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Why Should You Leverage AI Algorithms for Personalized Offers and Recommendations?

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Saffron Edge

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Aug 4, 2022

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10 min read

Being a business owner, it will always disappoint you when your shoppers do not convert. It generally happens when they don't get what they are looking for. You might need to understand that one of the critical factors that drive conversion and customer satisfaction is relevance - the relevancy of suggested products and services.

Shopping Cart Abandonments

It leads marketers and retailers, especially online businesses, to broaden their spectrum and shift towards advanced strategies that enhance segmentation and personalization, and leveraging AI Algorithms is one of them. Today, the majority of the companies have enabled AI (Artificial Intelligence) and machine learning tools to automate things and offer relevant content to users. According to Statista, 70% of European and North American decision-makers in online commerce believed that AI could help them with personalization in 2021. With the proper utilization of AI, you can deliver a personalized experience to your customers at the right time and improve customer engagement.

Suppose you are a marketer or thinking of stepping into the e-commerce world. In that case. In that case, this blog could help you understand the significance of AI and machine learning algorithms in enhancing the customized experience for your customers. So, please fasten your seat belts and get ready to experience this exciting journey of AI and its features in personalizing marketing!

The Future is Personalized Content

Whether it's Spotify or Netflix, be it Amazon or McDonald's, we all are surrounded by personalized experiences everywhere, every day. And that's why these brands have attained a position that everyone admires. However, like these names, customers expect the same level of personalization from all the global businesses.

Shopping Cart Abandonments

Investing in customized content helps in building customer relationships and enhancing brand loyalty. 91% of consumers prefer to shop with the brands that provide personalized offers and recommendations to them, as per a survey report by Accenture. And why not, especially when you show your consumers what they want to see when you offer the things they want to buy and suggest to them the options they can choose from.

All these things make your customers happy, and happy customers are crucial, as they don't just buy, but they also promote your brand. Always remember, there's one thing that speaks louder than your brand's objectives, ad campaigns, and marketing strategies, and that's the voice of your customers.

But doesn't it boggle your mind why personalization is crucial in satisfying customer expectations? Well, here are some statistics to show that and to make you understand the negative consequences of lacking personalization:

Lack of personalized content frustrates your users.

Yes, that's right. As per a survey report by the Association of Customer Loyalty, 74% of customers get frustrated when they don't find the website content personalized. According to a report by Infosys, 59% of the respondents believe that personalization has a profound impact on their shopping decisions.

No personalization means lower customer engagement.

If your brand does not offer personalized recommendations, you are more likely to lose customer engagement. According to a report by Invesp, 56% of online customers return to a website that recommends relevant and personalized products.

Lack of personalization can make the customers leave your brand.

Well, that's something serious. As per a research report by Accenture, 33% of the consumers ended their relationship with brands that lacked personalization.

Your consumers can say goodbye if you are still using poor personalization tactics.

It's not just about customizing the user experiencing but customizing it using the right tactics to get the desired results. According to the analytics data shared by Smart Insights, 63% of customers stop exploring and purchasing products from brands that use poor personalizing strategies.

It is probably clear to you how not prioritizing and developing custom experience can drive you towards the risk of getting left behind. Therefore, customer personalization is essential to build a personal connection between your brand and the customers. Wait a minute, you read about the importance of personalization in customer experience, but do you know what customer personalization is? Or are you just caught up in the buzz about what your brand needs and what you are missing, even when you are not sure what it is? Future is Personalized Content Don't worry if you are in the "not having an exact idea" camp; the following sections will guide you through the idea of customer personalization and how AI algorithms can help you in it.

What's Customer Personalization?

Have you heard about a "one-to-many" relationship? It is a kind of relationship in which one entity of the first group can interact with many of the second group, but vice versa is not true. An entity of the second group can only interact with a single entity of the former group. Confusing, right? No worries, let's understand it through a simple example. A person can own multiple pets, but each one of those pets will have only one owner.

Well, customer personalization also works somewhat in that way. When you send mass emails to your customers and clients, customer personalization makes sure that all of your customers get an email that feels unique to them. For instance, assume an email blast sent to all your customers with their respective first names.

Now, with personalization, you analyze your shoppers' behavior, interests, and requirements and show them the right digital content that satisfies their expectations. It helps brands improve customer engagement, make them valuable, and ultimately results in sales and productive growth. Customer personalization blurs the idea of marketing. It turns out to assist the users in getting the suitable options, best offers, and recommendations based on their habits and taste.

You can look at the example of Starbucks' mobile app to understand the significance of personalization in boosting sales. The company released their application that combines their loyalty programs with personalization, with which the customers can fully customize, pre-order, and take away their drinks from any location. The consumers feel it is helpful, and their interest in the app is easily visible through the results. Presently, the Starbucks mobile app drives approximately 22% of all the US sales for the company.

The Combine Power of AI Algorithms and Customer Personalization

Consider the image available above. What do you understand from it? Just a robotic hand-holding (or offering) a customized cocktail drink, right? Do you get any idea after seeing it? You might have already understood its significance. However, let's discuss the concept behind it anyway.

Suppose you own a club and know some customers frequently visit your place and order the same drink every time. Now, imagine how good it would be if you could record their preferences and when the next time they visit, they could get their drink even before they order it. Well, it would be hard luck for you if they have recently changed their preferences (which generally does not occur). However, if the stars are in your favor, it can make your customers extremely joyful that someone cares for them.

Now, the question is, how would you record the taste and preferences of all your customers. Well, that's when AI and machine learning algorithm will do their job. With the right AI approach, you can record a large quantity of data, gain insights from it, and predict all your customers' wants and preferences. It would also help you predict what product your customers want or what content would interest them. The robotic hand in the above picture is also AI-enabled and works the same way. It made a personalized drink based on the customer's usual choice and taste, probably making them happy.

How does AI work in Personalizing the Content, Offers, and Recommendations for the Users?

AI algorithms in personalization work based on a customer's past experiences with a brand. Let's understand this through Netflix's AI and machine learning approaches to deliver a personalized experience to all its users.

If you are a Netflix user, you can recall when you first registered your account on the OTT platform. It asks for your top 3 preferences of movies or shows that you would like to watch. Netflix will recommend other options that you would probably want to watch based on your choices. Not just this, when you finish a movie, the platform will recommend you some other options under the category "Because you watched that, you might like to watch this…."

So, ever wondered how Netflix does that? Well, it's all the magic of AI. It records your preferences and tries to deliver you the same personalized experience the next time you open your app. According to Todd Yellin, VP (Product) of Netflix, the brand runs almost 250 A/B tests every year, each one of them offering two unique versions of experience to users to see their engagement and reaction over them. Moreover, in 2014, Netflix used approximately 76,897 "altgenres" to figure out what show or movie it should suggest to all its users, not just to customize their experience but to make them return for more.

Similarly, the eCommerce platforms, such as Amazon, derive the users' data by analyzing their online browsing habits, search history, interests, social media posts, and much more. With AI tools and machine learning algorithms, this massive amount of data is processed in microseconds. Every time they visit, a relevant and personalized experience is delivered to each unique user.

Let's get an idea about this through some different features of real-time personalizations using AI and machine learning.

Personalized Marketing and Recommendation

Have you ever searched for a specific clothing item on Google and got surprised when the same thing is recommended on Amazon as well? Well, that's what AI does. It follows you throughout the internet by analyzing your browsing history and shopping behavior and pops out every time to make you purchase that product. The companies will offer you personalized offers and discounts, such as free delivery or a discount coupon code under the "Only for you" category to lure you into buying it. Amazon has been a leader in this area by developing an algorithm that has proven effective in customizing product recommendations since 2000!

Personalized Messaging

It has proved to be one of the most efficient ways to grab your attention with the help of push notifications, personalized emails, and text messages. Enabling AI and machine learning in this area will help you analyze the users' device usage and behavior to learn about their interests and daily activities. With this, you can sit back and relax while your system sends the refined and most customized content to your target audience at the right time of the day. These notifications can be anything from discount coupons to best offers, everything with the ultimate aim of grabbing your customers' attention.

Zomato can be a great example of the proper use of personalized messaging. The company shares the most personalized form of in-app and device notifications to make the users click on it. Remember, the more customized a message is, the more likely it will grab the customers' attention. According to a study, 90% of marketers who use personalization in email marketing increase open and CTRs.

Personalized Timing

Now, this is something different and challenging to achieve when personalization, but not impossible eventually. You can show personalized messages and content to your customers, but not everyone shares the same daily routine. Even a specific individual does not follow the same daily pattern or activities. However, AI and machine learning algorithms help customize the content delivery time based on previous engagements and shopping behavior.

In addition, the system can also analyze the specific days or months in which a particular customer usually shop. For example, in India, people wait for "Diwali Sale" or "Great Indian Sale" on Amazon in the hope of getting better prices and discounts on the products. Similarly, in the US, people look forward to the "Black Friday Sale" to get the best deals on their favorite products. Notifying your customers during these days with personalized offers and recommendations can remind them to visit your online store and shop.

Take Away

Marissa Mayer, former President and CEO at Yahoo!, once said, "To me, the future is personalization." Indeed, it is, and you can easily see it every day, everywhere. Today, when every business is striving hard to lead in the digital world, integrating personalization into your marketing strategies can be a plus point. As per the latest report by SmarterHQ, 80% of regular buyers only purchase from brands that personalize the shopping experience for them. Moreover, 86% of marketers have observed a measurable growth in their business outcomes after running personalization campaigns.

However, customer personalization is not as easy as it looks, and you have already seen this through this blog. But, thanks to AI and machine learning algorithms, personalization becomes more automated and effective. Since the future of the online retail market would be more personalized, it is crucial to enhance customer experience and engagement, and personalization could be the key. Therefore, by having a professional and skillful marketing agency by your side, you can retain your customers through personalization and can always be their favorite.