Personalized Offerings Fall Flat for Some Online Shoppers

By Bridget Aymar 
 

K.K. Sinha—Professor of Supply Chain and Operations, Mosaic Company Professor of Corporate Responsibility

Thanks to sophisticated algorithms and the growth of big data, more online retailers are leveraging customers’ tastes, preferences, and past purchase behavior to individually tailor their shopping experiences. But according to research by Supply Chain and Operations Professor K. K. Sinha, who was appointed the Mosaic Company Professorship for Excellence in Corporate Responsibility in 2010, personalization technologies that sense the preferences of online shoppers and respond with personalized product suggestions don’t always increase customer loyalty. And given the substantial cost of implementation, online retailers should carefully consider whether these technologies are a proper fit before taking the plunge.

Sinha and co-author Sriram Thirumalai of the Neeley School of Business at Texas Christian University collected data from 422 retailers specializing in a variety of products from apparel and home goods to computer software. Results showed transactional personalization technologies—the frameworks that collect and store shopper information such as name and shipping address to support the purchase process—were essential for customer loyalty. But contrary to the researchers’ predictions, decision personalization technologies designed to guide the user’s purchase choices were not always beneficial.

“Even when you’re catering to the needs of an individual, it doesn’t necessarily translate into customer loyalty,” says Sinha.

In fact, according to the research, if retailers were to incorrectly choose to implement decision personalization technologies, it could harm customer loyalty.

“Decision customization enables shoppers to make better decisions by reducing their search cost before completing a purchase,” says Sinha. “But decision personalization is not relevant to some types of retailers. More technology is not necessarily better.” His research reveals that large-scale retailers that offer a wide variety of products and which are not price competitors are wont to pursue decision personalization technologies.

“To Personalize or Not to Personalize Online Purchase Interactions: Implications of Self-Selection by Retailers” appeared in Information Systems Research (2013).

Sinha is invigorated by the potential that personalization technologies and big data offer for supply chain management. By sharing these discoveries in the classroom, he hopes to inspire the next generation of innovators, be they future business faculty or key decision makers in retail organizations.

“I try to sow the seed of research in students,” he says. “There are certain joys to discovery, to getting to the bottom of problems, to exploring uncharted waters.”