AI technology.

Customization

Modifying products or services according to an individual customer’s personal, stated preferences.

Segmentation

Dividing customers into groups based on shared characteristics that allows companies to better refine the messages and general content they present to each one.

User personas

Broad, archetypal characters that companies create using their customers’ real-world characteristics and whose features and needs are representative of a group of buyers.

The benefits of e-commerce personalization

There are many reasons why personalization is an essential pillar of every successful online marketing strategy. We’ve spoken about the advantages of using personalization in broad strokes, but there are several compelling personalization benefits, particularly when it comes to e-commerce companies.

Let’s look at how personalization can benefit your business.

Offer relevant product recommendations

One of the primary benefits of personalization, particularly for e-commerce sites, is the ability to generate relevant product recommendations. According to a study by Accenture, 48% of consumers spend more when their experience is personalized.

You can make accurate recommendations on items your customers may want to purchase next using the data you’ve already collected.

Gain a better understanding of customers (and customer loyalty)

Understanding what customers would want places a business in a better position to meet their expectations.

You can analyze the information you’ve gathered to develop buyer personas that will help you segment your most common customer profiles and personalize your entire website to meet their needs. This can save a lot of time in the long run because you’ll focus on a handful of defined customer profiles instead of struggling to cover the individual preferences of thousands of unique customers.

Generate high-converting CTAs and landing pages

Personalization plays a big part in generating conversions because it makes your landing pages and calls to action (CTAs) more effective.

Relevant offers increase the likelihood of customers engaging with an offer and making a purchase. For example, if you’ve just purchased a fancy toy for your children for Christmas and the store suggests adding a pack of batteries so they can play with it, you are far more likely to add them to your cart right then and there.

Keep in mind that relevance is about matching the right customer with the right product at the right time. It pays off, too: McKinsey found that faster-growing companies that create personalized web experiences drive 40% more revenue from personalization than their slower-growing competitors.

Increased time on site

Have you ever fallen down a YouTube hole or spent hours scrolling through Buzzfeed completing quizzes?

We tend to spend more time on things that interest us, which is why it’s in your interest to create a website that speaks to your customers and engages their attention. The more you know about your customer’s preferences, the more your site can be tailored to them, thus compelling visitors to explore your site.

Create more relevant product recommendations

What happens when you discover a new song you love? You’ll probably dig a little deeper to find more of that same artist’s work.

Spotify uses machine learning to categorize music according to your tastes – it goes so far as to predict new genres you didn’t even know you liked!

You can do the same thing on your site by collecting information and sharing product recommendations that are fresh and relevant to help clients uncover new products and even novel categories they’ll be delighted with.

Generate greater brand affinity

Did you know that 80% of your future profit will come from just 20% of your loyal customers?

Loyalty matters, but consumers have so many choices that loyalty is hard to come by. Personalization makes your customers feel happier and more appreciated, which increases their affinity with your brand.

When you personalize your users’ experiences, customers immediately feel that you are investing in creating positive experiences for them, which will factor into their decision when it comes to choosing a place to shop.

Customers care about brands that care about them. If you understand your users and tailor your website according to what you know about them, they’ll stick with you!

What does well-executed personalization look like?

A few businesses have perfected the art of personalization:

Grammarly, an online grammar and spell-checking application, is on a mission to not only correct users’ writing but help them become better writers. They send their customers weekly reports with suggested areas for improvement and highlight how much customers’ writing has improved over time. This fosters a sense of achievement for their users and demonstrates that Grammarly really wants them to succeed.
The Whole Foods app keeps a record of every item customers have purchased and makes it easier to re-order items based on past behavior. They also use this data to send personalized offers to clients when they are in the vicinity of a Whole Foods store.
Nike uses their loyalty program to make shopping easier than ever. Loyalty program users can scan items to find out whether or not they are available in their size and preferred colors.

Privacy, data, and personalization

Collecting data is a sore spot for many consumers who worry that businesses will bombard them with unwanted communication or sell their data to third parties. However, this doesn’t mean that many customers can’t be swayed to hand over their information in exchange for something the company can offer. According to research from Merkle, 71% of users are willing to share personal information with brands if it means that they get a personalized experience.

While collecting user data, keep in mind that there is a fine balance between personalization and invasion of privacy.

Why is data collection important for fueling personalization?

You can use your customer data to determine exactly who your customers are, what they want, and their intentions. You can learn how, when, and why they’ve interacted with your website in the past, and you predict what they will do next. Your customer data allows you to meet their current and future needs, perfectly aligning your offering with their intent at exactly the right time.

Responsible data collection

Data has to be collected ethically, according to GDPR, CCPA, and other regulatory bodies. You need a mix of data types (behavioral, geographic, demographic, and psychographic), a good understanding of your digital traffic levels, and granular customer data. The latter can be collected unobtrusively through a customer data platform (CDP), which can be used to stitch together different sources of data to identify your most valuable customer segments.

Balance personalization with data privacy

Once you have the information, you’ll have to carefully balance personalization and data privacy.

Think of it this way: If your friend suggests a pair of sneakers you might like, you’ll appreciate the thought, yet if a total stranger walks up to you and does the same, it will feel off-putting.

If you’re looking for ways to personalize your customer experiences without getting too personal, check out our article about successfully leveraging data for 1:1 personalization.

Best practices for building your personalization strategy

Personalization can transform your business, your marketing campaigns, and your website. Personalization is a must for companies that want to succeed in the experience economy, so let’s take a closer look at how to build your website personalization strategy, as well as some personalization tips.

Set clear and measurable personalization goals

What do you want to achieve through personalization? More conversions? Higher website traffic through improved retargeting? Increased cart size? Once you know what you’d like to achieve and set clear goals to track your KPIs, you can measure and test the success of your personalization efforts.

Here are a few examples of goals you may want to pursue:

Increasing engagement (more clicks, better open rate, etc.)
More time spent on the site
Increased revenue ( more transactions, increased cross-selling, etc.)
Increased loyalty (a higher percentage of returning customers)

Set simple but specific goals

The key to personalization is to take your time and start small and simple.

Creating a perfectly tailored digital experience according to the wants and needs of every customer in real-time would be ideal … but it doesn’t happen overnight. It takes careful planning and a good deal of time, resources, and data. We recommend you start small and simple and then scale from there.

Start with the broadest segments

Many companies make the mistake of over-segmentation. Taking a granular approach can be overwhelming and actually limit your understanding of your customer base because you lose sight of the big picture. Start off personalizing for your broader segments and refine your strategy from there.

Use no-code tools for faster turnarounds

Marketers often struggle to use the customer segmentation and personalization data at their disposal because they need developer resources to actually modify the content. A drag-and-drop editor with a pre-packaged widget library can help your marketing team implement changes faster so that your site (and customers) can benefit right away.

Use AI when it makes sense

AI is a useful tool for personalization, but it can’t be used as a black-box solution. For example, if you use natural language processing (NLP), make sure that it’s paired with the interests that you’ve selected. If you want to examine the visitor engagement score, make sure you are the one listing the criteria that will be used to determine engagement levels. AI should always be combined with your unique knowledge and existing data to get the best result.

Optimize your personalization campaigns with A/B testing

Once you’ve committed to running a personalization campaign and set your goals, you must know how to measure if it’s working or not. Here are a few guidelines to consider:

Test, test, and test again

You may already use A/B testing tools to optimize your website or your landing pages, but you can go even further and run A/B tests to identify which personalized version of your website works best for a given segment. Every test will reveal the most effective element to deploy so you can keep improving your site accordingly.

Ensure data reliability for your A/B testing solution

Conduct at least one A/A test to ensure traffic really is randomly assigned to different versions. If there is a dramatic skew between versions, something has gone wrong and will throw off your results.

Test one variable at a time

This is the golden rule of A/B testing! To isolate the impact of a certain variable, you’ll need to make sure this is the only one that changes between different tests.

Conduct one test at a time

When running several tests simultaneously, it can be hard to interpret the results and hone in on which elements have had the biggest impact. Focus on a single test before moving on to the next to ensure you’re measuring the impact of each modification correctly.

Adapt the number of variations to traffic volume

Bear in mind that the greater number of variations you test, the more traffic you’ll need. If you are unable to generate a large enough volume of traffic to test your assumptions, you should test the variation you believe will have the biggest impact first and slowly add variations over time.

Related: Be aware of sample ratio mismatch while A/B testing

Wait for statistical reliability before making definitive changes

Wait until the test attains statistical reliability of at least 95% before you hardcode any changes to your site. You don’t want to jump the gun and implement a modification that doesn’t really improve your existing website.

Measure multiple key performance indicators (KPIs)

Always set a primary objective and secondary objectives to measure your results. This can include your add-to-cart rate, the average cart value, click rates, etc.

Take note of marketing actions during a test

Keep in mind that large-scale marketing campaigns and other external variables can throw off your results. Make sure that you align with your marketing team and are fully aware of which campaigns are running in the background before interpreting the test results.

Examples of personalization done right

While there’s always room for experimentation and no right or wrong method when it comes to personalization, some companies seem to consistently hit the nail on the head with their campaigns and usage of personal preferences. Here are a few of our favorite website personalization examples:

Amazon

Amazon has a product database that contains millions of products, so finding what you are looking for isn’t easy. Luckily, the company uses personalization to determine your interests and instantly promote related content and suggestions in real time. This is a perfect example of how personalization can remove friction for customers by making it easier to find what they are looking for.

Spotify

Spotify uses numerous personalization methods. The latest, Blend, helps users merge their playlists with similar lists from their friends’ accounts. Blend provides match taste scores and shareable data stories. Spotify Blend shows that personalization leads to viral, shareable, and social experiences that cross-promote the platform.

Stitch Fix

Stitch Fix collects information users provide about their size, personal style, and shape, and then selects outfits based on each one’s unique taste and personality. Stitch Fix uses sophisticated AI to categorize style and clearly demonstrates how personalization and machine learning can work together to deliver as good of an experience (if not better) as a personal stylist.

All social media sites are great at personalization because of the wealth of data users willingly submit. LinkedIn is a shining example of a company that knows how to balance privacy concerns with utility. By gently providing personalized suggestions and links based on users’ current connections and searches, LinkedIn makes it easy to network, job-hunt, or catch up with former co-workers.

Frequently asked questions about personalization

Do you have more questions about personalization? Don’t worry – we have you covered!

What is a personalization strategy?

Personalization is a method of creating tailored, targeted customer experiences according to their needs and preferences. A personalization strategy helps you identify segments of visitors with distinct needs so you can better customize their experience.

What is the purpose of e-commerce personalization?

Personalization helps e-commerce brands gain insight into customers’ preferences, which is then utilized to build customer loyalty and extend their lifetime value. Personalization can increase customer engagement, offer relevant product recommendations which can increase cart size and purchases, increase the amount of time spent on your site, and boost product affinity with your users.

What’s the difference between personalization and customization?

Personalization is the act of creating tailored customer experiences using each user’s information to meet their individual needs. Customization occurs when customers manually make changes to a product or service to fit their unique preferences.

How can I improve my personalization strategy?

Start by identifying your goals, customer segments or buyer personas, and using code-free widgets and tools to implement hypotheses to test. You can use A/B testing to continually refine and improve personalization on your site.

How can I measure the results of my personalization strategy?

You should always measure how the results of your personalization campaign compare to the original version. With A/B testing, you can run your personalized campaign in parallel with the original version of your website to test the impact of the changes you’ve implemented.

What are the best personalization tools?

Several personalization tools may be useful depending on your goals. With AB Tasty, you’ll be able to build end-to-end, highly personalized experiences across your digital channels and test your campaigns for continuous improvement.