Understand relevant metrics impacted by personalization

As soon as you’ve decided to start personalizing your website, a ton of questions probably arise about how you would know you have been successful in this endeavor. What metrics to track and what to focus on to make sure personalization is helping you achieve your business goal?

7 relevant metrics for personalization

After integrating a personalization solution, you need to thoroughly track if the below metrics have been positively impacted or not. If these were impacted rather negatively or weren’t at all, you might want to dive-in deeper to analyze what works and what doesn’t. Then, consult with your vendor about improvement strategies to start driving growth.

Clickthrough rate (%), or the ratio of customers who click on a recommendation to overall page visits where the recommendations are displayed. It can be easily calculated as follows: clicks/pageviews*100.

Why it’s relevant? A high rate will indicate that the recommendation draws the attention of your customers.

A lower rate should motivate you to start looking into possible optimizations. One of the factors that could influence the clickthrough rate is the position of the recommendations on the page. Sticking them below the fold will certainly lower the number of clicks as they won’t have as much visibility as they could have. Another factor is the recommendation strategy which should be reviewed with the personalization provider – a different strategy might work better with your target audience. Testing is the key here.

Conversion rate (%), or the ratio of customers who purchased something from your business compared to the number of recommendation clicks. Calculate it by applying the formula: purchases/clicks*100.

Note that we can consider pretty much anything as a purchase, depending on your company’s objectives or products. It can be subscription, renewals or upgrades.

The conversion rate is also highly contextual and can be influenced by plenty of factors. The most common ones include payments user experience, the simplicity of the journey, poor call-to-action positioning or visibility, and other. Still, personalization is expected to drive an increase in the conversion rate as it drives relevancy for customers, churning uninterested customers.

Average Order Value which reflects how much money your customers spend in one order. The calculation is simple: revenue/number of orders.

Personalized recommendations or personalized messaging are helping customers find products easier and faster, addressing their specific needs. Therefore, you should expect to see an increase in the number of products customers are buying from you, upgrade their accounts or renewing subscriptions.

Revenue directly generated by recommendations might be considered the most important metric that you will look into. Increasing conversion rates, average order value, and overall customer satisfaction are pivotal in driving an increase in revenue which is the definitive reflection of the personalization success.   

Return On Investment (%), calculated as Revenue/Investmentx100.

The investment in personalization adoption might not be cheap. Therefore, you need to calculate your overall and monthly costs to have an understanding of how much value personalization ultimately brings to your business and what resources should be optimized.

As soon as you will have an initial ROI, you will be able to have a basis for the next business case to advocate personalization extension to other areas of your brand.

Repeated purchases, because relevancy will motivate customers to buy more from your business. Personalization makes customers feel heard and valued, so you should expect them to keep coming back for more products.

Improved lead generation. Even if you don’t have yet much data about the potential customer but the basics (source, geography, touchpoints), you can use personalization powered by machine-learning to map out a specific journey, recommendations and messaging that will appeal to your customer more than a generic experience.

Customer Acquisition Cost (CAC) which measures the cost invested to acquire a paying customer. It’s only logical that if customers start spending more and buying more often, the cost for each acquired customer will go down.

An important note here is that the improvements of this cost might not be visible immediately but will depend on your average purchasing cycle duration. For example, in B2B companies the purchasing decision can last up to several months, so you will start observing the changes in CAC driven by personalization only after the purchasing cycle is complete.

Avoid vanity metrics

One of the most important guidelines to follow when selecting your metrics is to make sure you track actionable metrics, rather than data that doesn’t help you make any business decision.

Positive data that is shallow will not drive business results. An increasing number of pageviews could be considered a success and boost your ego. However, it’s not quality traffic if these customers do not eventually purchase from your business.

How to identify a vanity metric? Think if you can make an informed decision based on this piece of data. If you don’t get any feedback from the metric about the state of your business, then you won’t be able to improve your business. Rethink the metric.

Know your baseline

No matter the metrics that you select based on your company’s objectives, you need to start by understanding your current analytics. Otherwise, you will just have isolated numbers without a proper context. So, first, invest some time (if you haven’t yet) to set a baseline with current metrics. Having a starting point will help you have a good overview of what personalization did for your business.

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