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How Companies Use Artificial Intelligence to Personalize Marketing

Personalization: Important to Younger Consumers…

Personalization is extremely important in marketing campaigns, especially to younger generations like Millennials and Generation Z. As a result, 40 percent of companies say that personalization efforts help to grow sales, the number of products or services purchased, and profits in ecommerce and other channels that sell directly to customers, according to a recent study by Arm Treasure Data and Forbes discussed in the industry publication Marketing Dive.

Twenty-five percent of companies use AI to personalize their products.

Perhaps even more surprisingly, one-quarter of companies indicate that their personalization strategy involves using artificial intelligence (AI) and see it as a key strategy. That’s particularly significant news because it’s both a meaningful percentage and leaves room for AI’s contributions to personalization to rise more in the next few years, especially since many companies feel their personalization attempts aren’t fully successful. In fact, just 21 percent think personalization efforts are “highly successful.” Of that 21 percent, more than half exceeded their forecast sales, but nearly 60 percent said significant personalization efforts are at least a year in the offing.

That means both opportunities and challenges exist for the utilization of AI in the future. On the opportunities front, there is plenty of room for expansion.

Data concerns may hinder the further growth of AI-derived personalization.

…but Privacy Concerns May Hinder Expansion

Recently, for example, beauty and cosmetics company L’Oreal partnered with uBiome to offer a product that leads to a personalized set of recommendations for skin care. The customer’s skin is analyzed via a cheek swab, and L’Oreal suggests both products and care regimens based on the results. The partnership was announced in the technology news of the South by Southwest conference.

The cheek swab is akin to the methods of biotechnology company 23andMe, which analyzes customers’ genetic history, but in L’Oreal and UBiome’s case, the analysts are confined to what is living on the skin. The appeal is the minimization of the trial-and-error sampling of skin products, according to L’Oreal’s business leadership.

This was developed because consumers have responded positively to personalized recommendations in the past. Both the data and technology required are outside of the usual partnerships of personal care companies, which can present challenges.

In addition, of course, consumers are becoming more concerned with privacy issues. Surveys have shown that a majority of people in the U.S. have concerns about how their data is harvested and how it is used. It is not clear whether launches such as the L’Oreal-uBiome will trigger concerns or be appealing and safeguarded enough to allay consumer fears.

It’s likely, though, that companies will continue to pursue personalized products and campaigns, utilizing loyalty programs, mobile devices and apps, and new product creation. Fifty-six percent of retailers are estimated to be committed to personalization as a method of appealing to customers, making it the most active U.S. sector. Consumer electronics is next, with 48 percent interested in personalized products and campaigns. In third place is consumer packaged goods, with 38 percent of companies committed, and 32 percent of media outlets.