ThoughtStream

February 23, 2010

The Road to Great Recommendations is Paved with Common Sense

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In part 2 of our findings of the ChoiceStream 2009 Personalization Survey, we reported a significant decline in consumers’ perception of recommendation quality between 2008 and 2009. According to our survey, the number of online shoppers who received poor quality recommendations in 2009 was 59%, which is more than 30% percent higher than the 45 percent reported in 2008.

These findings aren’t really surprising to us. Today’s consumers expect more from recommendations than they did even a year ago. They expect them to be accurate and on target, so when they’re not, shoppers notice.

The question is, then, what should retailers do about it?

Improving recommendation quality should be job 1 for every online retailer. Losing sales to poor quality recommendations is just unacceptable when you consider that by following some basic rules of merchandising, recommendations can be accurately tuned for each shopper.

Rule 1: Pay Attention to Context

If a customer walked in to a sporting goods store carrying a new, expensive tennis racquet, you wouldn’t you try to sell her another racquet, would you? No, you’d try to cross-sell her a similarly expensive bag to carry it in, or some fancy clothes to wear while playing.

So why is it, then, that when consumers shop online, retailers often completely ignore this basic rule of merchandising and make recommendations to shoppers that are completely out of context?

For example, online shoppers are bombarded with product recommendations that try to sell them more of what they already have in their carts. In a small percentage of cases (e.g., consumables like canned foods or paper products), it might make sense to try to increase order size by recommending more of what a consumer is already buying. But, for most online purchases, once a shopper has made a purchase decision — i.e., she put an item in her cart—product recommendations should no longer include ’similars’ or substitutes. Instead, they should immediately switch over to complements or cross-sells.

It sounds simple, but few recommendation providers take context into account when delivering recommendations, leading to consumer frustration with the recommendations they’re shown.

Rule 2: Learn from Past Shopping Activity

Good bricks-and-mortar retailers know their customers. They know who’s brand conscious and who’s not. Who only buys on sale and who doesn’t care about price and just wants the latest and greatest.

They know this because they know their customers past shopping behaviors and they take them into account when figuring out what merchandise to recommend.

Online retailers need to do the same thing. They need to ‘learn’ from their customers’ past shopping activity so that they can understand each shopper’s persistent behaviors and use that knowledge to recommend products for the next purchase(s).

For example, suppose you have a budget shopper who consistently buys lower-end or sale merchandise. But, in her current session, she’s looking at expensive, status-label products. A recommender that only looks at the current session data would label her a luxury shopper and recommend only high-end products to her. A recommender that also incorporates knowledge about this shopper from her previous sessions knows her better and might recognize this as a gift purchase or a splurge and provide a more balanced set of recommendations.

There are recommendation providers out there, like ChoiceStream, that follow these rules; but there are many more that don’t. When you evaluate recommendation vendors, be sure to ask about context and past purchase behavior. If a provider doesn’t factor these into their product selection process, you should probably move on and look elsewhere. If you don’t and you end up providing poor quality recommendations, your shoppers might just move on instead.

Posted by Lori Trahan in Survey Results | Leave a comment
January 25, 2010

Please Don’t Disturb! Consumers Not Ready for Personalized Recommendations on Social Networks

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Evan Schuman from Storefrontbacktalk.com recently challenged one of the key findings of the 2009 ChoiceStream Personalization Survey. In his article, Social Media E-Commerce: Just Because It Can’t Be Measured Doesn’t Mean It Doesn’t Exist, Schuman takes issue with our conclusion that while m-commerce appears to be a hot spot for product recommendations in 2010, social networking is not. That conclusion was based on the fact that only 8.5% of our survey respondents who belong to a social networking site reported that they had ever made a purchase while on the site. And, only 27 percent indicated any interest in product recommendations from trusted retailers.

Schuman contends that we missed the point because social networking sites were never designed to be e-commerce sites. They’re places where friends discuss their lives, work, hobbies and, in the process, end up influencing each other’s shopping decisions that take place outside of the network. He claims that just because shoppers aren’t physically clicking ‘buy it’ from within a social network, retailers shouldn’t ignore social networks as a place to have a presence.

We actually couldn’t agree more that the interactions shoppers have with each other on social networks influence their shopping behavior and purchases. What the survey indicated is that retailers need to think long and hard about the kinds of investments they’re making in social network advertisements and product recommendations, specifically. The numbers showed that while some people do happen to make a purchase while engaging in social networks, most are not ready for retailers to push product recommendations at them.

That’s not to say a purchase isn’t influenced by the things they are seeing from friends, fan sites and brand engagement campaigns. It simply means they don’t want retailers bombarding their pages with links and ads, as is pointed out in the story. Thus, it remains our advice to retailers that they not invest in this type of direct-response marketing initiative right now, allowing consumers to engage with the brand on their own terms. For 2010, personalized recommendations and promotions are better suited where consumers are actually looking for them — online and mobile.

What are your thoughts? Would love to hear from retailers how they’re leveraging social networks. How is your social networking strategy playing out?

Posted by Lori Trahan in Survey Results | Leave a comment
January 20, 2010

Attention Retailers: It’s Time To Make Your Move to Mobile

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2009 may not have been a banner year for e-commerce, but it was great for smartphones. According to Carolina Milanesi, research director at Gartner, smartphones are the fastest-growing segment of the mobile devices market with no slow-down in sight. And, they’re not just for phone calls and email anymore. 37% of users reported that they used their device to buy merchandise in 20091.

So, what does all that have to do with personalization and recommendations? A lot, actually.

We just released the results of the 2009 ChoiceStream Personalization Survey and one of the most interesting findings to come out of it was the fact that consumers want product recommendations on their smartphones to help them find products to buy. 65% of respondents said that they would buy more products on their devices if they got recommendations on them from retailers they trust.

Given the small screen size, it makes sense that shoppers don’t want to have to surf lots of pages to find merchandise. Now that the consumer demand is there, it’s up to retailers to improve the m-commerce experience and put relevant products and promotions at consumers’ fingertips — literally!

1 Compete, Inc., 2009
Posted by Lori Trahan in Survey Results | Leave a comment
September 30, 2009

What a Week It Was!

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Last week was a momentous one for ChoiceStream after it was announced that billion dollar online retailer Zappos.com has chosen ChoiceStream for personalized product recommendations for its shoppers. Then it was time for the Shop.org 2009 Annual Summit in Las Vegas where positive vibes were the norm — not the exception (see the accompanying photos).

Shop.org 2009 proved that online retail has survived — and even thrived — the economic storm and is beginning to feel reinvigorated as the holiday shopping season approaches. One of the more compelling stats underscoring this sentiment is that Shop.org’s organizers confirmed registered attendees were up 10% year-over-year from 2008.

At ChoiceStream’s booth, we saw a steady stream of interested retailers seeking to learn more about how ChoiceStream RealRelevance® Recommendations and Advertising solutions are increasing average order size, conversions and revenues for leading retailers while creating a relevant experience for shoppers that builds loyalty over time.

One of the highlights of the week was a guest appearance by Zappos.com’s Director of User Experience Brian Kalma where he discussed how vital personalized product recommendations are for Zappos.
Brian noted that not only do personalized product recommendations create a better user experience but they also drive measurable lift in incremental sales. Brian pointed out that recommendations driven by ChoiceStream have helped Zappos see a “nearly 30% increase in pages viewed per visit, a 12% to 13% click-through rate on recommendations and nearly a 3.5% lift in sales.” And that’s with recommendations deployed on only 40% of the site for a mere four weeks!

It was clear retailers both large and small are committed to providing a more personalized experience for their shoppers in 2010. And, as the “largest and longest-standing of the ‘pure-play’ personalization engines,” (according to Forrester’s Sucharita Mulpuru) ChoiceStream is uniquely poised to help retailers succeed by delivering personalized product recommendations and advertising that ultimately increase revenues!

One final note — many retailers said personalization was on the roadmap for the future — but it’s not too late to deploy personalization to positively impact holiday sales this year! Contact us to find out how.

ChoiceStream's marketing and advertising team celebrate with OverStock's Rob Gallaugher (center) and Nick Taylor (right)

ChoiceStream’s marketing and advertising team celebrate with OverStock’s Rob Gallaugher (center) and Nick Taylor (right)

Brian Kalma of Zappos (in checked=

Brian Kalma of Zappos (in checked shirt) details the positive results from personalized product recommendations using ChgoiceStream RealRelevance

Another Lucky Winner at Shop.org with ChoiceStream's Amy Vener

Another Lucky Winner at Shop.org with ChoiceStream’s Amy Vener

In-Booth Candid Photo (l to r) - Bryce Neal (ChoiceStream), Derek Mellencamp (Dell) and Bruno Sarda (Dell)

In-Booth Candid Photo (l to r) – Bryce Neal (ChoiceStream), Derek Mellencamp (Dell) and Bruno Sarda (Dell)

Some of the Zappos team savor their winnings at ChoiceStream's booth during Shop.org

Some of the Zappos team savor their winnings at ChoiceStream’s booth during Shop.org

Zappos Brian Kalma discussing personalization with a representative from Gap Direct

Zappos Brian Kalma discussing personalization with a representative from Gap Direct

Posted by Phil Fougere in Conferences | Leave a comment
September 21, 2009

Don’t Gamble on Your Personalization

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Choosing a personalization provider is a big decision. Find out why Zappos.com and other Top 50 retailers choose ChoiceStream. Stop by our booth (#114) at Shop.org at the Mandalay Bay Resort & Casino in Las Vegas and meet Brian Kalma, director of user experience at Zappos, and other leading retailers.

And don’t miss our ChoiceStream Chip Giveaway! We’ll be giving away hundreds of cash prizes. No purchase necessary. ;-)

See you in Las Vegas. And remember…what happens in Vegas, appears on YouTube. So, be careful out there…

Posted by Phil Fougere in Personalized Advertising | Leave a comment
September 2, 2009

Shining A Light On Performance Display Advertising

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The following post was originally published as a byline article on Adotas, a premier news publication focused on the Internet advertising and media industry.

As a reader of ADOTAS, you’ve no doubt heard the recent buzz around performance display advertising.
A striking departure from classic ad campaigns measured via clicks and impressions, performance ad campaigns rely on metrics that really matter to retail advertisers, namely conversions and revenue. To boost those metrics, today’s retailers are applying recommendation and targeting technology to display ads. With the in-market relevance of search and the reach of display, this type of performance display advertising is quickly becoming the preferred way to spend ad dollars — and new ‘performance metrics’ the only way to truly measure ROI.

There have been several ADOTAS articles recently that brushed the subject of performance advertising (articles by Zephrin Lasker and Chris Neuner come to mind) but it’s time to go a little deeper into what actually makes this type of display ad perform better, how best to measure its effectiveness and why advertisers need to welcome new attribution models. The holiday shopping season is nearly upon us – there is no better time than the present to get up-to-speed and start testing to find what works for you.

Contrary to what some might say, better display ads are not all about size, better placement and clever campaigns. Grabbing attention is only half the battle. The other half – the half that drives sales—is taking those creative display ads and making them relevant to each consumer who views them. What good is a perfectly branded, perfectly placed, creative ad if it’s for a product the consumer doesn’t need or want?

Regardless of the negative attention on behavioral targeting, research shows that consumers do want personalized recommendations to help them with their purchase decisions. The best performance solutions on the market today are the ones that merge personalization technology with display ads. These solutions rely on actual shopping data from advertisers to create ads with immediate, in-market relevance for each individual shopper. As more shoppers go online to look for deals and to research their purchases, e-retailers (Overstock, Zappos) and multichannel retailers (JC Penney’s, Staples) will look to this breed of technology to drive conversions and boost their sales both online and off-line.

The case for performance ad technology is clear, but it’s not only about finding the right performance solution. There are two other key factors that advertisers need to embrace in order to truly make an impact on ROAS:

Advertisers must make better use of shopping data to learn from every interaction with consumers. To capitalize on performance technology, you need to really understand each shopper’s tastes and preferences by analyzing all of the behavioral and shopping data you have available. That includes purchase data (both online and in-store), loyalty card transactions, online click and browsing behavior, etc. You’re missing a huge opportunity if you’re not learning from every engagement a customer has on your site, in your store and with your brand. It’s that precious data that enables personalization and creates unique occasions to purchase for each shopper.

Advertisers must use more robust performance metrics and models of attribution. Advertisers that focus solely on traditional metrics like clicks and viewthroughs are missing the big part of the revenue picture. Those metrics do impact ROI; but there are also other, less direct, metrics that are just as important. While every campaign should stand on its own in terms of direct performance metrics, understanding the indirect impact of display advertising is critical to making the best investment decisions when allocating dollars.

Quantifying metrics such as an ad’s impact on search engine traffic, social media buzz and message boards are all important in valuing ads correctly. For example, according to a recent study by Forrester Research, almost as many Internet users respond to online display advertising by performing a search on a search engine (27%) as by clicking on the ad itself (31%). This finding speaks to the symbiotic relationship between the two channels, and the power of display advertising to boost search engine traffic. If marketers are going to invest in online display, they should consider the broader impact of their campaigns to help them track their full value.

Unfortunately, this type of comprehensive attribution tracking is not the norm for online display advertising. These metrics can be hard to measure, but they’re not impossible. Online advertisers need to understand the value of measuring immediate, ad-specific actions (e.g., clickthroughs) as well as in-direct behaviors (e.g., performing an ad-related search on a search engine or message board). This will help advertisers come up with a system that provides correct attribution to their web marketing initiatives across the board.

There have been a lot of changes this year in the industry – it’s great to see performance-based advertising help advertisers go beyond the click and start paying attention to what actually drives results. The next steps are to ensure that we use all the data available to us to put the right products in front of the right shoppers and to fine-tune revenue attribution so that it provides a more comprehensive view of the impact of display ads. Once we do that, we’ll all be seeing display advertising in a whole new light.

Posted by Cheryl Kellond in Personalized Advertising | Comments closed
August 25, 2009

Measurement for Today’s Multichannel Retailers

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Pre-shopping online before buying in-store is a common consumer behavior that has grown rapidly over the last few years. According to BIG Research, 89% of consumers are doing this on a regular basis. It’s also true that consumers who pre-shop online and buy in-store spend more overall than their counterparts who only shop online or in-store, but not both. Recognizing this, many multi-channel retailers are using the Internet to drive true sales performance. In this new ROBO (research online, buy offline) reality, the retailer’s online advertising initiatives and web site activity plays a very important role in influencing the eventual in-store purchase.

Unfortunately, though, the ability to measure the impact of ROBO on revenue has not caught up with consumers’ use of this practice. The success of this interplay cannot be measured solely by click-through rates, online conversion rates or online average order size. And because there isn’t an established way for retailers to quantify the impact of ROBO behavior, retailers’ marketing budgets are often allocated inefficiently, where too much is allocated to programs that don’t produce results and not enough to programs that actually work. Once accurate ROBO measurement tools evolve and the marketing mix is optimized for overall company performance, we are going to see even bigger spending differences between the multi-channel and single channel customer.

With a better understanding of multi-channel attribution, there is a new opportunity for retailers to drive growth for their overall business through the use of personalization technology. With retailer’s looking more holistically at their online activities, personalization technology has a big role across many consumer touch points and purchase channels, both online and in-store. When a large traditional retailer is able to use all kinds of aggregated consumer data (online, in-store, 3rd party) to provide their consumers personalized product recommendations in email, banner ads, catalogs and direct mail, on the web site and in the store at the point of sale, that retailer has a true 360 degree relationship with their consumers.

This kind of marketing is happening now. The faster the measurement capabilities catch up with the practices, the more productive those marketing programs will be.

Posted by Amy Vener in Multi-Channel Retail | Comments closed
July 13, 2009

Re-building Your Team: Display Advertising in the Marketing Mix

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Note: The following blog submission was contributed by Range Online Media’s VP of Strategy & Media Dustin Engel. Dustin will be presenting a Webinar on Thursday, July 16th with ChoiceStream’s Cheryl Kellond entitled “Attribution: Proving Online Display Ads Drive Sales for Retailers“.


DustinEngel_200x300.jpgAs an avid professional basketball fan, I am watching the frenzied free agent market and teams looking to put the right pieces together to make a run at the NBA championship next year. Disclosure: I am an avid Lakers fan since birth so I wish all of the other teams the best of luck.

It does make me think about our industry though and how the NBA has a big edge. The role of each player is very tightly defined and the amount of statistics on each player and how they affect the team performance when they are on the court is a huge edge for General Managers trying to get ahead. In the online advertising industry, the majority of advertisers tend to focus on the last ad (87% of advertisers according to a 2008 Jupiter Research report). This is the equivalent of basketball statisticians only looking at who threw the ball in the basket. No assists, no second chance points, and no turnovers. Can you imagine the job of a basketball General Manager if that’s all they tracked? It would be a guessing game with big leaps of faith on where to spend their budgets…wait, this sounds familiar.
The question that plagues online marketers is “how do I know which marketing activities are generating results if I’m only looking at what puts the ball in the basket?”

There are many answers to this question, but they all center around the concept of attribution — that is the exercise of understanding the proper valuation across your “team” of advertising to make the most of your entire marketing mix. It is about collecting the right data and making that information actionable. It is about focusing on the most measurable and ROI-friendly activities without starving your upstream channels.

Take display advertising as an example: I’ve been in the online media business for more than a decade, and the potential for display ads is still largely untapped — especially when you look at how display ads interact with other marketing channels and how the emotional connection opportunity in display ads can not only increase the education level of the consumer in regards to the brand…but also intent.

Recent research by the Online Publishers Association, in conjunction with Comscore, in a presentation entitled “The Silent Click: Building Brands Online” (PDF), underscores the power of display ads have on driving sales:

  • 18% of consumers actually search on an advertised brand while nearly 30% visit the advertisers site as a result of seeing branded display ads;
  • Branded display ads actually improve advertiser site engagement as consumers spend more time on those sites;
  • Consumers exposed to display ad campaigns spend on average 7% more than those consumers not exposed to online display ad campaigns.

Furthermore, my colleagues at Range Online Media’s parent company, iProspect, recently released a study that showed that more than two thirds of online users respond to display ads in ways other than clicking on the banner.
So, there are some of compelling reasons why display ads are getting a closer look these days by smart marketers. If you’re out there re-building your team, this is the free agent you can pick up to play a variety of roles in your marketing mix.

I’ll be hosting a Webinar on July 16 with ChoiceStream’s Cheryl Kellond on the subject of online display ads and how smart online marketers can use actionable attribution, to determine how each advertising source, campaign and individual ad impacts your bottom line by properly assigning the conversion credit across the series of ads that contributed to a sale or conversion. If you seek to gain a better understanding of how to create an attribution model that works for your unique business goals, or are even just looking for case studies to prove to those in charge of budgets how intricate yet actionable the new media landscape is, I invite you to attend.

Posted by Cheryl Kellond in Online Advertising | Comments closed
June 22, 2009

Thickening the Silver Lining

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This year’s Internet Retailer Conference in Boston left me nostalgic, proud and in need of more shiny stuff (don’t worry, I’ll explain). On the plane ride home, I thought about the journey that e-commerce teams in large, multi-channel retailers have taken the past ten plus years. Starting back in the late 90’s, we were a rogue group of innovators with some great ideas about a new shopping channel accessed from the ease of a consumer’s couch, then quickly became the group that ‘wanted more resources,’ to now — a team of seasoned executives with power but still separate from their store counterparts. Today, e-commerce teams have successful lines of business and are more integrated into the overall retail organization than they have ever been.

Even with all this progress, multi-channel retailers are in a financially sensitive situation given the state of the economy and the impact that it has had on consumer spending. eBay’s SVP and GM of North America, Stephanie Tilenius , shared in her keynote address last Tuesday that many retailers have been reporting negative in-store sales growth, but are seeing continued positive growth in their e-commerce channels. Recent numbers from Gap, Kohl’s and others confirm this trend.

And while the online growth story bodes well for all the hard work and smart decisions these teams have exhibited over the years, the reality is that e-commerce still only accounts for 3.5% of overall retail sales in the US. Consumers still prefer to make purchases in actual stores.

Let’s use an analogy to help bring this multi-channel evolution to life visually. Picture the proverbial silver lining. Its thin shimmery metallic material surrounded by a much larger volume of less shiny material. So while this lining of e-commerce growth is thin — less than 5% of the whole package of retail sales — it is the layer with the most shine and sparkle.

At the show this week, speakers and panelists focused their remarks on the technology and innovation fueling the growth of the e-commerce channel. But, what if the attitudes and aptitudes being applied to e-commerce solutions directly impact online pre-shopping and influence the decisions made by those shoppers who prefer to buy in-store? Will the online teams show their counterparts in the rest of the retail organizations how to communicate with consumers online at each stage of the buying cycle and attribute purchases – in-store or online – to the right campaign? What would this look like? Isn’t it possible to leverage the silver lining online marketers created to reverse the current trend of declining in-store sales?

Posted by Amy Vener in Conferences, Data & Analytics, Ecommerce Technology, Multi-Channel Retail, Personalized Advertising, Product Recommendations | Comments closed
June 11, 2009

WOWed by Zappos

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Yesterday we had the incredible good fortune to host Alfred Lin, Chairman and COO of Zappos, technology guru and ChoiceStream advisor Esther Dyson , Joe Chung of Allurent, Ed Macri of CSN Stores , and Harvard professor Richard Zeckhauser . This diverse group launched into an insightful discussion about trusted brands using what they know about a consumer’s preferences to improve the consumer’s every interaction with the brand — for instance, personalized recommendations while shopping, targeted offers in email, and advertising that gets noticed not because of its size or flash, but because of its personal relevance. We shared our visions of the future, and debated the logic of getting there from here — how consumer demand for relevance will (or won’t) move brands to pool their information to benefit consumers, how brands will communicate their policies on data to their customers, and Esther’s favorite — giving control to the consumer so when she’s in market for a product or service, brands can readily find her and bid for her business. No evil in this room — everyone recognized that consumers are in the driver’s seat.
CS_Z-meeting.jpg

This visit was made even more memorable when Alfred spoke to all of ChoiceStream’s employees — at what we called our first ‘All-Feet’ meeting, in honor of the visit from the biggest shoe retailer in the world, Zappos! At Zappos, they emphasize delivering WOW through service — going above and beyond what’s expected — and there is no question that this core company value at Zappos (among 10 in all) contributes to the company’s success.
CS_Z-alfred_steve.jpgA lot has been written (and tweeted) about the culture Zappos has created, and people want to know the secret. I think what impressed all of us yesterday was the simplicity of the goals Zappos created years ago — break the billion dollar sales mark and be recognized as one of the best places to work. Zappos achieved both before their 10th anniversary last month.
CS_Z-alfred.jpg

When Zappos was founded 10 years ago, industry analysts and pundits predicted the certain demise of the start-up determined to sell shoes over the Internet — after all, ‘Who would ever buy shoes online?’ Zappos decided people would buy with the right kind of service. If shoppers could easily buy, try, and return, then shopping for shoes on the Internet — or for apparel of any kind — could become as commonplace as buying books, music, or electronic gear. Well, $1b in sales and millions of pairs of shoes later, it turns out a lot of people would, and do.

Alfred talked about how Zappos’ culture of a relentless focus on delivering WOW through customer service helped the company prove the naysayers wrong. The focus on service permeates everything Zappos does—from how they train their employees, to their call centers and shipping practices, and everything in between.

CS_Z-group.jpg

Alfred’s talk was a great reminder for ChoiceStream to strive for WOW in every interaction with our customers and to keep improving our technology to put the WOW in the personalized experiences our customers are creating for their shoppers. ‘Good enough’ is never good enough. Not for Zappos. And, definitely not for ChoiceStream.

We look forward to working with this first class team. Thanks Zappos!

Posted by Steve Johnson in ChoiceStream, Culture, Customers | Comments closed