1. Product recommendations – never heard of that
Mostly all of us have seen the well-known Amazon “Customers who bought X also bought Y” slots that recommend products to you when you have once visited their website.  That’s it – after all you already heard of product recommendations and also probably used it.
The parameters that influence these recommendations are derived from the various sources that the biggest online merchant in the world has access to. If you are a new visitor and were never logged in, it is still possible to have a deep view into your visited history to offer so-called cross sell recommendations. If the website knows you, so you were logged in before, the data sources include amongst many others common variables like purchased and abandoned shopping carts, referral sites, product ratings and user segmentation (see http://www.google.com/patents?id=dtp6AAAAEBAJ&printsec=abstract&zoom=4&source=gbs_overview_r&cad=0#v=onepage&q&f=false).

2. It’s all about data comparison
For generating suitable product recommendations, the websites have to collect an immense amount of data, because every click a user does, results in new or adapted product recommendations on the next pages. Basically the most used idea of webshop personalization is to compare the behaviour of a single customer with other customers and deducing recommended products from that. The result may also eventually be applied to some filter logics, e.g. to limit to accessory products on the cart page to avoid too much distraction and uncertainty for the customer that intended to checkout.

Once identified there are many places where product recommendations can be placed, e.g. on home page, product listing and detail view, cart page as well as make use of it in email marketing, mobile websites and search results.

3. Forgot to integrate product recommendations? That’s why you should act right now
A survey by the ECC Handel shows that in 2011 45 percent of asked online shop merchants used product recommendations in a more or less general way:

In 2003 Amazon was one of the pioneer webshops that used product recommendations to enhance their sales. Nowadays all major online shops invest heavy resources in providing the best personalization experience for their customers. The demand for providing large catalogs with lots of articles requires an intelligent strategy for the merchant to show the customer what he expects. So, what’s the customer view: today everyone is used to shop online and also everyone is using product recommendation without knowing about it. The result: everyone of us expects product recommendations in online shops and it could be quite irritating for customers to find a non-personalized and static shop without any recommendations.

The sweet thing: though you as a smaller online shop may only have a minimal fraction of the data that Amazon has available, integrating product recommendations into your shop is not an impossible thing with the right recommendation software.

4. But do these product recommendations really help?
According to http://static.carpathia.ch/1335282228/mk_03_2012-37.pdf product recommendations can lead up to 20 percent sales increase. That’s huge compared to other measures like checkout optimizations (usually in the range of single-digit percentage) and visualizes the enormous impact of this topic for every online shop merchant. Even small shops with less than 100 products can gain an improvement for their conversion rate by offering personalized recommendations.
Nevertheless an important requirement to achieve these improvements is to monitor and continually measure the effectiveness of the generated recommendations.

5. How does this affect my shop? A conclusion
As shown in this article every store owner neglecting this massive potential of personalized product recommendations may loose up to 20 percent of additional sales by using a proper recommendation engine. Product personalization is no more a nice-to-offer but a must-have feature, because today’s modern customers subconsciously expect personalized product recommendations.
Do you offer product recommendations already? Keep on track here to the besugre blog to learn more about how to integrate product recommendations in Magento, because you as a successful Magento shop merchant should not ignore this trend.

Sources:
[1] http://www.aboutdm.com/2013/01/product-recommendation-by-amazon.html