AI and Customer Journeys
Everyone knows online sales have seen incredible growth over the past few years, especially accelerated by the pandemic. More people are online shopping than ever, creating greater competition between online stores as they pine for customer attention, all while trying to keep up with demands. By 2040, Nasdaq predicts that 95% of purchases will be made online.
The use of Artificial Intelligence throughout the online purchase experience is changing the way companies manage operations. These companies are now able to capitalize on opportunities not previously available, optimizing various elements of the supply chain to keep up with consumer buying behavior.
According to Accenture, business productivity is enhanced by around 40% with AI, and 87% of businesses globally believe that it will give them a competitive advantage. Big tech companies are pouring money into AI to stay ahead of the competition and capitalize on opportunities the latest generation of technology is set to fuel.
As both demands and customer expectations continue to rise, how are companies adopting artificial intelligence, and in what ways is it enhancing online business productivity?
Adopting AI to Get in Front of Customers
Artificial Intelligence is used throughout the entire customer journey - even well before the consumer arrives at the online store. Companies use algorithms to identify patterns in existing customer data and create lookalike audiences based on information they find. Then, they are able to segment the audience and tailor the ads to target specific demographics with similar characteristics as the lookalike audience. Segmentation lowers risk while increasing returns, optimizing the effectiveness of online advertising.
Campaign Monitor conducted a study to measure the success of various campaigns, and found that companies who leveraged big data to personalize their advertising saw a 60% increase in revenue. Artificial intelligence devices become ‘smarter’ the more customers interact with them due to machine learning algorithms. Companies are able to use big data to study their segmented audiences purchasing behavior, predicting shopping patterns to further personalize the experience and put the right messages in front of the customer at the right time.
AI Throughout the Purchasing Experience
Once the consumer is brought to your online store, the use of artificial intelligence has barely scratched the surface. Big tech companies have found ways to extensively use AI to enhance the purchasing experience, from personalized recommendations all the way to chat bots for automatic customer support. Below we outline the various ways AI is used throughout the purchasing process.
Personalized Recommendations
AI algorithms analyze a user's browsing and purchase history, as well as the behavior of similar users, to provide personalized product recommendations on the homepage, product pages, and during the checkout process. This drives higher conversion rates, higher average order values, and more customer loyalty.
Netflix is a great example of a tailored experience fueled by algorithms from their recommendations engine. More than 80 percent of the shows people watch on Netflix are discovered through the platform’s recommendation system. The Netflix algorithm goes even as far as personalizing the image presented for the shows on their homepage. Computer vision algorithms are used to scan the shows and pick out the best image in line with user preference. Their personalized algorithm drives customer retention and helps them profit around $1 billion annually.
Search and Discovery
AI-powered search algorithms enhance the accuracy and relevance of search results. Consumers can now search by typing words, using images or even a voice search.
For example, Amazon allows users to search for products using images, and artificial intelligence helps in recognizing and matching visual elements. Users are able to upload or take a picture of an item to find similar products - enhancing the product discovery process and allowing consumers to find specific styles or designs unable to be accurately described in words.
Additionally, voice search has been gaining popularity throughout the buying journey. According to a survey by Perficient, 55% of consumers are using voice search to research products, while 44% have used it to add items to their shopping lists. Voice search is predicted to reach $80 billion annually by 2024 (Gartner).
Virtual Try-Ons
Big tech companies are leveraging virtual try-on and augmented reality (AR) technologies to help users see how items will look on them, encouraging them to make more informed purchase decisions. Companies like Amazon and Warby Parker use virtual fitting rooms to allow customers to virtually try on clothing, eyewear, and accessories.
The virtual try-ons extend beyond just clothing. Furniture retailers like IKEA and Wayfair utilize Augmented Reality technologies to help customers visualize how furniture and home décor items will look in their own living spaces. Consumers can use their smartphones or tablets to place virtual furniture in their rooms to facilitate the purchasing decision.
Customer Support and Service
Customer support teams have their hands full, and keeping up with demands places significant pressure on companies, especially with higher consumer expectations. Now, 90 percent of customers expect an ‘immediate’ response within 10 minutes, and consider it necessary when making purchasing decisions. This is why companies are now utilizing virtual assistance or chatbots to offer customer support even during weekends and holidays.
Chatbots can answer around 80% of daily questions, which allows live support agents to focus on more complex issues while not overlooking the simple, day-to-day customer demands. The increased efficiency and attention to customer needs enhances overall customer satisfaction, driving higher conversion rates for businesses using AI in customer support.
Smart Logistics - AI Increases Efficiency in the Supply Chain
Demand Forecasting
In addition to artificial intelligence enhancing customer buying experience, companies also significantly benefit from the use of AI within their supply chain for smart logistics and sales forecasting. Accurately predicting demand is growing increasingly more challenging, simply because using historical sales data is no longer enough. Companies are shifting to AI because rather than just using historical sales data, it uses real-time data like demographics, weather, social media, online reviews and performance of similar items to forecast.
Warehouse Management
AI-driven automation is applied to warehouses for efficient order fulfillment. A survey by Deloitte found that 79% of organizations are using or planning to use robotics and automation in their warehouses. For example, companies are using smart warehouse shelves that sense the weight and pressure of items, then communicate this information to management systems. This helps companies better keep track of when items are received, stored, picked, and shipped, leading to increased production efficiency while preventing overspending.
Route Optimization
Route optimization is another huge benefit companies receive by utilizing AI in their supply chain. AI algorithms analyze real-time data, including traffic, weather, and road conditions, to dynamically plan optimal delivery routes. These algorithms can also predict traffic conditions, allowing for real-time adjustments to delivery routes. TomTom Telematics reports that traffic congestion can increase delivery times by up to 50 percent, highlighting the importance of accurate predictions.
Conclusion
We are still just scratching the surface of how artificial intelligence can impact the overall buying experience. With personalized marketing campaigns, product recommendations, search experiences, virtual shopping assistants, and logistics optimization, the online customer buying journey is now highly efficient for both parties.
Artificial intelligence is revolutionizing the world of e-commerce and completely changing the way consumers interact with online businesses. With the increased effectiveness of online shopping, users are predicted to transform their purchasing behavior and, as mentioned earlier, shift to buying 95% of products online by 2040.