- Executive summary
- AI: pulling deep insights into plain view
- Consumer central: customisation down to the last detail
- The role of AI in personalised marketing
- Balancing AI with the human touch
- Today’s consumers agree: personalisation is awesome
- AI promises a hyper-personalised future
- The pitfalls of hyperpersonalisation
- Learnings
Executive summary
Modern consumers crave experiences that feel tailor-made just for them. They’re tired of being bombarded with generic, one-size-fits-all messages that don’t speak to them on a personal level. Instead, they want to feel seen. They want companies to prove their value by demonstrating care about their individual needs and preferences. With traditional marketing techniques, meeting these expectations is a tall – perhaps even impossible – order. Fortunately, that’s no longer the case, thanks to AI.
- Twilio’s 2024 State of Personalisation report found that 70% of leaders expect that AI will fundamentally change personalisation and marketing strategies.
- 59% of decision makers expect their teams to use AI on a daily basis by 2025.
- “One of the most significant changes we’ll see in personalisation in the next 3-5 years will be how AI influences and impacts the experiences companies are able to deliver to customers,” says Lauren Schuler, general manager at global marketing agency Verticurl.
- “AI-powered sentiment analysis weds customer voice and text to business action, providing every sales and service interaction with the means to account for customers’ emotional tone and attitude – context indispensable to supporting exceptional experiences,” explains Paul Greenberg, founder and managing principal of advisory firm The 56 Group.
Know what’s exciting? We’re just getting started with hyperpersonalisation, and it’s only going to get more sophisticated from here on out. Imagine AI-powered assistants capable of interpreting nonverbal cues such as body language and facial expressions and adapting their communication styles in real time. You’ll never have to deal with a problem because the system will have caught and solved it ahead of time. Physical and digital stores will increasingly flow into each other so that the shopping experience is truly integrated into everyday life. Developments like these will all but ensure that companies build truly valuable connections with their customers.
AI: pulling deep insights into plain view
Consumer expectations, and the ways in which marketing companies respond to them, have undergone a dramatic transformation in this digital era. Thanks in no small part to artificial intelligence (AI), companies can create detailed customer profiles and tailor their offers in perfect accordance. If you’ve never heard of this trend before, it’s called ‘hyperpersonalisation’. It’s already common knowledge that online stores make suggestions based on your purchasing history and browsing habits. But that’s just the beginning. Imagine, for example, a store app that analyses your facial expressions in real time via your device’s onboard camera. In a good mood? This would prompt the store to adapt its visual layout with warm colours and light-hearted products. It’s easy to imagine the appeal of this to marketing firms.
However, scaling up such personalisation efforts is not an easy task. Companies collect staggering quantities of consumer data every single day – all of which must also be analysed by human marketers to gain a better understanding of the customer. Fortunately, AI can quickly sift through millions of customer interactions, purchases and website visits. From this, it can extract patterns such as preferences for certain product categories, the best times to approach customers, or even predictions about future purchasing behaviour. With these insights in their back pocket, markets can tailor their strategies to individual consumer tastes with often shocking precision.
Indeed, some of the patterns AI can observe are not always immediately apparent to human marketers. AI could, for example, discover that people who regularly search for vegan recipes are twice as likely to purchase sustainable fashion and environmentally friendly cleaning products. The AI could also notice that customers who shop online on Friday evenings are more likely to make impulse purchases and spend more than at other times. Equipped with this knowledge, a webstore could send notifications to the customer’s device with personalised offers and promotions during these ‘golden hours’ to stimulate higher engagement and sales.
While that’s just the tip of the iceberg, you get the picture: AI has an uncanny ability to reveal the hidden connections between seemingly disparate things. Should marketers apply these insights intelligently, they can transform their outreach while also delivering material improvements to the user experience. What’s more, AI can build seamless connections between different marketing channels. As a result, customers experience more cohesion when they come into contact with a brand – be it through social media, email, or the official website. Put simply, it pulls everything together into one seamless fit.
Consumer central: customisation down to the last detail
Hyper-personalisation has clear allure, for companies and consumers alike. But don’t sleep on the downsides – or you could wind up repelling people by mistake.
As we’re sure you already know, personalisation is not a new concept. But previous attempts at it have been fairly basic – for example, inserting somebody’s name into an email subject line. We’ve come a long way since then, and it’s all thanks to AI. Companies are increasingly leveraging this technology to analyse consumer data at a granular level and identify patterns about what consumers like and how they behave as shoppers. This can be used to predict future behaviour with startling effect: for example, they can estimate when a consumer will make their next purchase, and what they might buy. They can even determine the best time to send out a promo message or email.
Hyperpersonalisation is really a solution for companies. This provides a glimpse into what customers like and how they behave. This offers something of remarkable value to marketers: the ability to offer customised products, services, and experiences that seamlessly meet the unique preferences and needs of each individual customer. In turn, customers are not only more satisfied, but they are also more likely to keep coming back.
Hyperpersonalisation is also a wise choice for those looking to reduce their overhead costs, as it allows them to target their marketing budget and do more with less. Companies no longer have to just try something and hope for the best. Instead, they can focus on only the most promising of opportunities. Because customers are being exposed to content they are likely to resonate with, they are also more likely to make a purchase. Ultimately, this provides a significantly better return on investment. Of course, the arrival of generative AI has only increased the potency of hyper-personalised marketing. In the old days, it would take months upon months to set up a marketing campaign. But with these innovative new AI models, hyper-personalised campaigns can be created and adjusted in near real time – all without human involvement.
The role of AI in personalised marketing
A growing number of companies are turning to AI to provide consumers with a more personalised experience.
There is no shortage of ways in which companies can use AI to personalise their marketing efforts. In addition to using OpenAI’s large language models to produce engaging ad copy, the online personal styling service Stitch Fix also uses the technology to instantly create product descriptions for thousands of items in its inventory. Trust us – there isn’t a copywriter on Earth that will miss that job.
Still, the most interesting application of generative AI by Stitch Fix involves its proprietary Outfit Creation Model (OCM), which provides customers with personalised outfit suggestions based on their previous purchases and style preferences. Initial recommendations are then reviewed by a human stylist before the final selection is presented to the customer – either through email or through their personalised shopping feed.
An AI that listens and empathises
Personal product recommendations may be impressive today, but the truth is we’re really just getting started with hyperpersonalisation. In the future, things are going to go a lot further. More and more companies, for example, are working on ‘emotionally intelligent’ chatbots that can deduce a customer’s state of mind and respond accordingly. Indeed, they make sense of your mood and make you feel genuinely cared about by the company. Let’s be honest – you rarely get that level of interaction even from a human customer service agent.
Earlier in 2024, a New York startup called Hume AI introduced an innovative new AI system which it calls the ‘Emphatic Voice Interface’ (EVI). Hume AI claims that EVI is “the first AI with emotional intelligence”. EVI doesn’t just listen to the words a person says, but also their tone and patterns in their speech to better understand how they are feeling – and then respond appropriately. The effect is startlingly human. Suppose, for example, that EVI notices you sound sad. It will respond by trying to cheer you up or offering helpful advice. Of course, EVI is a commercial product as well, so it may also thoughtfully recommend something that might pick up your mood a little bit. This isn’t just hyper-personalised marketing – it’s empathetic, too.
AI as a personal ‘co-pilot’
AI chatbots are also making their mark in the auto industry by transforming the way in which drivers interact with their vehicles. In January 2024, Volkswagen announced that all their cars with the IDA voice assistant will be updated to include ChatGPT integration. This update radically transforms the capabilities of the chatbot. Traditional AI chatbots, of course, can only respond to simple context-based voice commands: turn up the air conditioner, for example. Now IDA can also answer all kinds of complicated questions about anything and everything – provided it has a stable internet connection, of course.
Of course, the effect only goes so far if the voice itself still sounds stiff and robotic. That’s why the IDA update also added a new, hyper-realistic voice that is, frankly, indistinguishable from the real thing. Now the experience is comparable to sharing the car with a good friend – natural, relaxed, and enjoyable. Unlike a good friend, however, IDA can also act as your personal assistant during long journeys. It can help to schedule pitstops for you, find interesting sights along the way, or keep you alert by reading your favourite book or article to you. In the future, IDA can also be linked to the health functions of your smartwatch and smart mirrors, so that the assistant can intervene if it detects a potential issue with your health.
We all know it’s only a matter of time until companies find a way to incorporate advertising into the in-vehicle voice assistant. Google is already busy with a new feature for Google Maps that promises to inundate motorists with advertising content that suits their destination and current location. Haven’t stopped for a couple of hours, and had a conversation about pancakes inside the vehicle recently? Well, you better get ready for half a dozen pancake house recommendations.
Will your kitchen be the next frontier for marketers?
Eventually, every device in your home will be a potential receiver for hyper-personalised marketing. Take Samsung’s Family Hub refrigerators, for example. Recently, it delivered an update that allows the refrigerator to recognise more than 30 types of food via its built-in camera. Stuck on what to make for dinner? It can suggest a recipe based on what you happen to have sitting around. It’s easy to imagine how this service might evolve in the future – detecting when you are running low on certain food items and either placing an automatic order for more or listing nearby stores where you can buy more yourself. It could serve as an avenue for culinary discovery by suggesting new products, ingredients or recipes, using its knowledge of what you consume the most as a basis.
“AI-powered sentiment analysis weds customer voice and text to business action, providing every sales and service interaction with the means to account for customers’ emotional tone and attitude—context indispensable to supporting exceptional experiences.”
Paul Greenberg, founder and managing principal of advisory firm The 56 Group
Balancing AI with human touch
While experts agree that AI will have a significant impact on the consumer experience, there is still no substitute for the human touch.
Marketing experts are united in the belief that AI will have a dramatic impact on how campaigns are crafted and executed in the future. “One of the most significant changes we’ll see in personalisation in the next 3-5 years will be how AI influences and impacts the experiences companies are able to deliver to customers,” says Lauren Schuler, general manager at global marketing agency Verticurl. “Not only in terms of operational automation and gains in efficiencies but also in how the personalisation delivered becomes more human-like across the entire experience.”
AI will also enable brands to provide their customers with a hyper-personalised experience at every point of interaction. “Personalisation that is powered by artificial intelligence will also become increasingly multichannel, which means that it will create experiences that are seamless and consistent across numerous touchpoints,” argues Lauren Taylor, manager at First Aid at Work Course, a UK-based provider of in-house first aid training. “In the future, voice assistants, augmented reality, and virtual reality will become indispensable components of hyper-personalised marketing. These technologies will provide users with experiences that are both immersive and engaging.”
Empathy is key
However, brands need to be careful about how they approach this matter. “People are tired of being talked at,” remarks 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.” Emphatic AI could prove particularly useful in this regard, enabling brands to gain a much deeper understanding of their customers. “AI-powered sentiment analysis weds customer voice and text to business action, providing every sales and service interaction with the means to account for customers’ emotional tone and attitude – context indispensable to supporting exceptional experiences,” explains Paul Greenberg, founder and managing principal of advisory firm The 56 Group.
However, that doesn’t mean that humans are being pushed out of marketing just yet. “The experience can’t feel impersonal or robotic – the more technologically advanced brands become, the more customers want human interaction, so we’re a long way from completely removing real people,” says Annette Franz, founder of customer experience strategy consulting firm CX Journey. “There must be a balance, particularly in complex or sensitive issues where they want to speak to an agent.” This view is shared by many industry professionals, including Prashanthi Kolluru, founder of software company KloudPortal: “Human intelligence and emotions can never be taken over by AI, whereas all other manual processes certainly are vulnerable.”
Today’s consumers agree: personalisation is awesome
Consumers increasingly expect companies to understand and even anticipate their individual needs and expectations, forcing them to embrace AI in order to meet those demands.
If anything can be said with certainty, it’s that modern consumers crave the personal touch. A 2021 McKinsey survey found that 71% of US consumers expect companies to provide personalised interactions, with a further 76% indicating their frustration when this isn’t the case. What’s more, research by SAP Emarsys reveals that 44% of consumers believe that loyalty to a brand should lead to personalised offers or discounts. A further 73% of consumers expect companies to understand their unique needs and expectations, while more than 50% believe that those needs and expectations should even be anticipated – according to a 2022 Salesforce report.
McKinsey’s survey also found that personalisation can boost revenue by 10-15%. Clearly, the benefits don’t stop at today’s bottom line: 78% of consumers state that personalised communication from a brand would make them more likely to become repeat buyers and recommend the brand to others. Companies that use AI for real-time marketing decision making can also increase their conversion rates by 20% and reduce customer acquisition costs by up to 15%, according to an April 2024 report by Accenture. McKinsey has also predicted that generative AI could allow marketers to increase their productivity by 5% to 15%. This would translate to a staggering US$463 billion in value annually.
How leaders view AI
The importance of hyperpersonalisation is, unsurprisingly, not lost on industry leaders. 89% of business leaders indicated to Twilio in 2024 that they believe it will be critical to the success of their business in the next three years. 70% of respondents expect that AI will fundamentally change personalisation and marketing strategies, while 58% highlighted chatbots as the technology that will have the biggest impact on the sector over the next five years. AI’s impact is already being felt across the industry, with 88% of companies either already budgeting for AI tools or planning to do so within the next year. Some 59% of decision makers believe their teams will be using AI on a daily basis by 2025.
The report also highlighted that embedding emotional intelligence into AI systems is an important consideration for 82% of companies. Consumers seem to agree with this assessment, with 71% saying that they believe AI will help deliver more empathetic customer experiences, according to a 2023 Zendesk study. Close to 75% of consumers feel that brands often ignore their emotional state in digital interactions, which is why 67% of them want AI to be able to continually adjust its tone and communication style based on how they feel at the moment.
AI promises a hyper-personalised future
Let’s look a little further ahead. Hyperpersonalisation may be pretty impressive today, but what will it look like in ten years’ time?
The forward march of technological advancement never stops. That means hyper-personalised shopping experiences will only become more sophisticated – and prevalent – in our daily lives. One of the most noticeable changes will likely be the introduction of AI-powered digital shopping aids that offer tailored product recommendations based on factors including past purchases, current trends, and even environmental conditions. These next-generation chatbots will also be able to engage in natural, context-sensitive conversations with shoppers, providing detailed product information and addressing queries in real time.
The boundaries between physical and digital shopping environments are likely to become quite blurry. We may, for example, see an increase in opportunities to purchase items spontaneously – whether we’re watching a movie, scrolling through social media, or even just walking down the street. This could make shopping a more integrated part of our daily activities, rather than a separate and intentional act. Businesses will likely become more and more savvy in their communication and pricing strategies, finally moving away from outdated one-size-fits-all approaches. Things may eventually become so advanced that the algorithm will simply know what you want to buy, and preemptively add it to your basket for you to review before proceeding.
Companies may also evolve their approach to customer service by using predictive analytics to identify and address potential issues before they impact the consumer. For example, an AI system might detect patterns in a consumer’s software usage that indicate they’re experiencing difficulties, prompting the company to reach out with a solution before the consumer even thinks of contacting support. This approach could extend to various aspects of the consumer experience, from product maintenance to personalised usage tips, creating a more seamless and satisfying interaction between businesses and consumers.
The pitfalls of hyperpersonalisation
With great power comes great responsibility. Companies may gain unprecedented customer insights, but moderation and empathy are the real secret to success.
Hyperpersonalisation may seem like a magic bullet, but the truth is, it must be used with caution. Don’t overstep: get too personal, and it can easily backfire and creep out the very people you’re looking to appeal to. It’s important to remember that data isn’t everything and that technology is still a poor substitute for human intuition. Indeed, an individual’s emotions and circumstances can be influenced by a wide range of factors – many of which will not be captured in the data.
Of course, for some marketers, the solution to a problem with AI is to use even more AI – hence the attempts to develop ‘emotionally intelligent’ chatbots. In theory, these would allow for a consumer’s emotional state to be gauged so that marketing content can be adjusted accordingly. For example, it would know when a customer was becoming visibly frustrated and escalate to a human representative to resolve their issue. If done right, this could strengthen the relationship between the brand and the consumer.
However, the problems with hyperpersonalisation go beyond overstepping and saying the wrong thing. To create truly customised experiences, companies need to collect and analyse staggering quantities of personal data, up to and including your social media activity and browsing habits. While this data can enable better consumer experiences, it also poses privacy risks that need to be carefully managed. Make no mistake – the majority of consumers find the exploitation of their personal data deeply unpleasant. And that’s not all: there are also serious concerns around algorithmic bias in the AI systems used for personalisation. If the data used to train these systems reflects societal prejudices, it could easily lead to unfair – even egregious – mistreatment of certain groups.
Learnings
There’s no denying it – hyperpersonalisation has revolutionary potential. By adopting this innovative strategy, companies can reach their customer base in unique and thoughtful ways and generate experiences that are more engaging and resonant than were ever possible using traditional approaches. We may soon inhabit a world where every ad we see, every product recommendation we receive, and every interaction we have with a brand feels like it was crafted just for us.
- Hyper-personalised marketing can lead to deeper brand loyalty, increased sales, and a more satisfying consumer experience overall. For example, Stitch Fix uses generative AI to provide customers with personalised outfit suggestions based on their purchasing habits and what they like the most.
- AI can help companies optimise marketing spend by ensuring resources are allocated more effectively, resulting in stronger returns on investment.
- The amount of personal data required to deliver hyper-personalised experiences raises serious privacy concerns.
- Some experts are concerned that algorithmic bias present in training data could lead to unfair treatment of certain groups.
- Companies that can successfully navigate the challenges associated with hyper-personalisation will be better positioned to succeed in an increasingly competitive market.
While this level of personalisation can make our lives more convenient and enjoyable, it also raises some important questions. How much of our personal data are we comfortable sharing? Are we willing to trade privacy for convenience? And as our online experiences become more curated, are we at risk of being trapped in digital echo chambers, exposed only to ideas and products that align with our existing preferences?
