AI: Personalisation’s new frontier

Nov 11 2024 | PayPal Editorial Staff

Over the past few years, personalisation has evolved from a nice-to-have marketing strategy to an important consumer expectation. In fact, 71% of consumers report that they expect companies to deliver personalised interactions,1 and when brands fall short, over two-thirds (76%) of these consumers feel frustration.1

While personalisation fosters consumer loyalty, engagement and conversion, it also comes with challenges. Brands may struggle to keep up with fast-moving trend cycles and the consumer demands these cycles create. Personalisation relies on mountains of data that brands must sift through to garner actionable insights, which can be a struggle with limited resources.

This is where artificial intelligence (AI) can help. Businesses are increasingly leveraging AI to create more tailored and engaging customer experiences in unprecedented ways, from predicting trends to enhancing product recommendations, all while maintaining a “human” touch.

Here’s how:

Advanced trend prediction.

With social platforms like Instagram and TikTok, trend cycles have become shorter and shorter, and the trends themselves are more niche. This dynamism means that, brands, especially those in the fashion, beauty, and home and living space, should stay three steps ahead to create unique products and experiences that keep their customers coming back.

To overcome the gap between the market’s expectations and brand offerings, brands like Starbucks are turning to AI tools. The coffee giant has enhanced its loyalty programme with AI, using its capabilities to target occasional spenders with personalised offers. As a result, Starbucks has increased its 90-day active member base by 13% year-on-year.2

Dynamic product recommendations.

Product recommendations are a cornerstone of personalisation. Still, it takes intuitive recommendation engines to offer customers products they’ll actually buy.

Forward-thinking brands are developing AI tools that can help streamline product recommendations, helping ensure their relevance and budget-friendliness. E-commerce giant Etsy, for example, has implemented a “Gift Mode” tool, which uses AI for product recommendations that best suit the recipient’s interests and personality.3

Maintaining a human touch.

While over half of consumers say they’re eager for AI-driven tools to improve their shopping experiences,4 48% are concerned that AI’s presence means a lack of human connection in the overall retail process.5

To find the happy middle, brands who have recognised this are building AI tools that can still feel personable because they remain powered by human knowledge. Cosmetic giant Dove has created an AI diagnostic hair and scalp care tool that offers its customers personal care plans, informed by advice from in-house experts.6

Expanding consumer tastes.

AI is also helping customers explore their tastes in more creative and engaging ways than ever before. By offering personalised product suggestions based on broader contextual awareness, brands can enhance product discovery and meet deeper consumer needs whilst enhancing their experience.

Take Reebok’s GenAI project, which allows Instagrammers to design custom trainers inspired by their personal photos, blending AI art with personal creativity.7

The future of personalisation is advancing and AI is leading the charge.

Learn more about AI-powered personalisation in the latest instalment of our Think Forward with PayPal series, AI Advancements: A New Era of Personalisation.

The contents of this site are provided for informational purposes only. The information in this article does not constitute legal, financial, IT, business or investment advice of any kind and is not a substitute for any professional advice. You should always obtain independent, professional accounting, financial, IT and legal advice before making any business decision.

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