In a world of so many overwhelming choices for consumers, how can you best engage with the shoppers who visit your website or use your app? 

Delivering more personalized experiences made possible by the use of AI is the way to stop prospective buyers from drowning in a sea of options.

This is where artificial intelligence–powered personalization comes in. When it’s based on real-time data and integrated successfully, you can provide tailored product recommendations, customized content creation, and supremely enjoyable omnichannel interactions. Without requiring a deep dive to re-examine your marketing strategies, AI personalization can let you give your shoppers surprisingly delightful experiences and handily boost your revenue in the process. 

What is AI-powered personalization? 

Right now, 92% of businesses are using AI-driven personalization to drive growth and revenue, and they’re finding personalization so powerful that three of four business leaders believe it’s crucial for success.

But what exactly is it?

AI-powered personalization utilizes machine-learning algorithms and advanced AI workings to analyze large amounts of data. This AI technology is centered around gaining a deep understanding of context as well as your shoppers’ behaviors and preferences, all while not alienating people by violating their data-privacy expectations. 

AI-powered personalization stands in stark contrast to traditional personalization techniques in several key ways:

Complexity

Traditional personalization relies on simple rule-based systems and basic segmentation techniques. AI-powered personalization, by contrast, employs sophisticated machine-learning algorithms capable of processing and learning from much larger and more complex data sets. The result: more-nuanced and targeted personalization.

Data handling and insights

Remember the early days of personalization? Traditional personalization efforts were all about simplicity. Personalized email might have constituted inserting a prospect’s name at the beginning of the message. Providers of personalization features might have gone so far as to solicit rudimentary customer feedback about what people wanted. They segmented their prospects in broad categories according to their demographic data or simple user behavior patterns.

By contrast, AI-driven systems are much more complex. They analyze a vast array of data points, detecting subtle patterns and preferences that may (likely) be invisible to simpler systems. It’s safe to say that the advancements of AI go way beyond rudimentary email personalization.

Real-time adaptation

Traditional personalization systems often operate on a set schedule, updating personalization elements periodically. In contrast, AI systems continually learn and adjust. They essentially automate the personalization process, providing up-to-the-minute edits based on the latest user interactions.

Predictive capabilities

AI personalization not only reacts to customer behavior but can anticipate customer needs and preferences to deliver the right future messaging, a feature that’s generally beyond the scope of traditional methods.

How does AI personalization work? 

AI-fueled personalization is a sophisticated process that tailors user experiences based on individual behaviors, preferences, and needs.

To explore how it works, let’s use Kerry, a Seattle-based, middle-aged shopper who’s looking for the best offers on fashionable athletic gear, as an example.

Data collection

AI personalization for this shopper first involves collecting a wide range of data about her, which could include:

• Browsing behavior: Her search queries, which sports products she views online, and her time spent on different items’ product detail pages (PDPs)
• Purchase history: Her past purchases, which can provide insight on preferences and future buying
• Demographic information: Her age, location, and possibly other demographic factors
• Social media activity: Her interactions, likes, and shares on social media platforms

Data analysis

Once all this data is collected, AI algorithms can analyze it. In Kerry’s case, this analysis could involve:

• Pattern identification: detecting patterns in her browsing and buying behavior
• Trend analysis: understanding trends in products and services that match her demographic profile
• Natural language processing (NLP) utilization: analyzing text data from her reviews and social media posts to gauge her preferences, feelings, and style
• Creating a comprehensive user profile that encapsulates her needs, preferences, and shopping behavior

Insightful content personalization

Using the insights gleaned from the data analysis, an AI-powered recommendation engine generates personalized suggestions for Kerry, such as:

• Product suggestions that align with her past purchases and browsing history
• Content recommendations for blog posts, articles, and videos about cool athletic gear that might interest her
• Personalized offers on products that are aligned with her interests and previous purchasing behavior

Real-time adaptation

One of the most powerful aspects of AI tools is the ability to adapt in real time. This means:

• Learning from responses: If Kerry shows interest in a certain recommendation by clicking on a product link, the system notes that activity and adjusts its future suggestions.
• Adapting to changes: As her preferences and behaviors change, perhaps shifting with the seasons, the AI system adapts, ensuring that her recommendations remain relevant.

As exemplified by Kerry’s experience, AI personalization ensures that shoppers’ personalized customer experiences are tailored to their individual preferences, which can ultimately lead to higher satisfaction and better customer engagement.

Six effects of AI personalization 

When applied optimally in ecommerce use cases, AI personalization can have nothing-short-of-incredible effects on your business, underscoring the importance of making it a facet of your marketing campaigns.

For your shoppers 

1. Enhanced relevance

Shoppers don’t want random suggestions; they want great ideas that are entirely relevant to their searches. AI personalization helps ensure that site visitors see content and recommendations that align with their interests and preferences, leading to a more engaging experience. Otherwise they’re going to quickly lose interest and be gone.

For example, let’s say that Alex, a 30-something gamer, is looking for the latest game releases. He visits Amazon to start his search. The site’s AI knows his preferences from past searches and buys, and with state-of-the-art AI personalization, it can predict his needs based on this customer data.

One result: before he even starts searching, he sees recommendations ranging from the latest Bose sound bar to Pulse 3D wireless headsets for the PS5. These suggestions are relevant because of his past searches and preferences, so they could very easily pique his interest. Plus, they’ll change in real time based on how he continues to conduct searches.

2. Better discovery

As you know, giving shoppers too many options can undermine the quality of their experiences on your platform. According to the Baymard Institute, the cart abandonment rate in 2024 was around 70%.

Making search and discovery simple and relevant is vital to preventing shoppers from slipping off of your site. AI personalization can help your shoppers uncover new products, services, and relevant content that are potentially new to them.

Consider John, a parent who’s holiday shopping for his kids. His daughter loves board games and his son enjoys sketching. As John searches for gifts and converses with AI-powered chatbots on ecommerce platforms like Walmart and Best Buy, he’s presented with a curated list of age-appropriate, relevant gift ideas that are updated practically in real time. This eliminates his need to sift through irrelevant options as he browses, which improves his feelings about the experience.

3. Time-saving convenience

When AI personalization is used effectively, it enables shoppers to skip long-haul product searches. They’re presented with tailored options that match their needs, rather than having to waste time and effort and get exhausted by the process of sifting through tons of possibilities.

An example of this is Mia, a 40-year-old working professional who loves fashion but doesn’t have time to keep up with the ever-evolving trends. Fashion ecommerce platforms that harness AI personalization can save people like her time by recommending products that align with their preferences.

For your business 

4. Better conversion

Shoppers want personalization, and they’ll reward you for it. They want to feel understood and catered to. AI personalization’s real-time adaptation ensures that you can deliver relevant recommendations that reflect each shopper’s profile and preferences. By delivering personalized suggestions and offers, you’re likely to improve their satisfaction and increase your conversion rates. 

5. Improved customer retention

Seventy six percent of consumers are more likely to purchase from brands — even repeatedly — that personalize.

That means AI personalization can keep your customers coming back.

For example, if an online bookstore tracks a shopper’s reading habits across their past purchases in real time, it can suggest new releases in the shopper’s favorite genres. Such personalization tactics could lead to additional purchases as the shopper comes to appreciate their tastes being known and catered to.

By understanding customers’ preferences that they’ve revealed at various touchpoints along their decision-making processes, you can move toward building long-term relationships with them and reaping the rewards of their repeat purchases.

6. Better customer satisfaction

By supplying shoppers with the personalized experiences they look forward to on their customer journeys, you can quickly lead them to just what they’re interested in. And then, your higher customer-satisfaction levels and great reputation can transform your ecommerce platform into a retail powerhouse.

Improve your revenue with AI personalization 

Ready to optimize your shoppers’ search and discovery, increase your conversions and jump-start your ROI?

Implement a winning personalization strategy with the Algolia API, which builds personalized suggestions and experiences to meet people’s needs and exceed their expectations.

Contact us or get a demo and let’s get started!