Blogs

Ads – can’t live with them, can’t live without them

I have somewhat of a love-hate relationship to ads. As a concept, I think it is great – give away some of my attention to the advertisers, get something good in return (like a good tech article). Unless you prefer to pay for every TV channel, newspaper or media website, ads are good.

The problem with ads, however, is that they quite honestly, on average, suck. Personally, I hate the laundry ads that plague our television channels the most, but there are plenty of contenders to the throne. The problem is relevance – I’m just not interested in knowing more about laundry detergents. I don’t care if I am in their target segment, or happen to be watching a TV show that they have connected to their target segment, and so brought it on myself. Being constantly annoyed by those ads is not worth the price.

The promise of personalized advertising

Let me take an example. This is Sweden’s largest daily news site, Aftonbladet.

The ad selection is just all over the place – two dating sites, some kind of premium content subscription, jobs to sell salami sausages, price-comparison sites for electricity. Who benefits from this mess? I don’t – I just find it annoying. Aftonbladet and their advertisers do not either, since I would never click these ads.

So what should Aftonbladet look like, in a perfect world? With a bit of copy-and-pasting, I give you my ideal Aftonbladet experience:

At the top – a cool dock for my smartphone, just what I have been searching for. Next to that, the just released updated Macbook Air to replace the old one I have. History books and audio books, because those are the only categories of books I buy. I might even care more for these ads than for the news on the site.

So this is all dreams, isn’t it? No. Just as we can personalize on-site merchandising based on what behavior tells us about a consumer’s tastes and interests, an ad could also be tailored to each individual viewing it. They could show only the retailers, categories, brands and products that you are interested in. They could actually become ads you would want to click.

Making this dream of relevant advertising come true is something that I and my colleagues at Avail are spending a large bulk of our time on, and I’m proud to report we are about to launch our first new solution in this space.

Relevant, respectful retargeting

Personalized retargeting, where you target people who have visited your site based on what they did on the site, is just one form of personalized advertising. There are many other use cases, making it possible even to target people who have never been to your site on a personalized level.

But it is a quick win – a significant improvement compared to the standard, unpersonalized retargeting – and so we chose to prioritize it. Personalized retargeting focuses on the on average 97% of all visits to your site that did not result in a purchase, but did leave you with enough information to tailor any subsequent ads to that person by promoting only products of interests to them. The benefit is much higher click-through rates and conversion rates (we have even seen higher average order values) compared to both generic banners and unpersonalized retargeting, resulting in a very attractive ROI.

Of course, personalized retargeting is not new. Many retailers already have pilots. But up until now, retargeting ads have been pretty stupid – i.e. irrelevant – focusing just on pushing the last products clicked, over and over again. But the last product clicked might not have been what I wanted, but what finally made me give up and leave the site. The richer the customer data you have, the more relevant you can make the ads. And when you’re already collecting and measuring every customer interaction on a site, you have a huge advantage.

Personalized retargeting campaigns have also generally been hard to control for the retailer. They have been tied into specific retargeting networks, and had limited control over how products displayed are selected. To ensure full control over their brand exposure, and the sometimes outrageous arbitrages currently collected by retargeting networks, retailers need to get back in the driver’s seat on retargeting.

And this is just the beginning of what is possible. Online advertising – including retargeting – still has a long way to go.

Show me the money

If you are interested in learning more about Avail’s new solutions for personalized retargeting, our new Managed Campaigns service makes it extremely easy and quick to get started.

Follow this link and we’ll contact you to set up a demonstration:
Request a demo.

When Amazon sneezes, retailers catch a cold

Normally, Amazon’s quarterly reports are happy occasions. In 5 years, its share price is up nearly 500% – an amazing achievement for a period marked by multiple financial crises.

But on October 25, the company shocked investors by reporting a sharp decline in income, despite continuing its strong revenue growth. In one day, the company lost almost 10% of its market capitalization.

Amazon’s challenge put the spotlight on what I think will be a major trend for 2012 in online retailing – the fight for profits. Up until now, the growth possibilities in e-commerce have stolen the spotlight. But it is becoming increasingly clear that in the 2010s, the question is not if you can grow your sales online, but how you can grow your sales online profitably.

Interestingly, while Amazon’s lousy results received a lot of attention, Amazon might be one of the companies that need to worry the least. Underneath the hood, their gross margins are stable, their sales are growing and their marketing expenses under control. Much more worrying are that other major online retailers, such as Overstock.com and Bluefly are reporting falling gross margins and much smaller sales growth.

What’s behind

The causes for the profitability problem are not hard to find:

• More choice as more retailers move online, borders to international trading are eliminated, and new business models emerge (e.g. private shopping clubs)
• More knowledgeable consumers who have learned how to shop around for a bargain (e.g. using price comparison sites and coupon sites)
• Increasing costs of advertising online
• Increasingly complex demands on the e-commerce platform
• Stagnant personal incomes in much of Europe and the US

The key question – which is hard – is what to do about it? None of the causes listed above can be reversed or battled. You have to cope with them.

Active retailing

I think the solution can be summarized as active retailing. The core concepts in online retailing – how we design and structure an e-commerce site – stem from a world where the key challenge was to get people to start buying online. Low prices, a wide assortment and a search box (because people always knew what they wanted to buy) was enough. In that passive retailing mode, people were expected to inspire and convince themselves what to buy.

Today, online retailers are increasingly competing against other online retailers, with similar cost structures and assortments. You can still win the customer by offering lower prices, but only if you can compensate the loss of profit in other ways. As more and more sources of new customers are perfect markets – traffic goes to the highest bidder or deepest discounter – the price for a new visitor is set, and the only thing that determines if you can place the highest bid is that customer’s lifetime value.

In other words, the path to profitability lies in actively extracting the most value from each new visitor to a site – converting them, up-selling them, cross-selling them and remarketing to them through emails and ads. It is a continuous, relentless process.

But unlike physical retailing – where you can force people around your store, the IKEA way – online retail sites must be geared to actively sell to the consumer at every chance while still making it entertaining. Pricing, product selection and visual display must all come together to make customers feel inspired, not forced, to buy more and come back for more. Sophisticated personalization will be key in this process, as the retailers which are able to service customers on an individual level will be able to outsell those that are stuck in one-size-fits-all approaches.

As Winston Churchill put it, “If you mean to profit, learn to please”.

Just one month after the 2011 European Merchandising Forum was held, we’re already planning for the next. For 2012, our ambition is to make it larger, more relevant and more inspiring.

More attendees is not a goal in itself – we don’t want to create just another e-commerce conference. However, the feedback from 2011 was that you really enjoyed the networking opportunities. Twice the number of qualified attendees, the reasoning goes, twice number of great chats with someone facing the same challenges as you.

Relevancy and inspiration is something a conference can never get enough of. But to accomplish this, we need your help. Your help to identify what topics are on your agenda – which opportunities and which challenges that are keeping you up at night. And your help to identify great, inspiring speakers from the retail industry, who you’ve always wanted to listen to.

So if you have an idea for a great topic or great speaker – or would like to present yourself – please get in touch! Feel free to either use the comment function right here or email me at david.johansson@avail.net.

In the series “The Merchandising View” we have highlighted individuals working at the forefront of online merchandising. We have covered everything from leading retail practitioners to entrepreneurs and scientists. Now, we’re looking for more, fresh perspectives!

If you are doing something unique in online merchandising, and want the world to know, submit your opinion piece or case study to us. Maybe you have done a very successful relaunch of your retail site, maybe you are developing entirely new merchandising technology – or maybe, you know where online merchandising should go from here?

Every published columnist will win an Apple iPad 2.

To participate, simply email your text to david.johansson (at) avail.net with the subject line “The Merchandising View” by October 1.

For a long time, the “e-commerce market” has been synonymous with online retailers in the US and Western Europe. In terms of sheer quantity, online sales in Western Europe and the US still outstrip those of Asia – but not by much. With one out of every two humans on the globe living in Asia, the long-term outcome seems clear. Just as is occurring in so many other consumer industries, Asia will become the number one market.

However, talking of an Asian market is wrong. Just like in Europe, retailers are regionally fragmented and large differences exist:

• Industrialized countries Japan and South Korea are extremely mature markets, and dominated by strong local retailers such as Japan’s Rakuten.
• China is the real growth story, dominated by large eBay-like marketplaces such as Alibaba and a set of local retailers such as 360Buy, Joyo, and Dangdang fighting Amazon for share of the fast-growing B2C retail market.
• India and Australia are still surprisingly immature markets, given how developed they are in other aspects.

I believe Avail has a lot to contribute to online merchandising in this huge, emerging market – but also that we have a lot to learn. A brief comparison of the leading e-commerce sites in Asia with those of Europe and the US is enough to see how language, culture and consumer requirements influence online merchandising strategies.

And as always, you can only really learn by doing.

I’m proud to announce that we at Avail are now taking our first steps to enter this market:

• We have already signed up our first reference customers in Australia, India and New Zealand
• This summer, we signed an exclusive deal with a leading Asian e-commerce solution provider, who will become our local sales & service partner in South-East Asia.
• This autumn, we will open up a local delivery center in Singapore, making us able to offer low-latency, enterprise reliability delivery using AWS’ state-of-the-art infrastructure.

Looking forward to it!

In previous blog posts such as these ones, I have discussed filtering and what the output of collective intelligence might be, and as two of the areas I’m most passionate about is consumer behavior and behavioral economics, I will continue to go down that path.

I’ve recently finished reading the book The Wisdom of Crowds: Why the Many Are Smarter Than the Few by James Surowiecki and I can strongly recommend it to anyone that’s interested in how opinions are conformed, and why self-organization might be the key to success.

One of the core messages in this book, that groups don’t have to be dominated by exceptionally intelligent people to be smart, sparked a vast line of thoughts in my mind and I’ll try to serve some of the more uncluttered ones here.

Much of our thinking, intelligence and decisions are a bi-product of the impressions and thoughts served to us by the environment, if you surround yourself with people that challenge your thinking span, you will develop your thinking skills. My experience tells me that there is such a thing as thinking skills, which isn’t connected to the formal definition of intelligence or even communication skills, but simply a way of prioritizing, filtering and maximizing the use of our thoughts and every day impressions.

Our human core isn’t designed to make fast and smart decisions based solely on ‘intelligence’. To be able to make good and time effective decision in our everyday life we seek the help of our peers.

This is not something that we make an active decision to seek for, but simply something that we do – some better than others – by simulating social and collective intelligence, or what we perceive to be intelligence, from the people around us. Non of us are as smart as we think, however the human race has developed the skill of canalizing the collective intelligence from the people around us.

As you probably know making use of the collective intelligence is what Avail’s behavioral merchandising is all about, applying the collective intelligence used everyday and turning it into e-commerce sales. We all live our lives under the assumption that the more information we have, the better decisions we will make. This, combined with the fact that human beings are lazy by nature, is part of what make recommendations so successful – the more information we get in the shortest amount of time, the better.

The way to success within this field often lies in handling big data in an efficient and insightful way, that makes use of the collective intelligence yet still take the diversity of the input into consideration. In order to product and business develop in a future orientated way, Avail acknowledges and listens to what not is working as well as what is working. With that data we can figure out which collective guess that will be the most accurate and produce recommendations that will make both our customers and their consumers happy.

Much of our software’s cogency is based on avoiding to put forward irrelevant products, an aspect which from an outside perspective can easily be forgotten. However, when you present a irrelevant product for a consumer you aren’t just hurting your direct conversion and sales, you are also strongly communicating that the customer’s needs come second to your sales, one of the most fatal messages you can put out there.

Consequently: Analysing less successful products is as important as putting forward the successful ones, as it is ultimately the less lucrative products that will define the notion of ‘success’.

I must warn you that this will probably end up being my most personal blog post yet, however reading it might also end up being your most well spent minutes in a long time.

Everyday a market more than twice as big as China and India combined is being overlooked. The population of this market is often e-commerce savy, high spenders and brand loyal. Every day this market stands for missed commerce opportunities in the region of 600 million Euro.

Yes, I am talking about the women.

When women and e-commerce are being discussed, the message often ends up somewhere close to ‘Yes, of course women are e-commerce savvy – now they get an opportunity to spend even more!’, often followed by condescending laughter and a number of agreeing smiles. But nowhere in my line of business experience would it ever considered okay to patronize a buying customer.

The technology and consumer electronics sector could greatly benefit from reading this post, as the situation there seems to be just getting worse and worse. Women are being addressed with more discriminating, embarrassing advertisements than ever before. My screens keep filling up with commercials telling me to match my gadgets with my manicure or changing my iPhone shell to match the outfit of the day, and all I’m filled with is aversion to ever buy something from that brand. This goes for e-commerce sites as well – when directing product ranges towards women you don’t need to color code the section in pink or even include unwanted software telling me how many calories I have consumed in one day. Instead I suggest that you focus some of that energy on creating better usability, no matter gender, I promise you that sales will follow.

Let’s have a look at some tech facts:

• Apple has been said to spend over 70% of their research time focusing on women and optimising their UI for women and it has obviously proven to be lucrative time spent for them
• 91% of women are involved in home electronics purchases
• Women account for just under 50% of the Internet population in the U.S., however they generate 58% of e-commerce dollars

To overlook this target group is to deprioritize not just your own future ROI, but the market progress and spendings in total.

Women are interested in e-commerce, women are browsing more frequently than ever before and we’re willing to spend. For retailers it shouldn’t matter whether it’s a man or a woman sitting behind the screen, what matters is the relevance of the products being displayed. To define target groups by wide categories as gender or age isn’t relevant, instead we need to narrow down target groups to segments such as purpose driven shoppers, price sensitiveness and brand preferences, attributes we work with at Avail every day. Perhaps it’s easy to assume that a woman is looking for a computer to match her manicure, I am however not one of them and if you personalized your products towards my previous shopping patterns and interest you would know that and instead present me with the latest high tech product on the market, gain a loyal high spending customer and use my data to enhance another customer’s shopping experience.

All of the above are reasons why I take pride in being a part of the revolution that’s taking place within the field of personalization, through it we can all take one step forward and strive for true equality. Whether it applies to gender, ethnic origin or simply comes down to our color preferences doesn’t make any difference, as long as we can enjoy the opportunities that digitization has brought us instead of getting caught up in biased communication.

One of the most essential success factors to launching a behavioral merchandising strategy is the quality of your implementation – technically as well as merchandising-wise. And while we are more than happy to support you, sometimes self-service is just the easier, faster way.

That is why I am glad to announce the upcoming launch of our new Customer Portal. This site, which will be available to all of our customers, will bring together

• Product documentation and APIs
• Merchandising best practices
• Troubleshooting & support information
• Updates on new product releases

and much more, in one place. Starting July 1, we will launch a beta with a selected group of customers. The full launch is planned for mid August.

If you would like to become a beta tester, please email Client Services at support@avail.net and we’ll help you set up an account.