How much does personalization increase sales?

More sales with personalization: this is how you declare war on Amazon & Co.

If you want to be successful in e-commerce, you have to compete against big names like Amazon or Zalando, among others. But there is a clear trend in which segment users still expect increases: personalization. There is sales potential in this, which has yet to be exploited.

A study gives an insight into what customers want

Qubit has dealt with personalization in e-commerce. As a provider of software solutions for real-time personalization in this area, it has done a long-term analysis of the effects of personalization measures on sales as well as a current survey of users. In this, it was determined what expectations the users have of the personal customer approach and to what extent they would switch to a retailer who heed it.

For these findings, 1,120 online users in Germany were asked about online shopping behavior and preferences there last month. The overall investigation extended over three years. Two billion global user journeys and 120 million purchases were analyzed. 12.5 billion customer data records could be categorized and then examined to determine which optimization measures can be viewed as profitable for increasing sales.

To underline the representativeness of their study, Qubit has included an external assurance of the quality of their methodology by PwC.

The combination of the study and the survey paints a clear picture. Accordingly, many users are willing to switch to retailers with better personalization or to provide personal data for optimization. However, so far only half of the online shops are in the process of implementing such optimizations. This can be considered a neglect when considering the numbers of the investigation. Because with personalization measures - including automated ones - up to six percent increase in sales can be achieved. The report shows which measures are particularly suitable for this.

Purchase incentives have the most sales potential; but the combination is key

Results with regard to the optimization measures in e-commerce that actually increase sales show that buying incentives, as well as redesigns and welcome messages, can work well.

Aspects such as product shortages, social proofs or time constraints mean the largest average increase in sales per visitor through personalization measures. This means that an average of 1.5 percent more sales can be generated per visitor if there is time pressure, even twice as much if the product is only available in small quantities. But product recommendations also bring an increase of 0.4 percent, with a page redesign promising a 0.2 percent optimization.

On the other hand, purely cosmetic changes have not paid off. The study includes aspects such as experiments with navigation elements, which resulted in an average of 0.2 percent less sales per visitor. The analysts consider it particularly important that individual optimization measures, even if they are effective, work much better if they are specifically combined with personalization. In the case of segmented strategies, the turnover per visitor increases three times on average.

Such insights into the customer journey provide information about how and where companies can start when it comes to personalization and optimization.

Further sales potential: users can be won over by optimized shops

There are many benefits to personalization. On the one hand, it can not only promote customer acquisition, but also make it more cost-effective. McKinsey & Company even assumes that costs can be reduced by up to 50 percent in this way. However, the Qubits survey showed that only 49 percent of those questioned could say that their preferred online shops would optimize or personalize them in their interest. The 80 percent of shoppers online only visit one to a maximum of five websites to make purchases.

It can be assumed that many Amazon, Zalando, may include the regionally strongest book or electronics retailer. Nevertheless, or perhaps precisely because of this, there are opportunities for other e-commerce retailers to get a (further) place in the repertoire of users. After all, 83 percent of those surveyed are willing to switch to another online shop if this one offers better personal service. And only eleven percent show loyalty to stores where they are currently a customer.

How can the shops present themselves as such with better approaches? On the one hand, the findings from the comprehensive qubits analysis should be considered. On the other hand, the (potential) customers can be specifically addressed. After all, 69 percent of users are ready to reveal information about their preferences if that would result in an optimization of the shopping experience.

Personalization should not be generalized

It must be remembered that strong personalization also depends on the target group. 53 percent of users under the age of 35 would like personalized product recommendations. But only 37 percent of those over 35 follow this wish.

Nevertheless, product recommendations are still a key to user or better customer acquisition. 62 percent of those surveyed consider them "very" or at least "relatively important". This is just as big a growth factor for e-commerce retailers as the increase in sales that can be achieved through specific personalization measures.

Poaching customers and increasing sales are the goals: Personalization is a way

The study shows that customers can be easily enticed away if they find a better offer in terms of personal customer approach. Therefore, traders who invest little in strategies such as those listed in the analysis are at risk. Namely, the fact that they lose customers to these very websites, which are greatly improving in the area of ​​personalization.

The study shows that there is still a lot of catching up to do in terms of personalization.Thomas Seidel, Country Manager DACH from Qubit, says:

As our analyzes show, there is still a lot of potential in German online retail in terms of addressing customers.

This finding correlates with a Bitkom study, according to which a good 30 percent of companies in Germany do not collect and analyze any customer data at all. How important this can be, however, is also indicated by success factors for increasing sales such as preventing purchases from being abandoned.

The mentioned pent-up demand then really becomes a requirementwhen looking at the possibilities that segmented personalization offers. Maybe you can win some of the more than 300 million Amazon customers for yourself. Regardless of this, the up to six percent increase in sales indicated by Qubit should be incentive enough to start thinking about more effective strategies for personalizing your e-commerce shop. If you succeed in making a breakthrough, you can take advantage of the lack of loyalty among users to shops that has prevailed up to now. But then you have to develop another tactic so that you do not fall victim to the same development in the future. Here, too, the personal customer approach can certainly provide support.