Ecommerce brands are using customer data to provide highly tailored experiences. AI knows a lot about your buying habits – and it’s learning even more.
I recently joined a boxing gym, and as I was on my way home, I received a text from Sam. He said he was a representative with the gym, and he wanted to know if I had enjoyed my first class. (I had.) A few days later, he followed up again, telling me about a package of classes suited to a beginner. Sam has continued to text me ever since, talking casually in the first person as he suggests other options, like a studio membership, that I might be interested in.
I’d willingly handed over my phone number to this gym when I initially signed up, and knew full well it might be used for marketing purposes. What I didn’t know, however, was that that a seemingly real person would be talking to me, armed with unique information about my experience.
Sam, it turns out, is the gym’s general manager. Although I can’t say for sure, in the current ecommerce landscape, he probably isn’t spending his days hunched over his phone, eager to text me. Instead, his messages are likely pre-written and automated through some kind of software, based on the data they’ve already collected about me.
Your gym is one of countless companies collecting data on its customers, and using these insights to target them with personalised shopping experiences. Experts say many brands are taking personalisation a step further, engaging in AI-assisted hyper-personalisation tactics – like Sam’s timely texts – to keep consumers spending.
‘People are tired of being talked at’
Personalised shopping can take many forms, including texts from your favourite boutique, to Starbucks’ birthday rewards, to a personalised email addressed to your cat, by his name, from pet retailer Chewy.
For brands wanting to retain customers, build loyalty and convert in a modern, data-driven way, this kind of marketing is the new normal. And it’s essential. Many businesses have found tailored communication helps them break through the noise of social media and mass email blasts, which increasingly miss the mark in an age where consumers are barraged by digital marketing.
“People are tired of being talked at,” says US-based Rachel Pedersen, author and social media expert. “They’re tired of feeling like everything is selling to them. They want brands to understand their day-to-day and how they use things.” November 2021 research from McKinsey and Company showed 71% of consumers expect companies to deliver personalised interactions, and 76% are frustrated without it.
At its most basic level, personalisation happens in the inbox, with emails tailored to shoppers with information such as relevant styles based on past purchases, unique discount codes and more.
And, says Jessica Morelli, founder of American skincare company Palermo Body, companies don’t have to move mountains to do it. “We use tools that really everyone has access to, and get really smart about how we’re segmenting our email list and how we are engaging with customers.”
These tools include the use of browser cookies, which enable websites to remember users, their behaviour and, most importantly, their shopping carts. Brands can then use that information to forgo mass emails, and reach out only when its relevant. Bought a product? Here’s what you should buy next. Haven’t shopped in a while? Here’s what you’ve missed. Abandoned a shopping cart? Expect an email reminding you to check out, perhaps sweetening the deal with a discount code.
According to the McKinsey research, these personalisation tactics are small but mighty, potentially driving a 10% to 15% revenue lift. The more a company learns about their customers, the more effectively it can target them. AI tools not only find patterns in past behaviour, but can also use that information to predict what people might do next – their estimated next purchase dates or the probability of a repeat purchase, for instance – so brands can respond accordingly.
The success of personalisation goes beyond a customer making a purchase. McKinsey reports it’s just as vital for repeat engagement and building loyalty: 78% of customers said personalised communications from a brand made them more likely to re-purchase, plus recommend the brand to friends and family. Overall, the study showed companies that excel at personalisation generated 40% more revenue from those activities than those who did not.
There’s a fine line to walk, however, between effective personalisation and overstepping. As advanced as these tools are, they cannot account for every single aspect of a person’s life.
The more personal the outreach, the more a brand stands to lose from a misfire. For instance, a Mother’s Day discount landing in the inbox of someone grieving a parent, or who has an otherwise complicated relationship with the holiday, can sour a customer. Data is not always perfect – and technology isn’t yet at the point where it can replace human intuition.
AI, human or both?
Still, while some customers may chafe at an unsolicited text, or the knowledge of just how much of their data is in the hands of brands, tailored communication is the likely future of shopping.
A 2023 Twilio Segment report showed roughly 92% of companies are already using AI-driven personalisation to drive growth. And according to New York-based Kim Robinson Jr, founder of entrepreneurship platform 3pts, it’s something that’s only going to become more sophisticated in 2024.
He says customised interactions will start to appear at every step of a customer’s ecommerce journey, tailored to not just their shopping behaviour, but also the weather of their current locations and their body types, resulting in tactics as drastic as individualised pricing to make each customer feel special – and be more likely to convert to a sale. Robinson says customers can expect AI tools that will react in real time with offers and suggestions of style, size and colour, the same way a sales associate would respond to someone walking around a store.
While these tools are effective for brands, it also puts power in the hands of customers. Stores are not only willing to meet them where they are, but also wherever they might be in the future. They are also willing to offer up rewards and discounts to remain in a customer’s shopping rotation. The more a customer shares – knowingly or unknowingly – with a brand, the more tailored their experience will be.
However, don’t expect the human element to disappear entirely.
For one, real creators may become part of the future experience, says Robinson. “When you drop a cart, maybe you get an email from someone who has an audience and a general point of view relating to this, talking about, ‘Here’s how I’ve used this product in the past; go to my channel’,” he says. “I do think it’ll be a mix of AI and creators, both personalising it further, making it more human, but then less human.”
Morelli, too, says that as important as AI and data are to the marketing strategy for her skincare brand, her personal touch has made a difference to customers looking for a tailored experience. For instance, after a recent delay in orders, she contacted customers herself to apologise. “One of the responses I got was, ‘It feels good to support a small business, but getting an email directly from the founder is next level’.”
This kind of personalized engagement with customers is something audiobook service Audible heavily leans on. On X, formerly Twitter, they’ll invite followers to share their recent favourite books so they can reply directly with a specific recommendation for what to read next. Social video content is similarly catered to questions that come directly from their community, from breaking down the Audible Plus catalogue to announcing their launch in Brazil.
As for “Sam” at my own gym, the personalisation worked. By texting me every time I ran out of classes, I’ve consistently handed over $190 (£151) each month.