Eye on AI - November 13th, 2020
Welcome to Aigora's "Eye on AI" series, where we round up exciting news at the intersection of consumer science and artificial intelligence!
This week’s “Eye on AI” breaks down the science, benefits, and ethics behind customer profiling, and should aptly prepare you for the approaching onslaught of email promotions leading to Black Friday.
Loyalty Cards, and Surface-Level Customer Profiles
We begin with the loyalty card, a common and relatively simple marketing tool with heavy profiling benefits, which is described in the recent BBC article, “How artificial intelligence may be making you buy things.” On the surface, loyalty cards are fairly straight forward: customers sign up, are handed a card, and are granted ‘privileged’ discounts and promotions typically based on purchase frequency. Less understood is how companies utilize the data collected by these cards to influence purchasing decisions.
“.... retailers are using AI (artificial intelligence) - software systems that can learn for themselves - to try to automatically predict and encourage our very specific preferences and purchases like never before,” writes BBC contributor Jane Lakefield. “Retail consultant Daniel Burke, of Blick Rothenberg, calls this ‘the holy grail... to build up a profile of customers and suggest a product before they realise it is what they wanted.’”
If you’re a loyalty member at, say, Starbucks, and commonly purchase a latte each morning, you may find an offer for a discounted latte in your inbox if you take a few days off; or perhaps you’re a loyalty member at your local grocery store, and made brussel sprouts a staple of your Fall diet last year, and then – Voila! – a brussel sprout discount arrives in your inbox when Fall arrives the next year. Not every loyalty card is infused with AI. But they should be. This type of profiling is convenient, targetted, not terribly intrusive, and quite effective at customer retention.
Virtual Shopping Carts, the Next Evolution of Customer Profiling
The virtual shopping cart is the next iteration in customer profiling. It’s similar to the loyalty card, only instead of using a card to collect data it uses an app. This allows companies to track not only purchases being made by each of their customers, but also which products were viewed, for how long, how the app was utilized, etc. That means more data, a more complete customer profile, and better targeting with what Will Broome, the founder of Ubamarket, a UK firm that makes a shopping app, calls ‘hyper-personalized’ offers.
"Our AI system tracks people's behaviour patterns rather than their purchases, and the more you shop the more the AI knows about what kinds of products you like," says Broome. “The AI module is designed not only to do the obvious stuff, but it learns as it goes along and becomes anticipatory. It can start to build a picture of how likely you are to try a different brand, or to buy chocolate on a Saturday."
Customers using Ubamarket purchase 20% more product on average, while SO1, a Berlin-based company with a similar product, claims “nine times more people buy AI-suggested goods than those offered by traditional promotions, even when the discounts are 30% less.” Those kinds of conversions mean heavy profits, which is why so many of the large retailers are already well established in the virtual shopping cart game. Amazon recently opened their contactless brick-and-mortar retail space, called Amazon Go, which is packed full of AI-aided computer vision technology that will allow for even greater profiling, while home assistants, smart wearables, and smaller at-home AI give companies the ability to collect customer data from almost anywhere and create even more 'hyper-personalized' customer profiles.
The Ethics of Customer Profiling
Of course, not everyone is comfortable with their data being collected all the time. India is struggling to retain virtual shopping cart users. Ubamarket and others have struggled to penetrate large retailers (the retail behemoths typically use in-house AI) –– their platforms are mostly implemented in smaller convenience chains, a trend that may be shifting with the pandemic. And while many users appreciate the personalized benefits virtual shopping carts offer, some worry about their potential for abuse.
"We need to ask how equitable and ethical the data collection is,” says Jeni Tennison, who heads up the UK's Open Data Institute, a body that campaigns against the misuse of data. “So, for example, are middle-class white women being offered money off fresh vegetables, but it is not being offered to someone who could really benefit from it? What we really need to understand is what impact data collection and profiling has on different sectors of society. Is it profiling people based on race, social economic status, sexuality?"
Customer loyalty cards tracking purchases at checkout are more or less harmless, as are most virtual shopping carts at the moment. But as data collection becomes more expansive, AI will become better at influencing purchasing decisions. Ethically-driven data collection regulations, to my mind, would give customers more confidence their data is being used in the right ways, and increase adaptation to the benefit of companies and customers alike.
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