Recommender systems enhance E-commerce sales in three ways:
Converting Browsers into Buyers: Visitors to a Web site often look over the site without purchasing anything. Recommender
systems can help consumers find products they wish to purchase.
Increasing Cross-sell: Recommender systems improve cross-sell by suggesting additional products for the customer to purchase. If
the recommendations are good, the average order size should increase. For instance, a site might recommend additional products in
the checkout process, based on those products already in the shopping cart.
Building Loyalty: In a world where a site’s competitors are only a click or two away, gaining consumer loyalty is an essential
business strategy (Reichheld and Sesser, 1990; Reichheld, 1993). Recommender systems improve loyalty by creating a value-added
relationship between the site and the customer. Sites invest in learning about their customers, use recommender systems to
operationalize that learning, and present custom interfaces that match consumer needs. Consumers repay these sites by returning to
the ones that best match their needs. The more a customer uses the recommendation system – teaching it what he wants – the more
loyal he is to the site. “Even if a competitor were to build the exact same capabilities, a customer … would have to spend an
inordinate amount of time and energy teaching the competitor what the company already knows” (Pine, et al., 1995). Creating
relationships between consumers can also increase loyalty, for consumers will return to the site that recommends people with whom
they will like to interact.