By CORINNE BERNSTEIN
As e-tailers adopt personalization technologies and practices, they are taking their cues from the customer to set some limits on just how personal they should get.
Retailers are giving their online operations a more personal but not too personal touch as they balance their desire for more targeted communications and merchandising with their consumers' privacy concerns.
Although the ability to use customer specific data across consumer touch points offers additional avenues for sales growth and shopper satisfaction, only a few retailers use personalization to any significant extent. However, industry watchers expect personalization to evolve over the next few years and be pivotal to multichannel retailing strategies. For that reason, some multichannel retailers are out in front on personalization.
Take Best Buy, for instance, whose Web site has become its "largest store," executives at the Minneapolis based consumer electronics chain have said. Best Buy, which uses personalization technology from Art Technology Group, Cambridge, Mass., doesn't distinguish between its online and offline customers. And it's aiming for a uniform customer experience across all channels.
"Successful retailers have to focus on the multichannel experience, and personalization is the linchpin," said Kent Allen, research director at Aberdeen Group, Boston. "Twenty first century personalization is more than 'My Yahoo' which was what people considered online personalization three or four years ago."
However, online personalization which ranges from recognizing the type and speed of a users browser to sending the customer information based on the individual's historic transactions, demographics and even navigation patterns has taken off slowly. The reason: Personalization received a bad rap in the early days of the dot com era when it was overdone and caused some customers discomfort.
But e-tailers are now settling on more conservative personalization, said Andrew Bartels, research analyst, Forrester Research, Cambridge, Mass. "Personalization needs a lot of subtlety in order to do it effectively. Companies are being appropriately risk adverse."
Web based retailing is growing much faster than traditional retailing, and personalization, if done successfully, will sustain or spur higher growth rates for the sector, according to market trackers. Retailers may have the right product and the right content on their sites, but putting the right product in front of every customer is another matter. "With a few exceptions, most e-tailers are light users of personalization but heavy dreamers, but it will soon become a point of differentiation of the shopping experience if used successfully," said Ken Seiff, former CEO of Bluefly, a New York based online clothing retailer with plans to try out personalization, first through e-mail and eventually on its site. Bluefly, which is building its own personalization algorithms, has been looking at the technology for about six years.
As e-commerce matures, others are taking a fresh look at personalization as its benefits become clearer. The successes of e-tailing heavyweights such as Best Buy, Amazon.com and Lands' End are setting the tone for newcomers seeking to capitalize on one to one personalization.
TESTING BOUNDARIES
For those trying out personalization, one rule of thumb is to avoid excesses. This sentiment is reflected in the language e-commerce managers use to describe their first forays into personalization.
Bombay Co.'s goal is not to "over communicate but to grow organically through our stores," Matt Core, the retailers VP of e-commerce, told attendees at eTail 2004 last month in Fort Lauderdale, Fla. The Fort Worth, Texas based company, which began an e-mail marketing program two years ago, plans to integrate personalization into its e-mail. "You need to ask customers the right questions for the type of content they want to receive," he said. "We don't want to send a Bombaykids shopper with three sons an e-mail targeting products for girls. And as far as privacy, everything will be opt-in."
Likewise, Avon Products aims to avoid "over personalizing" its site, said Julie Barile, associate marketing manager for Avon.com. The New York based retailer, which has an aggressive e-mail campaign, is introducing "add to my favorites" and "people who bought this also bought" features on its site.
"We are careful of the customer information we keep and how we use it," Barile said. "We will continue to look for personalization opportunities that will enhance shoppers' experiences and not turn them off. Personalization needs to be beneficial and relevant to the user."
Personalization, which requires good data warehousing and complex analytics to interpret it, is only as good as the data available. Even with new technology and practices in place, the possibilities for misinterpretation remain strong. Shoppers who have bought cookbooks as gifts for others but never use their own ovens wouldn't respond positively to a deluge of information for cooks.
Making an incorrect offer based on misguided premises or delving too deeply could do more damage than good. Leaders in personalization are empowering customers to draw the requisite boundaries. A feature on Seattle based Amazon.com enables users to tell the e-tailer they already own a specific product, so the company won't include that product in future buying suggestions.
"Those pursuing best practices regarding customer privacy and security tend to be companies that provide customers with choices on how data is used and how they want to participate," said Eric Best, a former business development manager at Amazon and currently CEO of Mercent, a Seattle based systems integrator for Amazon and other online marketplaces. "That helps engender trust, which is part of a company's brand equity."
MATTER OF TASTE
There will always be questions on the privacy and efficacy of personalization, Denis Pombriant, managing principal at Beagle Research, Stoughton, Mass., told Executive Technology. "The market delivers solutions to meet those challenges but maybe not as fast as it should."
And because personalization is, well, personal, what's appropriate depends on the user and the content. Users in some sectors may be more accustomed to receiving electronic communication and may prefer it.
"Personalization works. In fact, some of our customers tell us they like to be e-mailed - a lot," Scott Sanborn, VP of marketing at St. Petersburg, Fla. based HSN.com, told e-Tail 2004 attendees. "We have several hundred thousand customers who say they would like to get e-mail every day from us. Special offers are triggered by purchasing history. The more you buy from us, the more e-mail you get from us."
But this won't work for every customer and every site. While seasoned Web surfers are more accustomed to providing personal information in exchange for a customized experience, others are even uncomfortable with one of the most common forms of personalization being greeted by name.
New Web users might consider this too personal, said Michael Marston, chief strategy officer and co founder of Art.com, Raleigh, N.C. "Some people are concerned that if they log in and the computer remembers their names, it might remember other things," he said. To avoid unintended intrusion, the art and framing e-tailer uses what Marston calls "non-intrusive personalization." For instance, technology from New York based E4X enables Art.com's customers to view prices in their local currencies. The company also uses software written in-house that allows customers to change the color of their computer backgrounds to match their walls at home.
Beyond that, Art.com is erring on the side of caution. Strategies will have to be tested overtime as companies weigh cost and complexity issues. They need to determine how much they can invest in personalization when they have other priorities, said Marston. Solutions can be costly and complex.
"If a user has logged on to our site in the past, we know his address and purchase history, but some of our users are anonymous," he said. "We may have an IP address and an ISP, which doesn't give us much to go on unless we do an analysis of how this user moves on th and potentially intrusive.
"The Net will remain a relatively anonymous network," Marston added. "It will always be a challenge to have a truly personal experience online."
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