Ask their VP of Ecommerce or Online Merchandising Manager what they are doing to increase conversion rates and revenue on their site and they will likely tell you that they are using the latest recommendation engine to produce a highly personalized shopping experience. I would say they left the money on the table.
Click on a pair of shoes and it will show you three other popular options, belts and handbags to go with them. Recommendation engines can be simple or quite sophisticated but the goal is the same; increase conversion rate and AOV (average order value).
So with all this technology available to dynamically personalize the shopping experience for online shoppers, where does the “Milk and Eggs” approach stand in a sophisticated Ecommerce operation? Better yet, what is a “Milk and Egg” approach?
The term is familiar to anyone with traditional merchandising experience. This concept is pervasive in the retail world and has stood the test of time for one simple reason; succeed. You put Milk and Eggs in the back of the store because you know customers will find them wherever they are. Other products are strategically placed on the path to and from milk and eggs to increase exposure aka sales opportunities which in turn increase AOV.
The same principle applies to online merchandising but a lot of people are missing the boat. How many sites have you seen placing a “Top Seller” or “Most Popular” item at the top of a page or category? This is a self-fulfilling prophecy. Your Top Sellers are in the top slots and they remain your Top Sellers as you would expect them to be. It’s like putting your Milk and Eggs at check-out.
Imagine the following Ecommerce scenario where 12 products fit on your category page. Product A is your most popular product so you put it in slot 1. It sells for $100 on any given day and the less popular Product B is in Slot 16 (page 2) and sells $25 for a total sale of $125.
The optimization algorithm following the Milk and Egg approach will place Product B in Slot 1 and Product A in Slot 8. Product A will sell $90 but Product B sells $60 for a total sale of $150 which is a 20% increase in sales just by changing your slot order.
Well, that’s an online merchandising strategy worth looking into.
If you already use a recommendation engine, think about how great it would be if the basic product list used by the recommendation engine was optimized this way.