While the use of artificial intelligence (AI) to generate messages creates new opportunities for retailers to produce content at scale, there is a risk that simply creating more content will merely add to the “digital noise,” as more businesses send more marketing messages across more channels. AI-generated, personalized language, in contrast, can cut through digital noise with relevant, engaging messages that help retailers drive conversion. Its success can be enhanced through first-party data containing insights about language elements that can better motivate consumers.
Retailers that fail to innovate their digital marketing strategies risk leaving revenue and profit on the table—which is especially risky heading into a more uncertain retail and macro environment.
In this Custom Report, we discuss how retailers can address revenue and cost challenges by engaging customers with AI-generated, personalized digital marketing.
This report is sponsored by Persado, the Motivation AI company that uses generative AI to enable companies to drive personalized communications at scale that motivate and engage individuals.
Current Retail Challenges
Multiple marketing headwinds are likely to increase operational costs and make it harder for retail marketers to drive business growth in 2023:
To make matters more challenging for retail marketers, a macroeconomic environment defined by decades-high inflation and high interest rates, is affecting the consumer heading into 2023:
To reach their 2023 top- and bottom-line growth objectives, retailers must increase the effectiveness of their digital marketing.
Market Scale and Opportunity
We expect retailers to increasingly leverage AI to efficiently aggregate, augment and analyze first-party consumer data to enable marketing personalization at scale and drive business growth.
According to research from Statista and Dash Network, global revenue for the customer experience personalization and optimization software and services industry is estimated to total $8.3 billion in 2022 and is set to grow to $10.7 billion in 2025, representing a CAGR of 8.8%.
Figure 1. Global Revenue from Customer Experience Personalization and Optimization Software (USD Bil.)
Motivating Customer Action and Driving Business Growth with AI-Generated, Personalized Digital Marketing: Coresight Research x Persado Analysis
1. How Marketing Campaigns Can Stand Out Amid Increased Digital Noise
The rise of e-commerce coupled with retailers’ increased use of language-generation technology has brought waves of marketing messages to consumer inboxes, on websites and on social media. Shoppers can easily feel overwhelmed and perceive them as merely digital noise, rather than as relevant, interesting messages.
As consumers reach this saturation point, we expect that the cost of conversion will continue to rise, putting even more pressure on marketers to pursue more effective digital marketing techniques that better engage consumers.
To break through the digital noise, retailers need to personalize their marketing. The most effective and efficient ways to do this will rely on a combination of real-time, aggregated consumer data and generative AI to produce motivating language tailored to specific individuals.
Key benefits of personalized marketing that retailers can quickly realize include the “Three Cs”: customer motivation, customer loyalty and channel optimization (see Figure 2).
Figure 2. “Three Cs”: Key Benefits of Personalized Marketing
Personalized marketing presents an opportunity in retail today, yet there are obstacles to unlocking its potential, such as:
Retailers have three levers to overcome these obstacles and better personalize their marketing messages across a variety of digital marketing channels:
2. Using AI-Generated, Personalized Messaging To Drive Top- and Bottom-Line Growth
AI can be a powerful tool for retailers to drive operational efficiency and increase profits as high inflation and slower consumer spending hit retailers’ top and bottom lines.
Retailers can increase digital marketing effectiveness by leveraging AI and machine learning (ML) to run sophisticated digital experiments that measure the impact of different versions of a marketing message to identify the highest-performing message elements.
AI platforms can leverage the simultaneous approach to select the best-performing message for each consumer segment. With increased granularity, the result is individualized, hyper-personalized messages that optimize customer engagement.
Figure 3 presents the top improvements global marketers have seen in customer engagement through enhanced personalization, showing that personalization is becoming more useful, according to the latest findings from an annual survey conducted by digital experience platform Acquia.
Figure 3. Improvements Seen in Customer Engagement Resulting from Enhanced Personalization (% of Respondents)
Delivering motivating personalized content at scale, however, is one of the most challenging barriers to marketing success. Retailers need to take action to make sure they get personalized content right and drive better personalization at scale:
3. The Missing Ingredient for Effective Personalized Digital Marketing—Combining AI and First-Party Data
A Coresight Research survey conducted in December 2021 found that while 71% of US brands and retailers think they excel in marketing personalization, only 34% of US consumers currently think retailers are succeeding at personalization. To improve the effectiveness of personalized digital marketing, retailers need to use first-party data, as shown in our November 2021 survey of US-based executives whose organizations use first-party data for marketing purposes:
Read more findings from our survey in Coresight Research and Persado’s separate report, .
Figure 4. Topmost Benefits of Using First-Party Data (% of Respondents)
AI-generated personalized language that leverages enhanced first-party consumer datasets is the missing piece of the puzzle that will enable retailers to meet consumer expectations for personalized experiences at scale.
Marrying first-party data with AI-generated personalized content brings optimal results when applied at each stage of the customer journey and through all customer contact channels, as each moment and context may require a different personalized message. For example, a Coresight Research survey conducted in October 2021 found that US consumers prefer to receive personalized marketing through certain channels over others: website and email (each cited by 32% of respondents) are the top channels in which consumers prefer to receive personalized marketing.
Retailers can take the following specific actions based on these insights:
Driving Business Results with Personalized Marketing: Michaels Case Study
Michaels, a leading arts and crafts retailer in the US, wanted to increase its use of personalized marketing across its social, email and SMS channels. The company realized it needed to automate the process and turned to Persado.
Persado used Michaels’ existing content to build a custom language model true to the brand’s voice. With its Motivation AI, Persado generated and deployed language experiments to feed predictive models to understand how to best personalize for customer engagement. These insights allowed Michaels to grow its personalization efforts, and the company now personalizes over 95% of its email campaigns.
Michaels reported the following results due to its enhanced marketing personalization:
What We Think
Consumer mindsets and shopping behaviors will continue to evolve as the economic outlook dims and retail trends shift—it is more important than ever to understand consumer motivations and mindsets and provide personalized messages and offers to engage consumers and optimize marketing campaign performance.
Retailers that use AI to more actively leverage first-party data will drive top- and bottom-line business growth—despite macroeconomic uncertainty—by enhancing customer engagement, driving new customer acquisition, and motivating shoppers to complete their purchases.
About Coresight Research Custom Reports
Coresight Research Custom Reports are produced as part of commercial partnerships with leading firms in the retail, technology and startup ecosystems. These Custom Reports present expert analysis and proprietary data on key topics in the retail, technology and related industries, and enable partner companies to communicate their brand and messaging to a wider audience within the context of brand-relevant research.
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