AI-Driven Personalization in E-commerce: Benefits and Implementation

Customers have come to e-commerce personalized experiences that are relevant to them, and tailored towards their unique preferences. Existing customer data, purchase history, location, etc. have been used for years to great effect.

Personalization is a win-win for customers and businesses alike, as better user experience drives increased conversions, loyalty and enables businesses to allocate marketing spend more efficiently.

AI of course adds a much more dynamic layer of possibilities. This article is going to discuss some strategies that modern e-commerce businesses are using to take data-driven personalization to the next level.

What is Data-Driven Personalization?

Personalization is about delivering the right thing to the right customer at the right time.

That “thing” could be anything from a product recommendation, a tailored email campaign or dynamic content which changes from user to user.

Personalization is the difference between landing on a generic website, and one which shows messaging or product recommendations and content that align with your values, tastes and past behavior.

By intelligently using customer data to the benefit of the customer - such as their browsing history, past purchases, location and marketing engagement - e-commerce business owners can truly set themselves apart from the competition.

Personalization and the Role of AI

Before AI, personalized experiences were more along the lines of “you liked this, so you might like that”-style product recommendations.

AI, however, is capable of delivering highly sophisticated, real-time experiences. AI (or more accurately machine learning and natural language processing) analyzes huge data-sets, identifying patterns and trends that would be impossible for humans to do at any scale.

AI is beneficial and pertinent to personalization because it can learn from every customer interaction, and therefore allows us to be more creative with the presentation in real-time.

As we make more data available to AI, the better it gets at predicting customer behavior and preferences. It’s like having an expert personal sales assistant available on your website who knows exactly what your customers want before they do.

AI-Powered Personalisation in Action

So, what do AI-powered personalization solutions look like on real-world e-commerce websites? Let’s take a look at a few use cases.

Product Recommendation AI

Product recommendation AI analyzes user data to learn what appeals to specific customers. By leveraging machine learning, these sorts of advanced product recommendation engines create high quality, personalized product suggestions based on customer behavior.

They do this by collecting a whole slew of data points, such as browsing data, search, purchase history and demographics, to determine which products will appeal most to each customer in the future.

Recommendation AI might also often use something called collaborative data filtering which analyzes customers preferences, pairing that info with data from similar customer cohorts.

Dynamic Content Personalization

Imagine landing on a homepage and seeing personalized banners, product features, and calls to action that speak directly to your interests. AI allows businesses to tailor website content in real time, based on who the customer is, where they’ve been, and what they’ve done. This creates a much more intuitive, engaging user experience to drive conversions and secure loyalty.

Chatbots & Virtual Assistants

AI-powered chatbots have been a feature in e-commerce for several years now, but most have been lackluster at best. But things are changing rapidly and with platforms like ChatGPT we can now have meaningful, engaging conversations with AI. AI chatbots are getting so good that they have already advanced beyond the ability to display answers to FAQs in real-time. With AI, they are capable of resolving complex customer service inquiries, increasing conversions and having conversations in multiple languages.

Personalized Search

A strong site search feature improves customer experience by helping visitors quickly find what they need. When users get relevant search results, they’re more likely to stick around, which can lower bounce rates and drive up conversion rates. Traditionally, site searches rely on keywords or phrases to connect users to products or services.

AI is taking search to the next level by delivering more accurate results based on context. By using complex algorithms and learning from past customer interactions, AI can tune in to customer intent and deliver most precise search outcomes.

Platforms Leveraging AI

Klaviyo

Before AI, Klaviyo was arguably already the world’s leading email marketing platform, specifically tailored towards e-commerce businesses. But in 2024, by leveraging AI, Klaviyo has taken things to another level.

Out of the box they now support predictive analytics, personalized product feeds and what they call “Review Sentiment AI” which spots emerging trends and helps identify potential issues before they escalate.

Learn more here.

Ada

Ada is an AI powered customer service agent geared towards e-commerce businesses. With Ada’s “Reasoning Engine” they tap into the best artificial intelligence models to maximize resolutions for customers and deliver personalized experiences aligned to your business.

Ada is marketed as “the brain behind your top performing AI agent” and is confident that it can immediately resolve 70% of customer enquiries. Rather than using scripted responses, Ada is trained to draw on existing knowledge sources and data from third party tools to help it reason through each given situation.

Further, your AI customer services agent can even be coached over time ensuring continual improvement of your customer service solution.

To demonstrate how good Ada is, you only need to look at their client list which includes heavyweights such as iHerb, Monday.com, Grab and AirAsia.

Boost Commerce

Boost Commerce has been around for a while and before AI offered a high quality search and filter solution for e-commerce stores. The introduction of AI has changed customer’s search behavior in that, rather than using a few short keywords, they are more likely to adopt a more conversational approach.

And the folks over at Boost Commerce have responded to this by upgrading their tech to leverage machine learning and NLP. According to Boost, AI-powered search virtually guarantees that visitor searches will be fully understood, even with typos and where colloquial language is used.

This is a game changer for consumers as they will be able to find the products they desire in an instant. Loved by over 14,000+ Shopify merchants, Boost commerce is clearly riding the AI wave.

Vue

Supported by corporate giants such as Gartner, Microsoft and Nike, Vue.AI offers a number of AI-driven e-commerce solutions including abandoned carts, product recommendations, workflow optimization and remarketing. Vue’s platform utilizes machine learning to help e-commerce transition from just “selling products” to providing the type of world class user experiences that consumers are beginning to expect. Their omnichannel and forward thinking approach to e-commerce makes Vue one to watch for e-commerce business owners.

Conclusion

AI-driven personalization is no longer a concept - it’s here already and in use by leading e-commerce businesses the world over. The major thing that all of these new platforms have in common is that they all appreciate the importance of delivering high quality, engaging user experiences to allow e-commerce businesses to differentiate and stay ahead of the game. Given how recently AI was unleashed on the world, it will be interesting to see how the next few years pan out and how important it will be for businesses to jump aboard the AI train.