A Starter Guide to E-commerce Personalization in 2024

With the new age of technology, you can reach anything you want with one click. This accessibility is both good and bad for companies; it means that you can reach your audience quickly and efficiently, but so does your competition.

The key to being one step ahead of your competition is to offer your customers the best shopping experience and raise your customer loyalty. The easiest way to do that is to offer personalized content to your customers.

An example of a great e-commerce personalization is Spotify's "year in review" lists. There is no way that you haven't encountered someone's list on social media. Spotify mastered its personalization to the point that people switch to their services to get that "special treatment."

That special treatment is the key to more conversions and customer loyalty in the long run. It's not that different when it comes to e-commerce. With the major shift Amazon made in the competition, personalization became the utmost important benchmark in the game. Therefore, if your e-commerce site doesn't have an e-commerce personalization strategy yet, it's time to come up with one.

In this article, we will go into detail about e-commerce personalization, explain why you should implement an e-commerce strategy, and offer you a guideline. Furthermore, we’ll list 5 phases of e-commerce personalization and give brief explanations.

What Is E-commerce Personalization?

E-commerce personalization can be defined as the set of practices using customer data such as demographics, preferences, browsing history, previous purchases, and device usage to know your customers better and offer them an excellent experience on your website.

E-commerce personalization covers different channels you reach out to your customers, such as the website and applications, and assists them in their journey of becoming repeat customers and, in the long term, loyal customers.

A basic example of e-commerce personalization would be modals with a sale coupon for visitors who will make their first purchase. Receiving and utilizing customer data to determine which visitors are not returning customers, your website includes a coupon for the target population, in this case, first-time purchasers; then they become inclined to shop for the first time because of the "special" offer.

It's a very simple detail, but it's very effective.

What Is the Difference Between Personalization and Customization in E-commerce?

Although, at first glance, you wouldn't assume that these two terms are confused with each other by many, they are. However, there are some distinguishing qualities that set personalization and customization apart.

The first and main difference between them is that the authority belongs to different parties. Personalization is done by e-commerce platforms. E-commerce platforms use customer data they receive to create and deliver personalized content to their customers. This act requires no active effort from customers or businesses.

On the other hand, customization is done by customers by hand. For example, some textile brands allow customers to customize their orders by choosing colors, texts, and patterns. Although the website allows customers to customize their purchases, the authority belongs to the customer.

The second difference is that customization and personalization depend on different sources. While customization is purely data-based, customization is not based on any data. Customization relies on the taste of the user.

The third difference is strongly connected to the second one. The data e-commerce sites use to deliver personalized experiences is collected automatically on personalization platforms and requires no conscious effort. The user does customization, and it's the result of their choices.

In essence, personalization belongs on the company side of the coin, and on the flip side, there is customization and the customer.

The Importance of Personalization in E-Commerce

So far, we've answered many "What" questions. So it's time to answer the "Why?"

Why should you pay attention to e-commerce personalization? Well, the numbers don't lie. Here is the list:

• Increased Engagement

79% of consumers say they are only likely to engage with an offer from a brand if it has been personalized to reflect previous interactions the consumer has had with the brand.

Consumers expect brands to be aware of their customer journey and create a personalized shopping experience for them. If they are returning customers, they want to see personalized product recommendations. If they are new customers, they want to receive personalized offers and coupons.

Also, with behavioral targeting, e-commerce platforms can personalize content according to site visitors' browsing behavior and increase the number of website visitors by using third-party data.

• Increase in Customer Loyalty

56% of online shoppers are more likely to return to a website that recommends products. Online shoppers love online retailers that deliver personalized experiences. Your online store should offer customers what they need. Product recommendations are the key to increasing the number of returning visitors and customer satisfaction.

You know what they say, happy customers are the best customers.

• Higher Conversion Rates

91% of consumers say they are more likely to shop with brands that provide offers and recommendations that are relevant to them. Sometimes, first-time visitors might need a little help to realize what they want or need. While tracking user behavior, you can analyze the relevant information and display products according to customer needs. Product discovery plays a big role in turning potential customers into customers.

• Increase in Average Order Value

Personalization can reduce acquisition costs by as much as 50 percent and lift revenues by 5 to 15 percent. Average order value (AOV) is an e-commerce metric that tracks the average dollar amount spent by customers whenever they place an order on a website or application. Although this metric doesn't directly show the profit, it offers insights into the performance of your e-commerce platform. Higher AOV means that you have lots of loyal customers, and you need to focus on your current customer base.

Quick note: Don't forget to consider customer lifetime value while evaluating AOV. LTV is crucial for most e-commerce platforms because the metric focuses on the value of the customer in the long term instead of their individual orders. If your e-commerce site has customers with high LTV, you need to focus on delivering personal experiences rather than using personalized marketing to increase the number of your customers.

• Better Customer Experience

E-commerce personalization is the most crucial step to improving the quality of the customer journey. 98% of marketers say personalization advances customer relationships. Delivering personalized experiences according to customer preferences will make your customers repeat purchases, and in the long term, a well-thought e-commerce personalization strategy will ensure a solid customer base and more profit for any size of business.

How to Start Designing Personalized Customer Experiences in E-commerce?

Since now you have the reasons to pay attention to e-commerce personalization, it's time to design a personalized shopping experience for your customers. We prepared a list with eight steps to help you come up with a solid e-commerce personalization strategy.

But first, let's take a step back. Remember the basics of e-commerce personalization: everything starts with data.

E-Commerce Personalization Starts with Data Collection

As a wise man once said, "Information is power."

Data is the baseline of e-commerce personalization. Let's say you have to buy a birthday gift for a friend of a friend. The chance of you getting the perfect birthday gift for someone you don't know is extremely low. In this case, there are a few ways you could follow. You can ask your mutual friends for advice or ask them to tell you about the interests of that person.

It's the same for e-commerce. Your website can't give product recommendations to customers without knowing them. You can't connect with customers without polishing their shopping experience according to little distinctive details about them. To turn a site visitor into a returning customer, you have to know about the buyer's journey.

Here, data points come in to help. However, before we get started with data types, we want to highlight that it's crucial to offer personalized experiences according to your customers' needs, not the other way around.

Because the information is a power that can be dangerous when it's not used responsibly.

Importance of Privacy in E-commerce Personalization

"Do you want to accept cookies?" - almost every website nowadays.

In summary, cookies track our actions on the internet, and the data can be shared with retailers through third-party aggregators. Remember the little distinctive details I've mentioned earlier. Well, third-party data can create very, very personalized customer profiles. This means that companies can know your exact location, the names of your friends, and even your dinner plan for next Tuesday.

There are privacy laws and regulations around the world to protect people from unethical practices, manipulation, and security risks. Customers care about their privacy as much as, if not, even more, they want to have a personalized experience on your website. Preferring first and second-party data, setting clear boundaries with your customers, and engaging in healthy communication with your customer base will bear more beneficial in the long run.

Don't forget that e-commerce personalization aims to increase customer loyalty. Meanwhile, a strong e-commerce personalization strategy brings you customers, and customer trust makes them stay.

The Type of Data You Can Collect About Your Visitors

• Demographic Data

Demographic data is a data type that illustrates the socio-economic status of customers. It might be information regarding race, education level, income, marital status, sex, and employment. Demographic data represents the information of customers in a specific geographic location. On the other hand, population demographic data covers area population, ethnicity, etc.

• Engagement Data

Customer engagement data depicts the current connection between a customer and a business. Any interaction the customer has with your e-commerce business will count as engagement. For example, the amount of time a customer spent viewing a particular product on your e-commerce website will help you to offer personalized product displays for them.

Tracking touchpoints is really important to understand the customer and build a stable relationship with them. These touchpoints can include visiting your site, signing up for an emailing list, writing in a live chat, or contacting customer support.

• Shopping Behavior

The data is the key to understanding the main factors behind purchasing choices. Shopping behavior can be defined as purchasers' actions and emotional state during the shopping session. By tracking the number of shopping sessions, you can view the pathways customer follow and create an e-commerce personalization strategy that can increase your conversion rate accordingly.

• Interests and Preferences

Get to know about your customer. Track your customers' browsing history on your site. Do they like a particular product? Do they prefer a particular seller? What is their favorite color? What are their hobbies according to their search history? Discovering your customers' interests and preferences makes it easier to offer product recommendations.

• Behavioral Data

Behavioral data is generated by a customer's engagement with an e-commerce platform. This type of data can include email sign-ups, number of page views, or other user touchpoints. You can get behavioral data through websites, mobile apps, CRMs, marketing automation systems, call centers, and billing systems.

Although consumers, businesses, or individuals within a business can be the customer in behavioral data, the data will lead back to a single end-user. The user can be known (logged-in user) or an anonymous visitor.

Behavioral data is usually generated and stored as an "event," which means the action taken by the user. The event has "properties," which is the metadata that explains the event.

For example, let's say that if there is an event (the customer added a product to the cart), then the property could be "not signed-up." You may think of events as the main actions and properties as the supporting details answering background questions.

5 Ways You Can Learn More About Your Visitors

• Shopping Quizzes

Shopping quizzes are the easiest and the most direct way to collect data for e-commerce personalization. Asking simple questions to your customers will improve their customer experience greatly and ensure that they find will end up seeing the best product pages for their taste. Just by asking a "Black or white?" or "Short or Long?" question, you can eliminate the wrong products and increase customer satisfaction with the right product pages.

• Interactive Chatbots

With interactive chatbots on your landing pages, you can assist new customers and learn more about their preferences and intent. You can collect data while making the learning process easy for customers. It's important to use a similar tone as your customers, so make sure your bot adapts the language of the online shopper.

• Behavioral Data

I've already mentioned behavioral data, but we want to highlight how beneficial it is for your e-commerce site. Let me give you another great e-commerce personalization example: Amazon's bundle strategy uses behavioral targeting to create bundles for their customers. Amazon evaluates its customers' browsing behavior, previous visits, and so on.

Behavioral data also assists machine learning for customer segmentation which we will explain later.

• Pop-Ups

You can ask your customers for permission to collect their data with pop-ups. Although currently, this method isn't a great option since new regulations aim to ban data collecting pop-ups and delete the previous data collected. Still, you can benefit from pop-ups by turning them into pop-up surveys.

• Purchase History

One's purchase history tells a lot about themselves. So you can use it to get to know your customers and e-commerce personalization. You can generate product recommendations according to their previous purchases and conduct a suitable email marketing strategy.

An excellent e-commerce personalization example using purchase history data would be Aliexpress' email marketing with customer segmentation. The site groups the people who have bought the same product and create product recommendation emails for customers.

And segmentation is crucial to offering personalized customer experiences. But why?

Importance of Segmentation for Personalized Shopping Experiences

Segmentation is the procedure of grouping people into cohorts or specific groups based on their attributes or behaviors.

The process of segmentation allows you to group customers based on micro-level as well, so you can ensure efficient personalization. You can take your customer segmentation to the next level with machine learning algorithms.

When it comes to e-commerce personalization, there are a few reasons why segmentation is important. The first reason is that segmentation helps you to understand your customers better. By analyzing data points, you can split customers into smaller groups and offer them more personalized content. As you discover what they want and prefer, you can work on your dynamic content to ensure their satisfaction.

The second reason is that segmentation helps you to implement the right marketing strategies. For example, an apparel shop that has customer segments based on demographic location can use these groups to personalize their email marketing and offer proper product recommendations according to the climate of the location of segments.

The third reason is that segmentation helps you to determine valuable customers. Segmentation allows you to acquire critical data on customers'. Life cycle stage, upsell opportunities, and risks. Customer success managers can utilize segmentation to calculate the churn rate for each customer segment and come up with strategies to improve a better CX.

Last but not least is that segmentation allows you to improve your customer support. As your business size changes, your customer support plans should too. Segmentation can help you to deliver more personalized customer support at scale and maintain a close relationship with your long-term customers while growing your e-commerce platform.

Now that you know why segmentation is essential for e-commerce personalization, it's time to create a personalization strategy for your e-commerce website

8 Steps to Getting Started with E-commerce Personalization

Step #1: Understand Your Personalization Campaigns, Objectives, and Needs

To come up with a better personalization campaign, you need to figure out what your e-commerce business needs. Why do you want to implement a personalization strategy? What are your objectives? Answering these questions will establish the basis of your strategy.

Step #2: Choose a Personalization Tool That Fits Your Needs

There are hundreds of personalization tools on the market. It would help if you weighed the pros and cons while choosing a personalization tool. The reasons and objectives you've determined in the previous step will come in handy.

Choose a personalization tool that comes with features that will help you along to way achieves the goals you have in mind. Don't forget to consider long-term outcomes as well.

Step #3: Define Your Personalization Strategy to Accomplish Your Objectives

You have chosen your tool, but without a proper strategy, even the best personalization tool can't prove to be fruitful. Primarily, you need to prioritize the home page, product page, search result page, and shopping cart page personalization. With the right personalization strategy, you can increase conversion rate and lower cart abandonment.

Step #4: Start Understanding Your Customer with the Data You Have

The most important step of personalization is understanding your customer. You need to collect and analyze data to create customer profiles. If you can't collect enough data, you can't offer personalized experiences to your customers.

It's crucial to know your customer to implement a successful targeted marketing plan as well.

Step #5: Create Customer Segments for the Personalization Initiatives

If you have customer data, it means that you can now create customer segments. These segments will help you to decide on personalization initiatives. You can decide which customer segments are more valuable for your business and shape your strategy accordingly.

Step #6: Monitor and Analyze the Personalization Campaigns

Track how your personalization campaigns perform. How are the results so far? Are there any inefficiencies? Use different metrics and perform different tests to see what you can fix to improve your campaign.

Step #7: Optimize the Process

Implementing an e-commerce personalization strategy aims to reach more potential customers and turn them into customers. Achieving a state of conversion optimization with continuous improvement is not impossible.

However, to optimize your personalization, you need to measure personalization:

• Did you reach your target segments? If so, what do numbers say? For example, compare default and personalized experiences with page numbers for each segment.

• For each target segment, how effective is the personalization? For example, monitor and compare the number of conversions connected to each personalized touchpoint of each target segment.

Step #8: Scale Your Personalization Campaigns to Achieve 1:1 Personalization

Take a step back and pay attention to the stages of the digital e-commerce journey (acquisition, conversion, growth, and retention) and improve related areas. For example, if your conversion rate is low, you can focus on personalizing lookalike-based product pages and retargeting campaigns based on shopping history.

Don't forget to add mobile devices to your personalization plan. Dynamic content for mobile devices and applications will help you reach one step closer to omnichannel personalization.

5 Phases of E-commerce Personalization

1. Data collection: The phase of acquiring the necessary customer data through different channels. You can benefit from zero-party, first-party, second-party, and third-party data.

2. Segmentation: The phase of splitting customers into separate groups based on their shared attributes such as web attributes, database attributes, and their user behavior data.

3. Rule-based personalization: This phase differentiates from basic A/B testing because it offers tailored experiences to customers. Instead of focusing on one average online shopper, it takes various customer segments into account. It allows you to personalize content faster and more efficiently according to customer profiles.

Rule-based personalization uses If/then logic. For example:

• If the user searched for X, then show banner 2.

• If the user clicks on "Add to Cart," then show/hide something.

4. Predictive personalization: The phase of combining historical data and real-time data to predict what your customers expect to encounter on your website. It allows you to deliver various variants to your customers according to their previous preferences and real-time actions.

5. 1:1 Personalization: The phase of delivering the utmost personalized customer experience. Every customer's experience is unique, and this phase ensures that your company utilizes the data collected in the previous steps to offer a 1:1 personalized experience.

The Bottom Line

In today's modern world, personalization is a must for e-commerce companies that want to succeed. Personalization keeps your customers interested and makes them come back for more. Although it might seem challenging to build a loyal customer base, it's not impossible when you take the right steps.

Start with determining your personalization objectives and let those objectives guide you through your e-commerce personalization journey. If you're still unsure how to begin your journey, check out our personalization guide: