Resource Type:

Interested in more resources on Personalization? View more Best Practices, Case Studies and Use Cases inspiration on the personalization page here.

There has been a sharp increase of interest in personalization technologies recently, as evidenced for example by Optimizely’s shift to reconfigure from testing platform to personalization platform. Personalization technologies in themselves won’t help you though, without a solid strategy to choose which personalization campaigns you should run, how to prioritize them, etc.

Behavioral Economics can help inform those choices of course. A number of behavioral economics tools have demonstrated effects on the choices people make, and their impact can be greatly amplified by using personalization technologies. Below are some examples, in the context of an online retailer using personalization based on known behavioral economics principles to improve their purchasing conversion rate.

Foundational Audiences

Foundational audiences are basically high-level customer segments that you will use to implement more advanced personalization strategies. Here are some basic ones in the context of a retailer:

Brand vs Home brand buyers

  • Brand buyers: customers who mostly buy items from big brands
  • Home brands: if you have a homebrand, as an increasing number of retailers do, those are the customers who are mostly buying your homebrand items

Price levels

  • Low-price: customers who tend to buy your lowest priced items
  • Mid-price: customers who tend to buy your average priced items
  • High-price: customers who tend to buy your highest priced items

Sales vs full-priced

  • Sales hunters: customers who tend to do most of their purchases on sale items
  • Full pricers: customers who tend to do most of their purchases on full-priced items

Then of course you can combine these segments to get a much more granular foundational audience mix.

Behavioral Economics tools amplified by Personalization

Order

Visitors’ choices are influenced by the order of items presented to them. Mainly, the items on the first place will get the most attention, and if your lists are clearly defined, the last item on the lists will get attention as well.

How to amplify through Personalization? Well, if you know the spots on your lists that will get the most attention from your visitors, then you should ensure they are matching their preferences as best as possible. So if your customer is part of the low-price audience, and the first items on your lists are high-priced items, then you’re wasting opportunities.

Personalizing the order of the lists presented to your customers when you know their preferences ensures you’re getting the most from the exposure of these elements.

Scarcity / Urgency

Scarcity is a well-known mechanism that improves the value people attribute to items the scarcer they are.

How to amplify through Personalization? If you can display which inventory items are running low on stocks, then you already can make use of the scarcity effect. But again, showing items that are “out of stock” soon to customers who are unlikely to buy them doesn’t take full advantage of this effect. Use personalization combined with Scarcity to display the very relevant products soon out of stock on your home page. You now have a far better shot at converting customers based on scarcity effects.

You could also look at measuring the sensibility to scarcity for each customer and then adapting the homepage to this. If testing shows that a customer is not responding to scarcity messaging, then you could record that and create an audience based on this low sensibility, in order to try a different messaging approach on them.

Ease

This is another very powerful BE tool. Increasing Ease of doing something usually has an outsized, underestimated impact.

How to amplify through Personalization? Personalization allows you to drastically increase the ease of buying/doing the targeted action on your website by hiding all the content that shouldn’t be of interest to your customer. For example, customers in the Sale hunters audience would likely be not very likely to buy a full-price item. So hide them and put the sale categories front and center. Likewise, customer in the High-price / Branded items audience won’t likely be very interested in your low-priced home brand offering.

Increase the ease of their journey to conversion by using personalization to remove everything that has a very low probability of catching their interest. It will still be there, accessible on the chance they need to buy something out of their buying patterns, but just out of the way most of the time.

Of course, the possibilities are endless here in terms of what personalization can enable:

  • adjusting the default sorting orders of all lists and menu items
  • showing relevant categories/brands/price filters expanded and collapse the rest
  • etc.

Concreteness

Concreteness is another BE tool that proved robust over time. If you can increase the concreteness of an option, or a behavior, you generally increase the proportion of people who will decide to do it.

How to amplify through Personalization? This one is very interesting as how to really take full advantage of it depends on each website, and is very much case by case. But here are a few ideas that take advantage of this (copy to illustrate concept only!):

Personalization based on days of the week

Examples would be:

  • Monday/Tuesday for retailers with delivery in 2 days: “Order now to get your delivery in time for this week-end”
  • Thursday/Friday for retailers:  “It’s too late for this week-end, but order now to ensure you still don’t have what you need next week-end!”
  • Thursday/Friday for lead generation websites in “boring” fields (insurance/financial services): “Don’t spend your week-end researching the internet, book now for next week and you will be ready for next week without spending your week-end on it”
  • Saturday/Sunday for lead generation websites in “boring” fields (insurance/financial services): “Get your week-end time back! Book an appointment/Schedule a call with an advisor now to get all the advice you need without wasting your week-end researching the internet.”

Personalization based on time of the day

Examples would be:

  • Early Morning/Late Evening for lead generation websites in “boring” fields (insurance/financial services): “stop spending your mornings/evenings researching the internet and let us advise you”
  • Mornings for retailer: show out-of-stock items fitting their audience and adopt a messaging like “Good morning! Here are the hot items that might be gone by lunch time, have a look now!
  • Lunch-time for retailers: finalize your order now and spend your evening relaxing instead of browsing.
  • Evenings for retailers: show out-of-stock items fitting their audience and adopt a messaging like “Good morning! Here are the hot items that might be gone by lunch time, have a look now!

Personalization based on weather, location and day of week

Now combining more conditions to show what’s possible:

  • Monday/Tuesday, in Sydney, with good weather but week-ends forecast very cold, for fashion retailer: “Be stylish in the cold! Hey there, it’s currently beautiful in Sydney but the week-end will be cold. We’ve selected a few items to keep you warm that will get to you in time if you order today!”

These kinds of messaging strategies work well because:

  • they really emphasize concrete aspects of the offering
  • personalization enables you to suggest items based on the foundational audience segmentation, so they are relevant.

The potential of using personalization technologies is real

These examples are just some ways personalization can be combined with behavioral economics to deliver potentially important increases in Conversion Rate. Personalization technologies play a dual role for behavioral economics practitioners looking to get the most out the latest scientific advances.

First, they enable the use of some BE tools that really are not implementable without such technologies. For example, it’s all well and good to know that adapting your online banking dashboard to the risk aversion or the risk of myopic loss aversion of your clients should improve their financial results. Without personalization technologies, it’s not exploitable.

Second, personalization really amplifies the reach of BE tools. Concreteness is another good example: without the technology to customize on the fly the messaging displayed, then you can’t take full advantage of it.

Personalization technologies are more powerful when used to enable sound behavioral science principles. See how they can amplify behavioral economics tools.

2017-01-12T13:05:22+00:00

About the Author:

Julien Le Nestour
Applied behavioral scientist & international consultant — I am using the results and latest advances from the behavioral sciences—specifically behavioral economics—to help companies solve strategic issues. I am working with both start-ups and Fortune 500 groups, and across industries, though I have specific domain knowledge in banking, asset management, B2B and consumer IT, SAAS and e-commerce industries.