Calling customers by their name is no longer going to cut it – in today’s marketing world, personalization has been taken to a whole new level. Find out how artificial intelligence is affecting its growth and what AI-powered personalization really means.
What’s Personalization All About
From “Hi Jane!” messages to personal recommendations on Netflix, personalization encompasses a wide range of marketing efforts to meet customers’ individual needs and establish a closer relationship with them. By personalizing marketing content and interactions based on customer data, brands can create more relevant and engaging experiences for their audiences, ultimately fostering stronger connections and driving higher conversion rates. Personalization can span various channels, including email, social media, websites, and advertisements, and aims to deliver the exact right message to the right person at the right time.
Personalization vs. Hyper-Personalization
Using personalized messaging in marketing campaigns is nothing new—in fact, its roots can be dated as far back as the 1880s, when “fragmentation,” a process similar to what we now know as customer segmentation, first began. Such strategies have been helping brands make their clients feel more seen for literal ages now – however, in the past couple of decades, personalized marketing has taken on a whole new meaning. With a rise in AI and other technologies, marketers discovered that there are ways to leverage customer data for a closer bond.
Especially that, as it turns out, only 2 in 10 loyalty program members say they are very satisfied with the level of personalization they get. Modern customers crave attention and want to feel special, which is why simple tactics like addressing them by name are no longer enough.
And that’s why personalization evolved into hyper-personalization – its advanced form that uses AI and data analytics to create highly tailored experiences for individual users. It goes beyond traditional segmentation by analyzing granular data points such as browsing history, past purchases, and real-time interactions to deliver personalized content, product recommendations, and offers.
What Role Does AI Play in Hyper-Personalization?
AI is taking personalization to the next level. But how? Here are 5 examples of the impact artificial intelligence has on hyper-personalization:
- Customer data and behavior analysis: AI algorithms analyze user behavior across multiple touchpoints, such as website visits, email interactions, and purchase history, to understand individual preferences and interests.
- Predictive analytics: AI predicts future user actions and preferences based on historical data, enabling brands to anticipate needs and proactively deliver personalized recommendations and offers.
- Content delivery optimization: AI enhances the efficiency and effectiveness of marketing campaigns by optimizing content delivery, timing, and channel selection based on real-time data and user feedback. This dynamic approach ensures that personalized marketing efforts remain relevant and impactful.
- Contextual understanding: AI considers contextual factors such as location, time of day, and device type to personalize experiences according to the user’s current situation and environment.
- Natural language processing (NLP): AI-powered NLP techniques analyze textual data from sources like social media comments and customer service interactions to understand sentiment and personalize responses accordingly.
6 Benefits of AI Personalization
Implementing AI personalization into a marketing strategy can yield substantial benefits for both your brand and its customers. Here are six that will convince you to start using it:
Increased customer engagement
Personalized experiences capture customers’ attention and encourage them to interact more with brands. Whether through more empathetic messaging or gamification, AI-driven hyper-personalization optimizes content, timing, and delivery channels, leading to higher engagement levels.
Boost in customer satisfaction
When personalization is done well, it leads to a 6.4x increase in customer satisfaction (for members of loyalty programs). That’s because tailoring your offer makes customers feel seen and valued. What’s more, navigating stores or dealing with customer service is much easier when the content and messaging are catered to their preferences, which makes shopping more enjoyable.
Better conversion rates
60% of businesses see an increase in retention and conversions thanks to personalization strategies. That’s quite simple – by continuously adapting to individual preferences and behaviors, AI-driven hyper-personalization fosters long-term relationships with customers. Satisfied customers are more likely to remain loyal to a brand and make repeat purchases over time.
Deeper insights into customer behavior
AI algorithms analyze data (and lots of it) to uncover patterns and trends in customer behavior. By gaining insights into what drives individual actions and preferences, they can help you make more informed decisions and refine your marketing strategies accordingly – not just for greater personalization but for meeting general business objectives.
More profit
Arguably, the most desirable outcome of AI-driven hyper-personalization is an increase in revenue. And that’s something very likely to happen, as 76% of consumers are more likely to consider purchasing from organizations that use personalization in their strategies.
Competitive advantage
Everyone is out there to get your customers – that’s why it’s essential you know them like nobody else does. And nothing proves it quite like ultra-personalized experiences. AI-driven hyper-personalization can allow your brand to stay on top of the competition by continuously adapting to evolving customer needs and providing them with the best, most unique shopping experience.
What’s Next? Future Personalization Trends
With the astounding pace at which modern tools are developing, it’s hard to predict the future of marketing personalization. However, we can only assume that its impact will grow, especially given how individualistic and technology-dependent our society is becoming. The market for AI-based recommendation engines is expected to reach $12 B by 2025, so it’s unlikely that momentum will suddenly stop.
Some of the other personalization trends we may see in the future can include:
- Predictive personalization
- Real-time adaptation, including dynamic pricing and product alerts
- Self-personalization, which allows customers to co-design their benefits and offers
- Omnichannel personalization, which extends beyond traditional digital channels and uses new tools, such as voice assistants or augmented reality, for a more immersive customer experience
Ultimately, hyper-personalization strategies will evolve alongside new technologies and will rely on further advancements in AI algorithms, data analytics, and privacy protection.