Personal Touch Pays Off For E-RetailersPersonal Touch Pays Off For E-Retailers

Elizabeth Peaslee, VP for customer experience at Web travel service Travelocity.com L.P., needs to hold onto your eyeballs. In the competitive online travel business, being able to offer shoppers customized information is invaluable in making a sale. So Travelocity knows its Web-site subscribers' home airports and favorite vacation spots, and in the next few months it will also link users' frequent-flier numbers to its search database to give travelers immediate access to the least-expensive flights on their preferred airlines.

"Personalization delivers high-value customers for us," Peaslee says. "The booking rate is also significantly higher than for nonsubscribers."

Peaslee is echoing the viewpoint of a soon-to-be-published study conducted by researchers at the University of Michigan Business School--that is, Web-site personalization works. But a key finding of the study is less obvious: Sites that do a good job with personalization can rack up sales on certain items, such as books or PDAs, even though they price them higher than competitors. "Consumers say, '[This site] gives me so much more that I'll pay a couple extra dollars,'" says Neveen Farag, co-author of the study, which looked at 79 retailers.

But personalization can't drive price premiums in every industry. "My gut tells me that, given the way price-comparison shopping in travel is so easy to do, it wouldn't fit for us," Peaslee says. Bear Stearns & Co. analyst Jeffrey Fieler also has reservations. Given the economy, and large businesses driving prices lower, "the idea that there's some pricing power is probably not accurate," he says.

Study co-author M.S. Krishnan, a professor at the university, says success or failure is in the details. "Ask yourself," he says, "what features will attract customers here?"