Tread Cautiously with Personalization

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Orbitz found itself under a spotlight recently when the Wall Street Journal published an article about the online travel agency's experimental method of segmenting hotel listings by the type of computer a shopper was using. Based on research that shows Mac users tend to book more expensive hotels than their PC counterparts, Orbitz has taken personalized offerings one step further, by occasionally positioning higher-priced hotels more prominently on a Mac user's screen.

"We've identified that Mac users are forty percent more likely to book a four- or five-star hotel than PC users. A similar skew applies for iPad users," wrote Orbitz CEO Barney Harford in a blog post. "We can use that information to influence which hotels we recommend to users we see searching on a Mac or an iPad versus a PC."

Orbitz's move to personalize its offerings using consumer data is just one of the latest examples of the growing trend of retailers trying new ways to hook consumers with relevant merchandise and service offers.

Despite the obvious benefit of giving customers exactly what they want, segmenting shoppers to provide them with more relevant offerings is a tricky business, warns Nikki Baird, managing partner at Retail Systems Research.

"I think Orbitz is an example of both the good and the bad of segmentation. From what the data told them, it made perfect sense: People shopping on Macs tend to buy more expensive hotel rooms, so they should get those options presented up front versus PC users. Theoretically, Orbitz is just helping their customers get to the answer most relevant to them faster," Baird observes.

The problem, Baird says, is that Orbitz risks alienating customers by not personalizing their offers accurately enough. "A lot of Mac users felt like the generalization didn't apply to them personally," she says.

As technology continues to advance, the use of customization is growing. Half of the major online retailers in the United States used some personalization technique last year, compared with approximately 33 percent the year before, according to Internet Retailer's Top 500 Guide.

The failure to provide customers with offers tailored to their shopping behaviors and interests could end up costing companies, according to Shai Atanelov, an e-commerce accounts specialist at New Edge Design, a Web design and Internet marketing company.

As an example, Atanelov points to a client that sells customized sports gear. Its sales were growing, but New Edge Design noticed that close to 300 online carts, totaling almost $50,000, were being abandoned each month by shoppers.

The marketing company staunched its client's losses using triggered email software. "This software allows us to capture the email addresses of people who started the checkout process but failed to complete it," Atanelov explains. "It instantly emails them…using incentives and offers of assistance to entice them to complete the checkout process." New Edge Design recovered 12 percent of the lost carts, totaling almost $8,000 in sales per month, according to Atanelov.

Retailers are also becoming more aware that customers might be alarmed—not delighted—by a hyperpersonalized offer.

Using historical buying data that it has collected about its customers, combined with demographic information, retail giant Target is now able to determine when a shopper is buying items related to a pregnancy. After learning that female shoppers reacted badly to receiving coupons for baby items, especially if they did not want others to know they were expecting, Target got smart.

The retailer began combining coupons for baby items with unrelated coupons for items like lawn mowers or wine glasses. "We found out that as long as a pregnant woman thinks she hasn't been spied on, she'll use the coupons. As long as we don't spook her, it works," a Target executive told the New York Times. Requests from CRM magazine for additional comments from Target were not returned.

Another client of New Edge Design offers customers coupons via live chat when they are viewing specific categories on the client's Web site. To avoid overpersonalizing the experience, the client offers only general coupons for the section instead of the exact item that the customer is looking at, explains Atanelov. In addition to not making the customer feel coerced into purchasing a specific item, Atanelov says this approach "allows the visitor to still feel like [he or she is] in control of the discovery and buying process."

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