Why Out-of-the-Box Recommendation Tools Fall Short: The Case for Custom Integration in eCommerce

Oct 31, 2024 • 12 min read

When it comes to e-commerce, one for all should never mean all (customers) for one (solution).

56% of customers will return to sites with recommendations and 74% get frustrated with non-personalized content. According to McKinsey, personalization can increase revenues by 5-15%.

Many ecommerce platforms offer out-of-the-box recommendation tools but these pre-packaged solutions fall short as businesses grow and need more advanced personalization strategies.

Custom-built recommendation engines allow you to leverage your unique data, scale with growth, and offer a more personalized experience.

In my opinion custom recommendation integrations beat out-of-the-box options because they provide a competitive edge by streamlining processes and enabling faster deployment.

Let me explain why.

Custom integration vs out-of-the-box recommendation tools

Out-of-the-box recommendation engines are pre-built software solutions that integrate with e-commerce platforms like Shopify, Magento, or WooCommerce. These tools use standard algorithms like collaborative filtering or content-based recommendations to suggest products to customers based on browsing or purchasing behavior.

Many businesses start with tools like “Frequently Bought Together” apps on Shopify or “Product Recommendations” extensions on Magento. These integration solutions offer basic functionality and are designed for easy installation with no customization required.

These tools are used by smaller businesses looking for a quick and cheap way to enhance the customer experience with minimal technical setup.

However, as we’ll see, these perks can quickly become limitations as businesses grow and their needs change.

Out-of-the-box limitations

Convenient out-of-the-box recommendation tools come with big drawbacks, especially for businesses that prioritize personalization and scalability.

One size fits all approach

Out-of-the-box tools are built for mass market applications so they are not flexible when it comes to addressing the unique needs of individual businesses. For example, a fashion retailer and a hardware store might have completely different customer behavior patterns, product catalog complexity, and recommendation goals. However, a pre-built recommendation engine might apply the same algorithm to both stores, so the recommendations will not be relevant to either.

These tools can’t be tailored to specific business models, such as recommending based on loyalty status, user segmentation, or product-specific insights. For example, collaborative filtering can’t recommend long-tail products or serve niche customer segments well.
The recommendations are driven by standard algorithms that don’t take into account product attributes, customer purchase frequency, or seasonal trends. They can’t test and optimize different recommendation strategies.

Data limitations

Out-of-the-box solutions work with limited data, only analyzing surface-level customer interactions such as last purchased or viewed products.

They don’t consider deeper customer insights like psychographics, motivations, and customer lifetime value, missing out on more personalized experiences.
These tools rely on internal data rather than integrating external data sources like social media behavior or third-party market data that could improve recommendation accuracy.

Hard to scale

As businesses grow their recommendation needs become more complex. Larger product catalogs, broader customer bases, and more varied buying patterns require a more advanced recommendation engine.

When a business expands its product range or customer base, custom solutions can lead to enhanced productivity by better handling the increased demand. Out-of-the-box tools may not scale with a larger product catalog or be able to handle the complexity of cross-sell and upsell strategies.
For big businesses, basic collaborative filtering or content-based recommendations aren’t enough. Businesses need a more granular level of personalization that takes into account real-time customer interactions, loyalty program data, and purchasing habits.

Custom integration solutions

Custom integration solutions solve many of the out-of-the-box limitations. These tools offer more personalization and flexibility so you can build recommendations that match your business needs and customer base. Choosing the right integration platform to facilitate custom integrations is key to making these tools work within your existing systems.

Unlike generic recommendation engines, custom integrations can be designed to prioritize specific business goals. Custom code gives you flexibility and control over the integration process so you can build solutions that connect applications or systems to your business needs.

Business focused

Unlike generic recommendation engines, custom integrations can be designed to prioritize specific business goals. For example, a business might want to promote high-margin products, introduce new inventory, or encourage customers to buy more.

A tailored engine can take into account specific business goals like increasing customer lifetime value, promoting seasonal products, or upselling complementary products.
By customizing the recommendation engine businesses can align it with their overall growth strategy. For example, if customer retention is a key focus the engine can prioritize recommendations to re-engage dormant customers or prevent churn.

Using advanced data in enterprise resource planning

Custom engines can use your entire dataset, not just surface-level interactions. By combining purchase history, real-time customer behavior, and even external data sources these engines deliver much more relevant and personalized recommendations.

A custom engine can integrate and analyze data from multiple sources including social media behavior, browsing history, and even third-party market data to deliver a full personalization strategy.
Custom engines don’t just segment customers by demographics. They capture deeper insights like customer intent, purchase motivations, and behavioral affinities to deliver hyper-personalized recommendations.

Scalability and flexibility

One of the benefits of custom integrations is that they can scale with your business. As your product catalog grows and your customer base expands a custom recommendation engine can evolve to meet new demands.

Whether you’re launching a new product range or expanding into new markets a custom engine can adapt to changing business needs.
Custom systems can do complex recommendation logic like dynamic bundles, cross-sell recommendations, or personalized promotions based on real-time data.

Better customer experience

Custom recommendation engines deliver a more personalized and relevant shopping experience which can directly impact customer satisfaction, loyalty, and conversion rates.

By offering more relevant and timely recommendations, custom integrations increase customer engagement and conversion rates.
Custom engines can offer different recommendations based on customer segmentation like loyalty status, new vs returning customers, or even customers at risk of churn.

ERP and CRM

ERP and CRM systems are core software applications for any business. ERP systems manage and integrate core business functions like finance, human resources, and supply chain management. CRM systems manage customer interactions and relationships. Integrating ERP and CRM systems can simplify business processes, and improve data accuracy and customer satisfaction. The custom API integration can be used to connect these systems to exchange and sync data in real-time so you have up-to-date and accurate information across all business functions.

Custom API integration for business

Custom API integration involves building custom API solutions to meet business needs, enabling streamlined workflows. This allows businesses to connect different software applications, platforms, and systems to exchange and sync data. Custom API integration can automate processes, simplify workflows, and increase productivity. For example, a business might build a custom API to connect its e-commerce platform to its CRM system so customer data can be synced in real time and personalized marketing can be triggered. This level of integration means all systems work together to create a cohesive and efficient operation.

Things to consider when building custom integrations

Data

A custom recommendation engine is only as good as the data. Clean, structured, and regularly maintained data is key to delivering accurate and relevant recommendations.

Businesses need to invest in keeping their data clean and structured. Inconsistent or incomplete data will deliver irrelevant recommendations and harm the customer experience.
A custom engine needs to be monitored, tested, and optimized to ensure it continues to meet business goals.

Cost and resources

While custom integrations offer long-term benefits they require a higher upfront cost compared to off-the-shelf tools. Building a custom engine involves hiring data scientists, developers, and UX/UI designers.

Custom engines come with a higher price tag but the potential for long-term ROI is big.
Businesses that invest in custom integrations see higher engagement, conversions, and customer loyalty over time.

Iterative development for smooth integration

A recommendation engine should not be static. As customer behavior and market dynamics change businesses need to iterate and optimize their recommendation engines. This iterative process means the system will continuously adapt to new customer behavior, product trends, and business goals.

Updates are necessary to keep the engine in sync with customer behavior and market changes.
A/B testing of different algorithms and recommendation strategies can help tune the system for maximum performance.

Implementation and maintenance

Implementing and maintaining custom integrations requires planning and resource allocation. Businesses need to have the technical expertise to build and sustain these integrations. Allocating enough resources to the integration process is key to its success. Ongoing maintenance is also necessary to keep custom integrations running smoothly and efficiently. Regular monitoring and testing can help identify and fix issues so business doesn’t get disrupted. By considering these factors businesses can ensure the long-term success and reliability of custom integrations.

Custom integration best practices

To get the most out of custom integrations businesses should follow these best practices. First, build a clear understanding of business needs and requirements to define a solid integration strategy. Data exchange and sync are key to operational efficiency. Also consider scalability, security, and compliance when building custom integrations. Ongoing maintenance and testing are necessary to keep integrations working. By following these best practices businesses can increase productivity, cost savings, and competitiveness.

Is a custom integration for you?

When deciding between an off-the-shelf recommendation engine and a custom integration businesses need to consider their needs, goals, and resources.

When to go with out-of-the-box

For smaller eCommerce businesses with simple needs and limited budgets, out-of-the-box solutions may still be the way to go. These tools are easy to use, low cost, and can deliver quick wins without requiring a lot of time or money.

Smaller businesses with basic product catalogs and simple recommendation needs may find the convenience and cost of out-of-the-box tools enough.
These tools require minimal setup and maintenance so are perfect for businesses without a dedicated tech team.

Go custom and plan for ongoing maintenance

Larger e-commerce businesses that need highly personalized, scalable, and flexible solutions will benefit from investing in custom recommendation engines. If your business has a large product catalog, a big customer base, or complex recommendation requirements a custom integration will give you the flexibility and power you need to succeed.

As your business grows a custom engine can grow with your complexity.
Custom integrations allow for much more targeted and segmented targeting leading to better customer engagement and higher conversion rates.

Where to go from here?

Out-of-the-box recommendation tools are a great starting point for small businesses looking to get personalized shopping experiences up and running quickly. But as e-commerce businesses grow and their needs get more complex the limitations of these pre-built solutions become apparent. Custom recommendation engines may require a more upfront investment but offer flexibility, scalability, and personalization.

By using custom algorithms, combining multiple data sources and continually optimizing the system businesses can offer more relevant and accurate recommendations to their customers. This leads to more engagement and conversions, customer satisfaction and long-term loyalty.

If you’re using an out-of-the-box recommendation engine it may be time to review if it’s still meeting your business needs. For mid-sized and larger e-commerce businesses a custom integration could be the key to more growth, better personalization, and happier customers.