Impact of personalized product recommendations on sales volumes on eCommerce sites
–“We examine the items you’ve purchased, items you’ve told us you own items you’ve rated, and items you’ve told us you like. Based on those interests, we make recommendations.” —
This is how Amazon defines recommendations of their products they are making on one of the largest retail E-commerce stores on the planet. Today, eCommerce is booming and developing at very fast pace than ever before in the history of retail thanks to the massive adoption of the Web as ‘open e-commerce platform’.
There are many individual online stores along with giant eCommerce platforms like Magento and Shopify that need recommendation systems for creating better buyer’s experience for their clients.
What is a recommendation system and how can an online store benefit from it? To understand the benefits of recommendation engine integrated to an eCommerce store, knowing how recommendation systems really work is important. Recommendation systems are used by online retail sites to suggest products to customers. They are made based on customers’ needs, interests, and previous buying behavior. For example, the majority of Amazon customers who shop for a 15.6-inch laptop bag may also be interested in a mouse or a pad. If a high percentage of Amazon shoppers view the same or similar items during the process of shopping for a bag, Amazon can also recommend these products to other similar shoppers.
Another recommendation option that big e-commerce sites like Amazon widely implement today is email recommendation. Product recommendations are delivered directly to customers through email. Customers appreciate the email recommendations because they help them watch out for new items they are interested in purchasing.
Obviously, recommendation systems work and make a difference in terms of increasing sales and conversion on the online store. 30% of Amazon’s sales come from recommendations. This is a huge portion of extra sales in any business.
For smaller eCommerce sites with at least 1000 products available on the site, recommendations system can also be an impetus for generating more sales. The use of recommendation systems in an e-commerce environment can not only impact the financial performance of the site but also affect on customer satisfaction positively
1. Conversion: Turning browsers into real buyers. What recommendations systems do is that they help consumers find relevant products, which best fit their interests and buying behavior.
2. Customer engagement: Visitors start trusting the company and communicate with the brand on its social media platforms.
3. Brand loyalty: Recommendation systems can improve brand loyalty by creating a value-added relationship between the site and the customers. The reason it improves customer loyalty is because the site provides ‘personalized service’ by offering relevant product recommendations each time a customer visits the site.
4. Cross-sell: If recommendations are good it increases chances for extra sales along with average customer’s order value.
Benefits of integrating recommendation system into an e-commerce site are more than obvious. In today’s world of business, stakes are high and businesses have to develop sophisticated strategies to attract and most importantly retain customers. Recommendation systems are one of these effective strategies that are working now and provide an extraordinary advantage over the competition.
Originally published at trouvus.com on May 4, 2015.