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According to a recent report of Twilio Segment, companies around the world are embracing artificial intelligence (AI) to deliver personalized customer experiences, with 92% of companies using AI-driven personalization to drive growth.
The fourth annual State of Personalization Report from the customer engagement platform found that while 62% of business leaders see customer retention as one of the top benefits of personalization, only 41% of consumers are comfortable with companies using AI to improve their personalize experiences.
The report highlights the importance of building customer loyalty through tailored experiences, including using large amounts of real-time data to drive personalization efforts. Nearly 60% of business leaders considered this an effective strategy for acquiring new customers.
“Business is increasingly experimenting with AI, and customer engagement is no exception,” said Katrina Wong, VP of Marketing at Twilio segment, told VentureBeat. “Consumer demand for personalization continues to soar and companies see a huge opportunity for AI to help them meet those demands.”
The report also found that a personalized experience would lead to 56% of consumers becoming repeat buyers, up 7% from last year’s survey.
However, a gap remains between business enthusiasm for AI and consumer confidence in the technology. The report shows that only 51% of consumers trust brands to keep their personal data secure and use it responsibly, highlighting the critical need for transparency around AI and data privacy.
“Confidence in AI is divided and some consumer discomfort stems from a lack of confidence in how brands use their data to power AI,” Wong added.
The report is based on two comprehensive surveys conducted by Method Communications in March 2023. The consumer survey focused on 3,001 adults who made an online purchase in the past six months, while the corporate survey focused on 500 executives and decision-makers at consumer-facing companies who made an online purchase. offer goods and services.
The studies were conducted in a dozen countries, including the United States, United Kingdom, Australia and Japan.
Drive customer acquisition through personalization
Twilio Segment’s State of Personalization report highlights the importance of engaging customers through tailored experiences to drive brand loyalty. In addition, the report underscores the effectiveness of using real-time data to drive personalization efforts, with more than half (60%) of business leaders surveyed saying this is an effective way to acquire new customers.
That’s what the company said Norrona, a leading outdoor clothing brand in Scandinavia, was able to increase its e-commerce sales by a significant margin by using Twilio Segment and machine learning tools to create an advanced recommendation engine. Using the engine, customers could easily find products that matched their preferences and purchase them in no time. As a result, Norrøna saw a 50% increase in conversions.
But the report also points to a dichotomy in AI confidence among savvy consumers. The survey found confidence in the use of AI is divided, with many expressing reservations about how brands use their data to power the technology. This lack of trust highlights the need for companies to be transparent about their data collection practices and give consumers more control over their personal information.
“To build consumer confidence in AI-driven personalization, companies must first gain trust in the data used to deliver that personalization,” Wong told VentureBeat. “Companies need to invest in data quality, use real-time data management tools and make greater use of first-party data.”
The essence of data quality to improve business processes
Data quality is key to the success of AI-driven personalization, according to the report. Half of companies surveyed reported challenges in getting accurate data for personalization, a 10% increase from the 2022 report. Key metrics for successful AI-driven personalization were accuracy (47%), speed of real-time data (44%) and customer retention or repeat purchases (44%).
“AI is only as effective as the underlying data used. Like an electric vehicle that is not properly charged, personalization that is not powered by real-time, high-quality data will only deliver limited mileage,” Wong said.
The main problem, she said, is inaccuracy due to data not being updated in real time. For example, a customer receiving a recommendation for an item they recently purchased is an example of an interaction based on outdated information that results in a poor customer experience.
“First party data is optimized for accuracy because it is provided directly by the customer. By leveraging first-party data and tools like a CDP, companies can build customer data profiles that are accurate, comprehensive, and updated in real time,” Wong explained.
Twilio Segment argued that companies should build trust with their customers by thoughtfully and responsibly using real-time, first-party data to balance consumer comfort levels. In addition, the report found that 97% of companies are now taking steps to address consumer privacy concerns, with investment in better technology to manage customer data being the most popular move.
“As consumers become more aware of how their personal data is used, companies are beginning to become more transparent about how they use customer data and are giving consumers more control through practices such as consent management,” said Wong. “By investing in zero- or first-party data (data that consumers have given permission to share), brands can leverage customer data without compromising user privacy.”
Challenges in creating personalized brand experiences
An intriguing finding from the study was that Gen Z has a strong preference for AI-integrated experiences, with 75% of Gen Zs surveyed saying they would stop using a brand if their experience is not personalized, compared to 66% for all consumers.
“To meet these high expectations without compromising privacy, brands must move away from third-party data and shift to zero- and first-party data strategies,” said Wong. “Powering AI with data that consumers have given permission to share allows brands to deliver intelligent, personalized experiences that don’t compromise their customers’ privacy.”
Wong believes companies have the opportunity to collect first-party data every time they interact with a customer, but the challenge is to activate this data to improve customer experiences.
“CDPs are designed to help companies not only build comprehensive, data-driven customer profiles, but also activate those profiles in downstream marketing and communications tools. They also ensure that data is updated in real time, so that companies always have the latest information on customer needs and preferences,” she said. “The Twilio Segment CDP helps companies lay the foundation of data quality necessary for a successful AI implementation. With Segment, teams can build complete, accurate customer profiles that can be activated for AI-driven personalization.”
Wong believes that having the right data infrastructure in place can greatly assist companies in effectively implementing AI-driven personalization strategies, while ensuring transparency, protecting consumer privacy and delivering value to customers.
“Before you even think about implementing AI in your customer experience, make sure you have the right data infrastructure in place that sets you up for success,” she said. “Once a plan and the right team are in place, the implementation process should follow these phases: readiness, discovery, planning, implementation, and review. Then, with a CDP as your data base, you’re set for AI-driven personalization success.
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