Retail has been transformed by AI and ML driven personalization. Personalization is used for many purposes such as product recommendations, coupons, special personalized offers, personalized communication touchpoints and more. Consumer behavior in 2023 is dependent on many impactful factors: global recession and inflation, more online shopping and an even greater offering than ever before. So, what should retailers do in order to retain customers and increase sales? Focus on personalization and more so with technology (AI/ML) that helps in learning and understanding consumer behavior in order to monetize the data and create a better customer experience.
The Future is Very Much Here
AI/ML is everywhere and is here to stay, but the technology and the market has matured. Brands use personalization to make every transaction relevant, and customer engagement, retention and loyalty is dependent on this.
The market continues to grow and top retailers cannot be left behind, but there is also the need to find the right provider – one that understands both the data and how to monetize it. The technology chosen should align with business goals and strategy.
What is AI/ML Personalization and What is it’s Value to the Retailer?
AI/ML-driven personalization uses machine learning (ML), deep learning, natural language processing (NLP), etc. to personalize a brand’s marketing messages, content, products, offering and services. And now we hear more and more about XAI – explainable artificial intelligence is a set of processes and methods that allows human users to comprehend and trust the results and output created by machine learning algorithms.
Once, a long long time ago, you had the corner shop, where the seller knew your name, size and favorite color and could offer you exactly what you wanted – with a smile! Now, as the world has grown and businesses with it, the vast amounts of data that retailers have can be evaluated and used to create customized recommendations and offers – very much like the seller of old times but much faster and on a much larger scale.
Strategy! And Some More Strategy
The most important part of personalization is strategy – both on the organization’s side as well as the technology provider’s side. In order to strategize we need to consider some important facts:
- Only 15 percent of retailers have fully implemented personalization strategies (US)
- The global personalization software market hit an estimated $943 million in 2022
- Product recommendations and predictive customes service are the top two personalization uses in marketing
- 91% of consumers are more likely to shop with brands that provide relevant offers and recommendations (US)
So, we have 91% of consumers wanting personalization but only 15% of retailers fully implementing personalization technology and strategies – how do we overcome this gap? In addition personalization must be accurate in order to be effective – and this brings up another issue – data collection. For personalized products and services, 47% of consumers and 63% of marketers think companies need consent to use their data. So strategy is essential in order to overcome these obstacles (read our paper on personal relevance and how to use it effectively).
So, How Can AI/ML Add Value to Retailers?
Increase Average Order Value: Average order value (AOV) tracks the average dollar amount spent each
time a customer places an order on a website or mobile app. Using AI/ML increases the total purchase amount in a single order.