Personalization: Buy, Build or Outsource

It seems everyone wants to customize online content for individual customers. But should you trust an off-the-shelf personalization tool, build your own or just outsource the whole thing?

There's no dearth of technology to help deliver personalized content to Web sites and to deliver targeted promotions via e-mail. Users have plenty of choices, from the template-driven packages of BroadVision Inc. and Vignette Corp. to the more flexible development platforms of Art Technology Group Inc. and Blue Martini Software Inc. There are also site analysis tools, profiling systems, data analytics engines and collaborative filtering products. But analysts caution that software alone can't solve the personalization problem. Careful assessment of customer needs and business models are just as critical.

"Personalization is not something you buy out of a box," says Chris Selland, an analyst at The Yankee Group in Boston. "It's something you do."

The Children's Place:Outsource it!

The Children's Place Retail Stores Inc. knew it wanted to do one-to-one marketing with its online customers. But the Secaucus, N.J.-based retailer also knew it didn't have the in-house expertise to do it.

So the company sought outside help and found that, yes, even personalization can be outsourced. The Children's Place left it up to Net Perceptions Inc., a software vendor in Eden Prairie, Minn., to set up its collaborative filtering software with whatever partners needed to be involved.

Unlike some high-profile online retailers, The Children's Place outsources everything. Sunnyvale, Calif.-based Pandesic LLC handles the Web infrastructure. Boston-based Zefer Corp. does the Web design. Cambridge, Mass.-based Akamai Technologies Inc. delivers graphics. Minnetonka, Minn.-based Fingerhut Cos. handles fulfillment and customer service. Sunnyvale-based eGain Communications Corp. does the e-mail maintenance.

"We wanted to stay focused on what we do best: children's merchandis(ing) and (serving) our customers," says Debra Brummer, the company's director of e-commerce.

So her company leaves it to the Net Perceptions tool to study its customers' past and present buying behavior, both at its online and brick-and-mortar stores. Based on that buying behavior, a customer is sorted into a buying community filled with other shoppers who have established similar patterns. The more the customer shops, the more likely the tool's algorithms are to produce effective results. Or so the collaborative filtering theory goes.

"The reason why we're excited about collaborative filtering is because (the tool) learns in real time," Brummer says. "The engine gets smarter with every transaction."

Of course, there are skeptics. There's always the possibility, for instance, that a customer making a one-time gift purchase of fishing gear will receive prompts for rods and reels in the future, even if they aren't regular fishers. But Childrensplace.com asks customers if the item is a gift.

Brummer says her company has seen promising results since the site launched last November. When customers reach the virtual checkout counter, they're shown five items they might like to add to their shopping carts. Brummer declined to divulge the results, saying only that the company is "incredibly pleased."

The Children's Place also tried a small, targeted e-mail campaign based on Net Perceptions' recommendations. Hoping for 9% click-through, the company reached 19.1%, with 14.3% of those customers actually purchasing the suggested product. Brummer added that the average order was 114% more than the normal sale, dollar-wise.

"We're very excited," Brummer says. "We can use Net Perceptions' (tool) and get an immediate return on investment."

Garden.com: Build, and use off-the-shelf tools

Delivering personalized content was no afterthought for Garden.com Inc. The Austin, Texas-based retailer went into business thinking it could become the virtual gardener for each of its customers.

But when the site launched five years ago, Garden.com didn't find the commerce engines and personalization packages now on the market. So staffers built their own proprietary commerce engine with extensive customer tracking in mind.

"Session tracking is not very interesting these days because any good commerce platform does a pretty good job on it," says co-founder Jamie O'Neill, the company's chief operations officer. "But session tracking is actually quite hard to do effectively."

By depositing a cookie onto a visitor's PC, the company associates a "clickstream" with that specific customer or registered member. The proprietary system takes the Web logs, compares them to any transactions performed and builds a unique history for each customer. That information is stored in an Oracle Corp. database along with any information the site collects through direct questioning of customers.

Customers who want personalized regional newsletters, "garden minder" tips catering to their special climate considerations or advance notice of weekly promotions get e-mail. Garden.com uses Digital Impact Inc. to manage the mail process.

But Garden.com also wanted to deliver customized content via its Web site, so it extended its NetGravity Inc. ad server to deliver content as well as banner ads. Whenever a customer hits the site, the cookie identifies the visitor. A call to the Oracle database checks residence information and purchase history. Then a request goes to the NetGravity ad server to display content specific to the customer's home region.

Realizing it was using only a small part of the data it was collecting, Garden.com needed a sophisticated analysis tool. After some false starts, it turned to an Austin neighbor, Knowledge Discovery One Inc., better known as KD1 (since acquired by Net Perceptions Inc.)

Until then, Garden.com had been doing only basic customer segmentation along regional and product lines. The KD1 system let it do more detailed analysis. KD1's output could be fed into the NetGravity server to deliver Web content to customers or to conduct e-mail promotions.

For instance, Garden.com recently completed an e-mail campaign promoting Princess of Wales roses. Using the KD1 tool, now called Intelligence Channel, the company identified customers who were deemed highly valuable based on the money they spent in the past year and the frequency with which they visited the site. Those targeted customers outpurchased a control group by 33%, O'Neill notes.

To further take advantage of its customer data, Garden.com is building a Net Perceptions data warehouse that will consolidate information from its Oracle transaction system and Web server logs. Garden.com also hopes to conduct more real-time analysis of customer behavior. Those findings could then be combined with the stored data or information from an outside data-collection company to modify the site to spur sales.

Caution on Privacy

But O'Neill promises the company will proceed "with extreme caution" in that "implicit" personalization arena, which involves data that customers don't voluntarily provide.

"We are really concerned about making sure that we provide a more compelling shopping experience but don't breach any kind of privacy issues with our customers," O'Neill says.

No matter how much the technology can do, O'Neill says he still thinks his site needs "really smart people" to decide what data to pull and how to use it. "There is this vision of the system running itself and brilliantly coming up with a personalized site for everyone," he says. But that's not "near term. That's the Holy Grail."

Collectibles.com:Buy

Jewelry collectors typically don't give a hoot about autographed baseball cards, and sports nuts probably won't hunt down porcelain dolls and fine cutlery when they're in the mood to shop.

That's why Collectibles.com, the online arm of Nashville-based Shop At Home Inc., decided to invest in BroadVision Inc.'s One-To-One e-commerce applications to deliver targeted, dynamically generated content to customers.

"We were looking for something that would give us a significant amount of functionality out of the box . . . something that we could easily integrate with everything else we wanted to do," says Bob Miller, vice president of Internet technology at the retailer.

During a six-week period last fall, with the help of three integration teams, Collectibles.com implemented a new Retail CRM call center system from Retek Inc. in Minneapolis, Oracle Corp.'s financial, inventory and human resources applications as well as the package from Redwood City, Calif.- based BroadVision. The Common Object Request Broker Architecture (CORBA) distributed-object technology helped staffers hook BroadVision to the other systems, and built-in procedures eased the shift of Oracle inventory data to the Web site. But with so much going on, implementation was a challenge.

Time pressure drove Collectibles.com to choose BroadVision's template-driven package over a more flexible development platform, such as Cambridge, Mass.-based Art Technology Group Inc.'s suite of Java application server-based products. "We signed the deal with BroadVision in June and then launched in November, and that's with very fragmented IT resources, since we had so many projects going on," says Miller.

Information technology staffers developed cookies to be dropped onto visitors' PCs the first time they hit the site, so the users could be uniquely identified. As visitors browse, the BroadVision system helps establish content ratings for them. If a person continually looks at coins, for instance, coin content will be given a higher rating than any other content.

Collectibles.com staffers identify a visitor's level of interest in various product categories. Mere browsing may add a point to the content rating, viewing details might add five and a purchase may tack on 10, Miller says.

"You can segment your visitors in as fine a way as you care to manage," Miller says, noting that a sports enthusiast might be designated a casual collector if he spends a considerable amount of time reading frequently asked questions.

The marketing department can step in and use wizards-based BroadVision tools to earmark content, promotions or advertisements for about two dozen categories of visitors that Collectibles.com has designated.

IT staffers are needed to set up templates and make more complicated changes, such as adding a rule for free shipping.

Scalability is a concern sometimes raised about the BroadVision system, but Miller says his site should be in good shape since it took BroadVision's preferred approach, distributing the software over multiple servers (in this case, two Sun Microsystems Inc. E450s).

Collectibles.com runs its CORBA layer on one machine and the BroadVision Interaction Manager on the other. The CORBA layer interfaces with the Web server and passes requests to the interaction manager, which brokers the requests, determining if it can get the data from its own cache or if it needs to make a database call, Miller says.

Implementing BroadVision isn't cheap. The average price for the software is $400,000, and a company typically spends another $400,000 on consulting sources, a BroadVision spokeswoman said. Miller declines to discuss the cost, saying only that his firm spent $15 million on its entire system, including the revamped Web site, call center, Oracle applications and hardware.

So far, officials say they've been pleased with the results. Tim Engle, president of Collectibles.com, says his company collected nearly $760,000 during March, less than five months since its Nov. 12 launch. "We make 38% margin on that $760,000," he notes, adding that the pace was exceeded with one $170,000 day this month. Among visitors to the site, 95% hadn't purchased anything from the company before.

So Collectibles.com plans to forge onward with more personalized content and add more tools to augment its BroadVision system. The company expects to launch an auction on the site by summer's end, and it hopes next year to deliver targeted video on demand through Java applets.

"Right now," Miller says, "we're not doing anywhere near the level of personalization that we're shooting for."

SmarterKids.com:Build

SmarterKids.com Inc.'s raison d'ýtre is personalization. The Needham, Mass.-based company's mission is to recommend products that meet an individual child's learning style and goals.

But SmarterKids.com didn't find any off-the-shelf personalization software that it felt could help its cause. The most prominent of the scant packages available was costly and required use of a proprietary language. So SmarterKids opted for a homegrown approach: building a complex algorithm that matches a child's profile with the products deemed best for his or her needs.

"I think we probably looked at every personalization product out there," says Richard Viard, the company's senior vice president of research and development. "But our site is very unique, and we're better able to tailor our personalization" to fit the company's needs.

Microsoft Corp.'s Site Server, Commerce Edition handles all of SmarterKids' order processing, NetGenesis Corp.'s NetAnalysis helps with log file analysis and Quadstone Inc.'s Transactionhouse and Decisionhouse tools will be added for mining of the company's Microsoft SQL 7 database.

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