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AI in Action: How Retailers are Using AI Basics and Advanced Marketing Principles Now

AI in Action: How Retailers are Using AI Basics and Advanced Marketing Principles Now
How Retailers are Using AI Basics & Advanced Marketing Principles Now

Artificial Intelligence (AI) is rapidly reshaping the retail industry, helping companies develop a unique advantage as the market—and technology--evolves. Many exciting opportunities exist to reimagine the retail experience, with early adopters of AI technology already reaping the rewards. A 2024 study by NVIDIA, the State of AI and Retail in CPG, found that 69% of retailers have attributed increases in annual revenue directly to embracing AI technologies.

Over the past few months, our series on AI & Personalization has focused on three significant trends within the retail sector: personalization, non-offer content, and learning from customer touchpoints to refine the retail experience.

In this article, we look at how retailers have implemented these trends to achieve their business goals.

Loblaws: Using AI to Deliver Personalization at Scale

Advanced personalization is the cornerstone of modern retail. According to McKinsey, 71% of consumers expected personalized offers from retailers, and 76% said they were frustrated when they didn’t receive them. Loblaws, a leading Canadian retailer with over 2,000 stores nationwide, identified the potential of personalization early on. In 2018, the company partnered with Eagle Eye to power its PC Optimum loyalty program, which stands as one of Canada's most widely subscribed and popular loyalty programs. Today, PC Optimum delivers personalized offers each week to nearly 16 million active members. The Eagle Eye AIR platform delivers these offers based on thousands of data points, including customer purchase histories and where they like to shop. The key to utilizing this data was breaking down siloes across its vast nationwide network. Loblaws’ success in harnessing its data to deliver individualized shopping experiences also helped make PC Optimum one of Canada’s ten most influential brands in 2023. The loyalty program’s success illustrates the dividends of providing highly individualized shopping experiences, and state-of-the-art AI tools can now drastically simplify fulfilling this customer demand.

ASDA Rewards: Born Into an AI World

Personalization plays a pivotal role in engaging customers, yet it forms just one piece of a bigger loyalty puzzle—and that puzzle includes tailoring offers and messages to meet each customer's unique needs. Our 2023 research on consumer loyalty trends, Grocery’s Great Loyalty Opportunity, revealed that 69% of consumers prioritize "value" as the foremost advantage they seek in a loyalty program. Such insights should prompt retailers to ask themselves, "How can our loyalty initiatives offer savings and provide greater value to our customers?"

The UK supermarket chain ASDA addressed this query head-on by developing a clever and captivating proposition built around value. In 2022, ASDA rolled out its ASDA Rewards program, promoting a “Pounds, Not Points” strategy to help shoppers save at the checkout. Through the app, shoppers could accumulate savings in their “cash pot” by engaging in in-app “missions” and buying designated “star products.” This approach helps shoppers economize their grocery bills and introduces a fun and interactive shopping experience.

Like the PC Optimum program by Loblaws, ASDA Rewards leverages the Eagle Eye AIR platform, enabling the grocery retailer to connect its point-of-sale systems seamlessly with the program's offer and reward functionalities.

In Omnichannel Retail 2.0: How to Build Winning Stores in a Digital World, Eagle Eye CEO Tim Mason spotlights the successes of ASDA’s loyalty scheme. Presently, ASDA Rewards boasts 6 million active members, with 49% of its sales attributed to the program. Additionally, in June 2023, 12% of UK consumers named ASDA Rewards their favorite loyalty program, securing the third spot right after Tesco’s Clubcard and Sainsbury’s Nectar program.

ASDA's clever app design marks just one aspect of how the retailer employs AI to captivate its customer base. By harnessing customer data from its loyalty program, ASDA has been adept at delivering personalized and appealing offers. Beyond that, the supermarket has explored additional avenues for engaging with shoppers, such as utilizing AI to customize non-offer content. This approach has yielded significant direct engagement, with ASDA reporting a 179% increase in engagement rates via its email newsletter.

So why has ASDA’s AI-powered initiative led to such a positive response from shoppers? Data science. The retailer has provided customers with no-hassle savings at the supermarket, delivered in personalized, engaging, and entertaining ways.

Carrefour: AI-Powering Gamification and Personalized Promotions

ASDA Rewards show how a powerful blend of AI-driven gamification and personalization can boost customer engagement and translate into revenue growth. The French supermarket chain Carrefour showcases another success story of successfully leveraging AI and machine learning algorithms to engage its customers.

The grocery retailer's commitment to enhancing its loyalty scheme has positioned it as the most sophisticated, incrementally designed program deployed at scale today. In an earlier article, AI and the Current State of Retail Marketing, we looked at Carrefour's collaboration with Untie Nots, now part of the Eagle Eye Group, to create "Challenges." This feature of the MyClub loyalty program employs AI to generate custom thresholds and goals for members, tailoring the experience to each member’s shopping habits and preferences.

These thresholds rely on metrics such as purchase history to predict what will trigger the next desired customer action. The “Challenges” initiative also incentivizes customers to engage with MyClub and Carrefour by turning their shopping experiences into games (like the ASDA example above) and making them enjoyable along the way.

Starbucks: Driving More Valuable Rewards

Starbucks, the global coffee chain, is another retailer leveraging AI to elevate the customer experience. Its loyalty program, Starbucks Rewards, uses AI algorithms to analyze customers' purchase histories and suggest food or drink items based on preferences and contextual factors like the weather and time of day.

The retailer’s Deep Brew data analytics and AI tool plays a central role in recommending these personalized choices to customers through the Starbucks Rewards app, like dynamically suggesting an offer for a free iced coffee on a hot summer day to a customer who consistently orders similar cold beverages on warm days at a specific time.

Starbucks is also expanding its reward offerings beyond its brand through partnerships and leveraging its AI capabilities to target those partners’ audiences. For example, in February 2024, Starbucks partnered with Bank of America to connect Starbucks and Bank of America customers. The coffee giant is now building an AI-connected ecosystem to help its loyalty program members derive more value. So far, the strategy has worked tremendously, with its Q4 2023 results reporting a 13% year-on-year increase in members, amounting to four million new members.

Overcoming Technology Gaps with the Right Partners

From these examples of AI in action, it’s clear the retail industry is embracing and preparing to use AI in various ways throughout its marketing approaches to achieve specific goals. But one commonality remains: this needs data science experts to get the most out of its AI and machine learning initiatives.

While Starbucks has taken an in-house development approach (as one might expect from one of the world’s largest brands), the other retailers we mentioned in this article have formed strategic partnerships with AI-capable companies to develop customized solutions. According to UK government data, only 40% of businesses adopted AI-developed solutions in-house.

Given the applicability of predictive AI solutions for retail and their potential impact on personalization capabilities, customer engagement, and revenue growth, finding the right partner to accelerate an AI transformation makes sound commercial sense.

As these examples of AI in action demonstrate, retailers can vastly improve their customer experience, drive loyalty, introduce new engagement tactics like gamification, and increase the profitability of their promotional strategies by utilizing this new technology.

Embarking on the path to AI mastery requires adopting AI's promised competitive edge, developing a strategic approach to data optimization, and collaborating with expert partners who can navigate the journey to an AI-enhanced retail future with you.

To learn more about AI's transformative impact in retail and to guide your next steps, download our eBook, AI and the Current State of Retail Marketing, or contact our AI team, which specializes in the retail sector.

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