How Online Retail Product Recommendations Affect Sales Growth
Implementing the right online retail product recommendations can drive sales and improve profits.
Amazon’s product recommendation engine is an excellent example of this in practice, with experts estimating that as much as 35% of its total revenue comes from product recommendations alone.
These marketplace giants have been able to achieve this by ensuring every potential customer is shown products personalized to specific interests, past interactions, and behavior.
But is that all? No!
Yes, personalization is a crucial factor in an integrated product recommendation strategy, but it is not the only one to consider — especially if you want to sustain long-term eCommerce sales growth and profitability.
In this post, we will look at the powerful benefits of product recommendations that drive long-term growth, including:
Let’s dive in.
The Powerful Growth Benefits of Product Recommendations
On the surface, the benefits of product recommendations are easy to ascertain: conversions. The more a product recommendation is in line with a customer's specific needs, the more likely they are to add that product to their cart.
But as any eCommerce marketer knows, it’s far more involved than that. When product recommendations are used strategically, they can help your brand reach its marketing and retail KPIs through advanced merchandising, improved shopping experience, and more.
Let’s look at the top benefits of onsite product recommendations and how they affect online retail growth.
1. Improved Inventory Optimization
The first benefit of a well-optimized, strategically placed online retail product recommendation is improved inventory optimization. And as we know, inventory optimization drives profitability and long-term growth.
To receive this benefit, you will need to sort your products and visual merchandising (including product recommendations) in a way that ensures potential customers are seeing products that not only appeal to their needs and personal interests but offer your store the best-earning potential. All this while simultaneously reducing:
- Slow-moving and dead stock
- Operational and handling costs
- The eCommerce Pareto Principle effect
…which will further contribute to long-term profitability and growth.
2. Better CTRs
Another benefit of online retail product recommendations is improved product page CTRs (click-through rates). The more optimized a recommendation is to what potential shoppers are actively searching for, the higher the chance they will move to the next digital touchpoint on your store’s sales journey: your product page.
The trick to guaranteeing that your product recommendation merchandising drives CTRs is ensuring you are:
- Highlighting key benefits and features in a clear, concise way
- Placing recommendations at the right steps in your product sales flow
- Targeting the right shopper with the right product recommendation
- Using eCommerce AI and automation tools
3. Increased Conversion Rates
The next benefit of online retail product recommendations is increased conversion rates. After all, you can’t have sales growth without working on conversion rates!
Let’s say you’re using your after-sale email marketing to recommend personalized products as part of your cross-selling strategy. The more customized these product recommendations are, the more likely you are to convert previous customers again.
Of course, the potential for increased conversion rates is not limited to repeat customers. According to a Barilliance study, 12% of a customer’s purchases are based on product recommendations — and product recommendations, overall, account for 31% of eCommerce revenue.
To get you started on improving your own conversion rates, here are a few product recommendation tips you can use to improve them:
- Optimize your eCommerce sales funnel
- Ensure your product’s value proposition is clear
- A/B test your product recommendation selections and placements
- Optimize your category and product pages with shopper rates and reviews
4. Reduced Cart Abandonment Rates
There are two ways the proper product recommendations play a crucial role in cart abandonment strategies.
Firstly, by recommending the right product at the right time from the get-go — as long as you aren’t guilty of cart no-nos such as hiding costs or terms, of course — you reduce your chances of cart abandonment.
Secondly, you can use cart abandonment data to boost product recommendations for returning store browsers by showing them products — or similar — they have already actively engaged with. Here’s an example of a winning online retail brand that does just that in one cart abandonment email.
5. Higher AOVs
In one study, Salesforce found that product recommendations can increase a brand's order numbers by 24% and total revenue by 26% — a lot of that comes down to increasing AOVs (average order values).
Whether it’s a well-placed cross-sell in your checkout pages, product bundle in your category page, or upselling in your checkout pages, when used well, intelligent online retail product recommendations can help improve your overall AOVs.
And the higher your AOVs are, the more revenue you earn from a single shopper and the quicker your sales grow over time.
6. Improved SEO
The next benefit of product recommendations may not be as obvious, but it definitely affects long-term sales growth. That is improved SEO.
The right on and offsite product recommendations can help improve bounce rates and increase time on pages — both of which are vital in improving overall SEO performance.
Let’s quickly look at how each affects your SEO and how you can use product recommendations to boost them:
- Bounce rates. A well-placed product recommendation can keep shoppers from leaving a page, thus improving that page’s bounce rate. The better your store’s bounce rate is, the more it signals to search engines that the content (product) is relevant to the searcher — and the more likely that engine is to then send more potential customers.
- Increased time on store site/pages. The more intelligent your product collections are, the more engaged a potential customer will be with an onsite sales funnel. Ultimately this ensures that browsers are spending more time on respective category or product pages. This is partially important for improving SEO overall if shoppers are clicking from search pages or ads.
The better your store’s SEO, the more opportunities you have to bring organic, targeted traffic to your product pages. And the more targeted traffic your store gets, the more potential shoppers you can move along your sales funnel — ultimately leading to more conversion over time. AKA, sales growth.
7. Better Brand / Customer Engagement
Last, but not least, well-planned product recommendations will help you connect to your potential shoppers and customers better. Yes, if the product is in line with what they are looking for, it helps sales. However, there is also the emotional link to consider.
When potential shoppers feel like your selection reflects a good understanding of what they want or need, they are more inclined to trust your brand. And trust goes a long way to boosting conversions and long-term retention — both of which ultimately drive sales growth.
As you can see, there is no doubt that online retail product recommendations, and how you optimize them, affect long-term sales growth and profitability.
The secret is investing in advanced online merchandising tactics to improve recommendations and product discovery. You can read more about how to do just that in our How to Build a Winning Online Merchandising Strategy guide.