It’s no secret that most retailers know product recommendations software can be valuable: it improves cart sizes, AOV, and overall sales performance, not to mention it can positively impact SEO. It’s said that nearly 30% of Amazon’s sales are a result of their personalized product recommendations. Certainly, a good product recommendations software will drive anywhere from 10-30% in sales increases.
However, when asked about their product recommendations tools, most retailers are sort of in the dark about their performance. They say something like this: “We set up our recommendations system a few years ago, and it seems to be working fine, but I haven’t looked at it in a long, long time.” In short, most retailers do what that RONCO guy who sold those rotating chicken broilers on paid infomercials at 3am 10 years ago did: they set it, and forget it. That is, they don’t pay attention to it, and just assume that it is working hard for them.
Don't Set it and Forget It
At first look, it may seem that there is no real harm in having a “set it and forget it” attitude. “I think our recommendations system increased sales 5% last year” say some people, but the fact is that most retailers are probably leaving a lot of sales and additional revenue on the table because of that attitude. They don’t recognize that that 5% increase could have easily been 14%. And, in the end, missing out on new revenue can be viewed the same as losing revenue.
Considering that a product recommendations solution set can be responsible for up to 30% of a retailer’s total sales, I find it a bit unnerving that so many retailers are not paying more attention to this powerful merchandising tool. It’s carrying a larger burden that most people give it credit for, and it needs some TLC.
All the time, we come across retailers’ websites whose product recommendation engines could be doing so much more for them, and it can be a bit frustrating to see, because they have so many great tools at their disposal to make really positive, revenue-driving changes. The merchandising power of many product recommendations systems is huge, yet many marketers either don’t take advantage of their capabilities to start, or they don’t think about taking a look at their recommendations system from time to time to ensure that they are working as hard as they should be.
Get the Most out of your Recommendation System
Here are a few things that you can do immediately to get the most out of these vitally important merchandising tool
1. Discover what is going on with your system now. Here are a few basic questions you should find the answers to before you do anything else:
- How much sales contribution does your recommendations solution make to your top line today?
- Where are your recommendations widgets running? On which pages?
- Which widgets are driving the most clicks? How about the most revenue? Which ones are driving the least? How much are you earning per recommendation widget per pageview? This will give you a very good assessment of what one recommendation impression is worth to you.
Answering these questions will establish a baseline for you, and will ultimately help you understand why your system might be underperforming in certain places. Most importantly, it will help you know where you need to improve things.
2. Make sure your recommendations have the right logic on the right pages and in the right communication channels. Each will play a different merchandising role for you.
- New customers: When you greet a customer you do not yet know, show her your most popular items as well as the items that are trending on your website over the last day, week, or month. If you do know a customer, let him know that you know what his interests and expectations are, and show him the items he browsed on your site the last few times he visited (but that he did not buy).
- Category Page: Recommend the most popular and latest trending items within that given category channel. Extend the number of products as much as you can (while still maintaining integrity of the look and feel), thereby creating quick shortcuts to the products your customers most likely want to purchase. Most retailers want customers to get to the check out page quickly, and this is a great way to do it
- Product Page: This is where most marketers need to spend the most time when looking at their system, because they are by far the best place to make product recommendations. It is vital to make several product offers to customers on this page, which will increase the likelihood that your customers will click onward and not back. Especially when a customer is coming from a different source, you have to increase the odds that she will find what she wants on the first page she lands on. Offering a few more products on this page just increases your chances of a click ahead. This becomes even more critical if you’ve paid for that customer to come to your page. Of course, there is a balance you need to find: you don’t want to present so many alternatives that it clouds decisions or causes hesitation or regret for your customer. Simple A/B testing on what the right number of products to recommend as alternatives will quickly tell you.
- Shopping Cart & Checkout Pages: Be sure that your business logic is set to offer complementary products on this page. Think of your own local supermarket: As you stand in the check-out line, you get bombarded with small, lower priced items, like mints, magazines, and soda. And supermarkets do this because it adds as much as 2% to their total sales every year. It really works. Last, and most of all, make sure your recommendations are above the fold on these pages. We often see retailers put really valuable and meaningful products below the fold on these pages, where their effect plummets because they are not seen.
- Mail Communications: This is a great way to close the loop with customers who have not purchased from you recently or not visited your site in while. And it’s a real must-have for any retailer who has a significant mailing list and sends marketing communications on a regular basis. Personalize your mail campaigns and remarket to your shoppers with mail recommendations. Checkout recommendations could be sent with the order confirmation e-mail. Cart abandonment recommendations can be included to remind users of their pending purchases. Any of the home widgets can be added to regular campaigns.
3. Test everything. We are advocates of A/B testing, which can make an enormous difference. For product recommendations in online retail, you can collect the last few percentage points of sales, but the increases will be relatively small if you’ve been smart about your business rules and have done most of the heavy lifting already. For the average, mid-sized retailer, testing for months or even weeks isn't needed; a few days should be enough to gather the data you need to make informed and longer-term decisions.
What will be important is that you test again later on, both when you want to make changes to your business logic due to business-need change, or when you see a wholesale shift in the purchasing habits of your customers. The most important thing is to set up the basic logic well in the beginning – that’ll be the biggest difference maker.
In order to ensure that your recommendations systems perform to maximum effect, it's essential to check on them from time to time, because things change. Customers change, needs change, and product lines change. All of those changes can affect a recommendation solution’s performance. Retailers should test and tweak every few months, especially when so much of their revenue is derived from these tools. It is an easy way to drive additional revenue, and it might end up being the thing that makes the difference to any retailer’s quarter.
If you're interested in seeing Strands Retail in action: