Today’s consumers demand personalization across nearly every aspect of their digital lives, be it shopping, social media, or entertainment. For decades, it was one among many marketing buzzwords, but more recently, artificial intelligence (AI) has transformed personalization into a core concept of our digital reality—and a must-have for ecommerce businesses that want to stay ahead. In fact, experts estimate customer personalization as an industry to reach $11.6 billion globally by 2026.
For consumers, a personalized shopping experience is now more of a requirement than a “nice to have.” According to Twilio Segment’s 2023 State of Personalization Report, 56% of surveyed consumers say they would become repeat buyers after a personalized experience. Even more of them (62%) say that a brand will lose their loyalty if their shopping experience is generic.
Based on feedback from business leaders, the same report estimates that consumers spend an average of 35% more when their experience is personalized. With more than 9 in 10 companies now using Al-driven personalization tools to drive growth, the industry-wide shift toward enhanced, hyper-tailored shopping journeys that spans numerous channels is set to have a profound impact on nearly every corner of ecommerce going forward.
But there’s more to it than simply devoting resources to personalization—you have to get it right. Otherwise, you risk a a disconnect between what ecommerce companies deliver and what shoppers say they want. While 91% of brands told Twilio researchers that they offer personalized engagement, only 56% of consumers agreed—with just 17% willing to describe those experiences as “excellent.”
What is personalization in ecommerce?
In ecommerce, personalization is the practice of harnessing data to provide customers with unique, tailored shopping experiences and interactions with brands. With data-driven insights into individual consumer habits and preferences, brands can deliver personalized content and products, targeted marketing messages, and highly engaging interactions that drive sales and loyalty.
Successful personalization entails reaching consumers with the right message at the right stage of their shopping journey, with specific strategies and tactics adapted for each distinct touchpoint in the life cycle:
Pre-purchase awareness, discovery and evaluation
At-purchase decision making and conversion
Post-purchase nurturing and remarketing
Personalization is driven by information captured about a shopper’s previous purchases, browsing activities, demographics, geographic location, and language. There’s no shortage of data points that can inform personalization programs, so it’s a best practice to determine the granularity of your tailored experiences early in the planning cycle.
Depending on where a shopper is on their path, they might see a special landing page based on their location, a unique set of product recommendations based on their interactions, or a discount offer based on their previous purchases.
According to research from McKinsey, consumers define personalization as “positive experiences that made them feel special.” So at the end of the day, that very definition should be your north star.
“Think about personalization as the difference between a local shopkeeper and a big department store, where you can easily get overwhelmed by, say, thousands of different socks,” explains Drew Burns, a leading personalization expert and Group Product Marketing Manager for Adobe Target. “That local shopkeeper is going to recognize you when you come in and show you the socks that they know you’ll like. That’s the experience we’re trying to adapt to the digital world.”
Tune in to the final webinar of the Adobe Target Personalization Maturity Series on Tuesday, March 12, about unlocking AI-powered personalization capabilities across every stage of the customer lifecycle. Sign up for the webinar
The benefits of ecommerce personalization
Personalization requires investment, but the benefits in both the long and short term are undeniable for ecommerce brands. Two-thirds of surveyed executives in Gartner’s 2023 Brand Leaders Survey reported exceeding return-on-investment (ROI) expectations when brand messages were personalized and contextualized.
Shoppers prefer when they’re served products, deals, and content that match what they’re actually looking for. And they’re more likely to convert when they’re presented with messaging, products, and experiences tailored to meet their needs. Personalization increases interactions and the likelihood of engagement. For instance, Klaviyo reports that personalized emails have much higher open rates than static, homogeneous blasts.
McKinsey researchers found that personalization can reduce customer acquisition costs by as much as 50%, boost revenue by 5–15%, and increase marketing ROI by 10–30%. According to the analysis, companies with faster growth rates also derive as much as 40% more of their revenue from personalization than their slower-growing counterparts.
Done well, personalization—often in the form of targeted product recommendations or bundling at point of purchase—leads to higher average order value (AOV). Personalized customer experiences (CX) increase customer satisfaction, allow you to deliver better customer service at a lower cost, and buils trust and loyalty, ultimately driving higher customer lifetime value (CLV). That’s why personalization is often cited as one of the top customer retention strategies used by Shopify brands—and an ecommerce trend you can’t ignore for 2024.
5 steps to get personalization right
1. Understand your customers
Identifying and understanding your customers is retail 101, but it’s even more important when implementing effective personalization initiatives. According to a recent study from PYMNTS Intelligence and AWS, more than half of all surveyed consumers say the personalized offers that they receive are irrelevant to their needs.
“It’s no longer enough to suggest similar products based on past purchases or broad demographics,” Doug Brown, President of Digital Banking at NCR Voyix, told PYMNTS. “Hyper-personalization has to go beyond the obvious, tapping into a wider range of data points to create a truly individualized experience.”
And as analysis from Forrester points out, while more consumers actually prefer personalization during the at-purchase and post-purchase stages, new data shows that brands tend to focus the majority of their efforts on the pre-purchase stage of the customer journey.
Dialing in on when, where, and how to target your customers for personalization is paramount—and it starts with understanding who they are across sectors and generations. You should already have these foundational insights from the early days of starting and building your business. Now it’s a matter of looking at them through the lens of personalization.
For example, according to PYMNTS, 58% of surveyed consumers are generally interested in personalized discount and promotion offers. Yet, when divided by age, nearly 90% of Millennials are interested in the same personalized offers, making them the leading demographic in the category. Compared to Gen X consumers, Millennials are also nearly twice as likely to switch to a different brand if given more personalized offers.
2. Develop a strategy
Once you’ve identified how your target audience values personalization, the next step is closing the relevance gap and pinpointing what your customers want—specifically when, where, and how.
For example, a PYMNTS Intelligence research study found that 63% of surveyed Millennials prefer to receive their discounts via email, while 31% want mobile app notifications.
“Exclusive access to new products or personalized recommendations are appealing nonmonetary incentives, although they hold less sway compared to savings-based incentives,” writes Tim Sweeney for PYMNTS. “Discount and promotion offers, as well as free shipping, are also highly valued by consumers.”
If you haven’t already done so, creating customer personas is often a good strategic starting point. Each persona represents a shopper segment that exhibits similar behaviors in their purchasing decisions. Incorporate the demographic characteristics, interests, and buying behaviors of the highest-value audience segments that your brand attracts. Identifying the distinct preferences of these personas can reveal meaningful patterns to help you target them more effectively by anticipating their needs.
It’s important to consider questions such as what kind of products and services do they want; how do they prefer to receive information; what types of interactions or prompts result in action; and what kind of tailored experience will they respond to? Use answers to these questions to map the customer journey for each persona to gauge how the existing elements of your CX perform contextually, identifying how those customer segments progress across channels and touchpoints, and where personalized recommendations or content can have the most impact.
3. Collect data
Implementing successful personalization can be a complex, multistep process that touches on every aspect of ecommerce, from infrastructure and software to CX design and content. But the journey really begins with data collection. Building a complete picture of your customer journey requires a combination of customer relationship management (CRM) system data and analytics from multiple engagement platforms, such as website, social media, and email.
“Understanding your customer, establishing your customer journey, and setting your goals are just prep for getting your data in order,” says Drew from Adobe. “You want not only the contextual or in-browser data—what device they’re on, what content or product or category they’re engaging with—but also any first-party data. That means unifying data from different sources and standardizing it to create a schema that allows you to surface high-value propensity segments that you can take action on.”
Types of data that are important for personalization:
- Zero-party data (0P) is valuable and reliable information (think email addresses, phone numbers, preferences, and birthdays) that your customers actively give you, such as when they sign up for a newsletter or place an order.
- First-party data (1P) is information that you collect directly from audience when they engage with your websites and product pages, social channels, and email campaigns.
- Third-party data (3P) is collected, managed, and sold by outside organizations that don’t directly interact with your shoppers. It’s generally less reliable than OP and 1P data, and it can be costly. NOTE: With Google phasing out third-party cookies, Apple removing link tracking, and Meta removing detailed targeting from its ad service, 3P data will no longer be a viable data source.
In place of 3P data, quizzes, surveys, polls, and customer support chat prompts can be a great way to collect high-quality, permission-based data.
Categories of data to collect include demographic (location, income, age, etc.), psychographic (customer preferences and values), behavioral (past purchases, browsing and on-site search history, marketing engagement), and contextual (devices, channel interactions, seasonal fluctuations, whether they’re coming from TikTok, Google, or Meta).
For example, real-time behavioral data can offer direct insights into why someone is shopping on your site or how long they’re staying on a given page. With that data, you can implement an offer that only applies to a shopper segment it recognizes from the data as a first-time customer.
4. Invest in foundational tools
For the most part, there is no single tech solution for personalization that covers every stage of the customer journey. Rather, most ecommerce businesses use a system of integrated tools for recognition, analysis, decisioning, delivery, and optimization. These can include systems to pool and analyze data, algorithms to identify behavioral patterns and customer preferences, and analytical capabilities that can be automated to trigger certain actions based on preset rules.
While email marketing tools offer automated solutions for nurturing and retargeting, they primarily cover the latter stages of the customer lifecycle. A customer data platform (CDP) like Klaviyo can help solve this problem by centralizing subscriber and customer data within a unified platform that also sends personalized marketing.
CDPs use software to clean and collect data to create a structured, unified customer database that is accessible to other systems. CDPs are often fed into full-scale customer experience and optimization solutions like Adobe Target, which integrates data from CDPs, CRMs, and 3P analytics into a comprehensive customer profile that can be used to create robust, AI-powered personalization experiences at scale.
For example, by combining several tools, Macy’s was able to completely transform its customer experience with dynamic personalization.
Gartner defines this broader category of solutions as “personalization engines.” It’s a technology that enables marketing professionals to identify, set up, implement, and measure the optimum experience for an individual based on knowledge about them, their intent and context. It can then deliver tailored content, offers, and promotions to the individuals across channels.
Beyond Adobe Target, popular personalization engines include Optimizely, Monetate, Insider, Dynamic Yield, Salesforce, Oracle, and Sitecore. Ecommerce providers like BigCommerce and Shopify also offer a long list of integrated third-party solutions, plug-ins, and apps to help you achieve your personalization goals.
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5. Measure effectiveness
Your personalization strategy is only as good as the results it delivers. In order to tell if the customized content, product recommendations, or deals you’ve created to appeal to individual customer cohorts are actually working is to constantly track and test them—then improve them based on new information. That may involve tweaking the automated rules that you’ve given an algorithm to trigger a custom experience or tweaking the experience itself.
“We built Adobe Target on a foundation of experimentation, so we never deliver a recommendation algorithm without testing it while we’re doing it,” Drew says. “You need to find out if what you’re doing is improving the experience over another option—or even the default experience. Experimentation is there to help validate your decisions and decide between different algorithms and customizations, and the logic and formulas for how you want that data to be evaluated.”
Effectively automating A/B testing at scale between incremental tweaks can help your personalization efforts. You should also track essential metrics to measure the impact of your personalization strategy on both a macro and micro level, including your revenue per visitor, custom conversion rate, click-through rate on personalized content, time spent onsite per shopper, and personalized cart abandonment rate. Measuring your CLV over time can give you a picture of how well your personalization strategy is building customer loyalty and repeat purchases.
Personalization across your customer journey
“Content should be adapted based on accurately identifying an individual wherever they are in the customer journey,” Drew explains. “Make adjustments based on what you know about them, what you’ve gleaned from their interactions up until that point, and their changing intent over time, from first touch to loyal customer.”
Pre-purchase | Acquisition
In the pre-purchase stage, you can help shoppers learn about the value of your brand, products, or services through broader personalization tactics. But to maximize the performance of your marketing, you want to deliver the right message to the right audience in the right context and tone.
With the behavioral, contextual, demographic, and historical data that you’ve collected about your most likely customers, you can design omnichannel segmented ads and marketing campaigns that resonate with those valuable shopper archetypes.
At-purchase | Conversion and retargeting
A truly seamless, tailored at-purchase experience can drive more conversions and reduce friction for shoppers. Robust personalization starts with dynamic content optimization, including personalized site search and navigation, and customized content across homepages, category landing pages, and product detail pages.
Dynamic content widgets, related products and categories, and product recommendations based on customer profile data come to life at this stage, helping to drive conversions and increasing AOV. For instance, advanced AI-powered recommendation engines like Amazon’s drive 35% of total sales, according to McKinsey research.
At this point in the journey, automatically engaging customers who abandon products in their carts, such as with automated email flows from Klaviyo or other email marketing providers, is a fundamental component of effective personalization.
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“Remarketing is still handled primarily through email, and it’s a part of the journey where personalization can be really effective,” Drew says. “Personalization can help us create the most compelling reason for shoppers to rush back. What’s the right incentive for that individual based on the segments that they fall into, based on what you know from the data. Are they discount driven? Are they time driven? Do they respond to a dynamic template within an email that shows them the product that they’ve left behind?”
Another effective win-back strategy is including user-generated content featuring real customers using or wearing the same product that the individual was shopping for or authentic customer reviews in abandonment emails or advertisements.
Post-purchase | Remarketing
When it comes to nurturing satisfied customers with post-purchase personalization, the sky’s the limit. Leverage the data that your customers willingly give you to deliver unique welcome and nurture experiences. You can also use personalized CTAs to entice customers to sign up for newsletters, giving you another opportunity to drive brand loyalty with customized content. If you offer consumer packaged goods, like food, beauty, or cleaning products, send personalized renewal reminders on the day that they’re likely to run out.
Another effective tactic to drive repeat purchases is offering individualized customer loyalty and referral programs alongside personalized and proactive customer service offerings. And don’t forget to wish them a happy birthday!
AI-driven customer experience
AI is now in the driver’s seat when it comes to personalization. AI-powered personalization, loyalty, and post-purchase customization were major topics at the 2024 NRF retail conference .
The limits—including physical boundaries—of what defines those experiences are constantly expanding. For example, beauty brands are now using AI to create products that match their customers’ individual skin types and lifestyle, building virtual try-on tools to generate personalized shopping experiences, and experimenting with AR and VR try-on filters.
Learn how bareMinerals used Shopify+ and Buy with Prime to create a bespoke experience for its shoppers. Read the case study
The next step in the AI-driven personalization evolution could include in-the-moment ads and promotions, as well as content customized and generated on-demand for each individual shopper. Predictive content curation allows brands to determine the media format that resonates most with individual customers. And AI can deliver hyper-personalized CX across all platforms and devices, both virtual and physical.
As more brands adopt variations of AI-created content, Keith Nealon writes in Forbes, they “strive for a balanced integration of human creativity and AI-driven efficiency.”
However, when it comes to using AI for personalization, experts emphasize that AI is only as good as the data it’s being fed.
“But it does bring so much efficiency,” Drew says. “Think about it as predicting the future. What we’re trying to determine is statistical significance, where we reach confidence that if we show this version of content versus that. It’s a repeatable act that can have a positive outcome on your company’s revenue goals—at scale.”
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