AI-Driven Personalized Promotions
These days, communication with clients must go beyond the traditional framework. This means, among other things, the necessity of introducing innovative solutions to make the message more attractive in all possible channels. Fortunately, we are not alone in solving this problem, support comes with the development of artificial intelligence. One of the most interesting applications of this is in the area of personalized customer communication.
It can take place on many levels, in the context of a specific customer, product, content, time or contact channel. But let’s focus on one application in particular, personalized promotions. From the perspective of, for example, the FMCG industry, they may have significant impact on increasing customer satisfaction and loyalty. This is important since building a strong and long-lasting relationship with the customer has been one of the most important goals for companies in this sector for years.
What are personalized promotions and how can they be used to build a strong relationship with the client?
Personalized promotions are simply the selection of the best promotions and content for a given customer, taking into account their purchase history and all kinds of interactions with the brand from an available pre-defined set of promotions. That’s quite a definition, I know, but how does it look in reality? So far, one of the standard approaches to marketing promotion was to offer the same thing to the entire customer base, at most diversified in relation to the location. It’s simply a fact that in a world dominated by digital strategies, such a solution just isn’t good enough to keep up with the changes in the expectations of customers regarding the content they see.
The solution to this problem comes artificial intelligence, which analyzes behavior and preferences from customer data and chooses the promotion most likely to interest certain customers. The undoubted advantage of such a solution is the fact that we do not have to create a new set of promotions, and can instead take advantage of existing offers by being smarter and more efficient in pairing customers with the messaging they receive.
Why you should consider personalized promotions for your business
- Customers receive offers with promotions adapted to their preferences, which translates into higher satisfaction and more frequent purchases.
- By creating promotions for less popular products from the perspective of customers, we can assign them to those most likely to be interested in them.
- Customers willingly return to places where they receive interesting products at favorable prices. This translates into an increase in the number of customers using the loyalty program.
- Promotions can also be targeted in the context of a given location, meaning you can base them on existing stock levels
- Thanks to appropriate adaptation of the promotion to the current supply of the warehouse, you will avoid wasting food or products with a specified shelf life, which will translate into financial profit.
Step 1: Product quantification
At the beginning, the client or store sets the promotion list.
Step 2: Detailed analysis of customer behavior
The next step is a detailed analysis of customer preferences, taking into account the following information:
- Product purchase histories
- Frequency of purchases
- Price range
- Most-purchased brands
- Store location
After analyzing this data, the algorithms are able to determine the promotion ranking according to their convergence with the preferences and behavioral profile of a given client.
Promotions personalized in the way described above can help accomplish many business goals, including:
- Revenue growth
- Stock optimization
- Minimizing promotion costs
- Building customer loyalty
Step 3: Ways to use a promotion
An important issue connected with personalized promotions is how to use them. Basically, you can separate them by the moment of purchase (before or after). However, it’s important to remember that’s a very simplified view because it doesn’t take customer identification into account. In a time of strict customer data protection regulations, the most popular way to identify an anonymous customer is to scan a loyalty card, offered with a previous purchase, or by using an alternative, such as a mobile app. To sum up, there are three main ways to implement a personalized promotion:
- Before the purchase, distributed, for example, via self-service kiosk
- After the purchase, to be used next time the customer shops
- Using a mobile app
Personalized promotions in practice
One of the practical uses of personalized promotions is when you want to encourage customers to buy a certain product which has many substitutes – dishwasher cleaning tablets, for example. In the case of a large supermarket chain, the product produced by their own brand can be promoted in two different ways – 2 for 1 or a 40% discount.
Very unlikely to buy – the customer has never bought a certain type of product; also, they have never purchased any product from the “home” category.
Unlikely to buy – the customer has bought a large amount of the product a couple of days before.
Quite likely to buy – the customer buys similar products of other brands, usually the ones at discounted prices, which indicates price as the first criterion of choice.
Promotion: 40% off
Likely to buy – the customer regularly buys the same type of product from different brands.
Promotion: 2 for 1
Very likely to buy – the customer buys the promoted product regularly.
Of course, this sort of personalization is just one idea to boost your imagination and take a different look at the customer data. Let’s analyze other examples of personalized promotions using different means of communication and distribution.
Personalized promotions examples
Example 1: Reaching the customer through multiple communication channels
Personalized promotions can be implemented in a variety of communication channels:
- Check-out coupon
Thanks to identifying the customer’s location (e.g. by the use of GPS) you are able to send a message informing them about promotions on selected products matching the customer’s preferences. By showing the loyalty card by the cash desk, the customer enjoys the discounts on the products mentioned in the message.
Example 2: Self-service kiosk
The customer receives a promo offer by scanning their loyalty card in a self-service kiosk located by the store entrance. After presenting the card by the cash desk, they get an instant discount on currently promoted products.
Example 3: Mobile app
What can you offer to a customer who has just installed your store’s app and it’s crucial to engage them and gain attention? In this case, a discount for a selected product would be a good idea. The only thing the customer needs to do to use the discount is scan the QR code from the app by the cash desk. It’s important to remember that in all such cases we know the transaction context, store location and current stock, which resulted in an optimal match of the offer to the customer.
Now that you know more about personalized promotions and the benefits coming from implementing them in your business, it’s time you thought about how they might fit into your business. No matter if you focus on customer acquisition or activation, promoting new products or increasing revenue, personalized promotions are a great means to develop your business effectively and join the leaders of your branch.
To find out more about promotions available on our platform check out our Help Center and learn more about the technical aspects of personalized promotion settings.