How New AI tools can Transform Customer Engagement and Retention

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How new AI tools can transform customer engagement and retention

Ryohei Fujimaki, dotData, July 8, 2023 8:20 AM   in Venturebeat.

As the cookieless future continues to gain momentum, the global digital advertising sector is experiencing a tectonic shift. Companies are being forced to reimagine the way they reach out to customers.

Online marketing has been dominated by third-party cookies — tracking codes posted on websites to extract users’ information — and data brokers who sell the information in bulk. 

However, this multibillion-dollar business, perpetuated for decades, is now in checkmate by a perfect trifecta: new privacy laws, big tech restrictions, and global consumer privacy trends.

While the end of cookies is inevitable, businesses still struggle to find new advertising techniques. Statista’s January report reveals that 83% of marketers still depend on third-party cookies, spending $22 billion on this outdated technique in 2021. 

In this report, we’ll dive into the complexities of digital advertising transformation and reveal how new technologies, machine learning (ML), and AI present new opportunities for the industry.

The challenges, risks and new trends of digital marketing

Using third-party data has become a high-stakes risk strategy. Companies that do not observe data privacy laws can face millions in fines for data breaches or misuse. For example, defying the General Data Protection Regulation (GDPR) can cost up to €20 million (about $21.7 million) or 4% of a company’s annual global turnover in 2023. 

And the legal data landscape goes well beyond the GDPR; it is diverse, constantly evolving, and growing. From state laws like the California Consumer Privacy Act (CCPA) to federal laws like the Health Insurance Portability and Accountability Act (HIPAA), businesses must identify which laws apply to their operation and know the risks. 

The dangers of running third-party data campaigns do not end with courts. Brands that do not align with consumer expectations risk losing clients and business opportunities. A 2022 MediaMath survey revealed that 84% of consumers are more likely to trust brands that prioritize using personal information with a privacy-safe approach.

The issue is not new — privacy concerns have been growing for years. In 2019, Pew Research reported that 79% of Americans were “concerned about how companies use their data.” In 2023, privacy has become a top priority, and customers expect companies to protect their data. Failing to do so brings devaluation of brand perception and potential loss of customers and business partners. 

The most significant barrier to third-party data is coming from online giants themselves. Companies like Apple, Google and Microsoft are leading the way towards ending cookies. Increasing restrictions make it harder for marketers to obtain consumers’ data daily.

First-party data — obtained under consent in a direct relationship with the user, for example, when making a payment transaction or agreeing to the terms when signing up — is trending and expected to replace third-party data. First-party data is also better-quality, as it goes beyond limited information based on age, location and gender. Furthermore, companies can use first-party data to create modern data marts. ... ' 

Wal-Mart's New, Wealthier Customers

 Has been happening for a while:

Can Walmart hold onto the new, wealthier customers it is picking up?

by George Anderson  in Retailwire

Walmart’s savings message is resonating with Americans across income levels and helping the company dramatically reduce its inventory in the process.

The retailing giant’s U.S. business reported an 8.2 percent year-over-year jump in sales during the third quarter as the retailer rang up increases in both average ticket and transaction size. Shopper visits to the retailer’s stores increased 2.1 percent. E-commerce sales were up 16 percent.

Walmart’s gains were largely driven by grocery.

“We’ve continued to gain grocery market share from households across income demographics, with nearly three-quarters of the share gain coming from those exceeding $100,000 in annual income,” said John David Rainey, executive vice president, chief financial officer, Walmart, on the company’s Q3 earnings call. “This quarter, our private brand penetration in food categories increased about 130 basis points, reflecting customers’ increased focus on quality products at value prices. We observed incremental trade down in categories, including proteins, baking goods, baby and dog food.”

Walmart CEO Doug McMillon said that a combination of the right products inside and outside of grocery, value prices and the retailer’s broad suite of  shopping and fulfillment options will enable it to hold onto new customers it has acquired in 2022.

John Furner, president and CEO of Walmart U.S., said the chain is seeing an increase in digital engagement with its customers. Walmart app downloads have continued to grow, as has the number of users. Shopping frequency has picked up.

“For a long time, we talked about the value of a store customer plus shopping on e-com, how much more valuable that was,” said Mr. Furner. “We see that accelerate when it’s pickup, e-commerce and stores. So, you know, going forward, you’re going to hear from us talk about this more and more as an omni offer, which is really flexible for the customer.”  ... ' 

Stanford Chatbot Study

Mostly obvious results, but useful characterizations.   We leveraged a 'concierge' model being most important, how do you get people to the right humans, the ones with the best answer in context?   I also recall also including a 'competence in context' rating we also measured.   We also tried to measure 'ongoing engagement', which was useful for future marketing connections

Do chatbots need to be more likable?    by Tom Ryan in Retailwire

A new Stanford university study finds people will more readily use a chatbot if they perceive it to be friendly and competent and less so if it projects overconfidence and arrogance. The challenge, the authors say, is finding the right balance.

Across three studies with 300 participants in the U.S., researchers tested reactions to AI-bots with the same underlying functionality but different descriptions.

Among the findings:

Low-competence descriptions (e.g., “this agent is like a toddler”) led to increases in perceived usability, intention to adopt and desire to cooperate relative to high-competence descriptions (e.g., “this agent is trained like a professional”). 

People are more likely to cooperate with and help an agent that projects higher warmth (e.g., “good-natured” or “sincere”).

Descriptions “are powerful,” helping drive user adoption and engagement with chatbots.

The authors suggested chatbots need to instill confidence that they are worthwhile to engage with. At the same time, acknowledging some errors may occur early on as the chatbot learns what users want will likely help people become more accepting of a chatbot’s mistakes. Pranav Khadpe, a co-author, told The Wall Street Journal, “You really want to manage the expectations you set before the first interaction.”  ... '

Are Your Students Bored? Do They Understand?

Once you have information about emotion based engagement, this naturally follows.  Could further be used to rate the quality of the instruction.    Where does this kind of measurement end, even if  not completely accurate?

Are Your Students Bored? This AI Could Tell You
IEEE Spectrum
Emily Waltz

Researchers at the Hong Kong University of Science and Technology (HKUST) and China's Harbin Engineering University have created an artificial intelligence (AI) system that analyzes students' emotions based on video recordings of their facial expressions to measure their engagement level in a class. The AI system was tested in a classroom of toddlers in Japan and a classroom of university students in Hong Kong. While the visual analytics system was successful in detecting obvious emotions like happiness, it often incorrectly reported anger or sadness in students who were focused on the lectures. Said HKUST computer scientist Huamin Qu, "To address this issue, we need to add new emotion categories, relabel our data, and retrain the model."  ..."

Bosch Face Reco Keeps Drivers Attention and Entertained

Clever general idea.  A demonstration for now.  How broadly might it be deployed?  Something as simple as detecting when you a start looking 'down', and providing a beep of the kind now used for lane encroachment would be a good start.

Bosch’s facial recognition tech keeps you safe, entertained behind the wheel   By Ronan Glon in DigitalTrends

This story is part of our continuing coverage of CES 2020, including tech and gadgets from the showroom floor.

German supplier Bosch is working on bringing facial recognition technology to the world of cars. Similar to what’s available on many smartphones, the feature is a way to keep the passengers safe, entertained, and comfortable.

Digital Trends checked out the tech at CES 2020, where Bosch packed it into a #vanlife-spec Volkswagen Touran for demonstration purposes. In this application, it consisted of a driver-facing camera positioned between the steering wheel and the instrument cluster, and a passenger-monitoring camera located where the map lights are. Thomas Lenzen, one of the product managers responsible for the technology, explained that it’s possible to move the cameras around, and add or remove them as needed. Users may want a third camera to watch their kids in the back.  ... " 

Predicting Humor for Engagement

Humor as engagement.     Can it be delivered artificially, as a strong component of story?

It's No Joke: AI Beats Humans at Making You Laugh    |by Dina Gerdeman  in HBSWK

We all enjoy sharing jokes with friends, hoping a witty one might elicit a smile—or maybe even a belly laugh. Here’s one for you:

A lawyer opened the door of his BMW, when, suddenly, a car came along and hit the door, ripping it off completely. When the police arrived at the scene, the lawyer was complaining bitterly about the damage to his precious BMW.

"Officer, look what they've done to my Beeeeemer!” he whined.

"You lawyers are so materialistic, you make me sick!” retorted the officer. "You're so worried about your stupid BMW that you didn't even notice your left arm was ripped off!”

“Oh, my god,” replied the lawyer, finally noticing the bloody left shoulder where his arm once was. “Where's my Rolex?!”

Do you think your friends would find that joke amusing—well, maybe those who aren’t lawyers?

A research team led by Harvard Business School post-doctoral fellow Michael H. Yeomans put this laughing matter to the test. In a new study, he used that joke and 32 others to determine whether people or artificial intelligence (AI) could do a better job of predicting which jokes other people consider funny. ... "

Alexa Enabled Gadgets for Teaching and Fun

Ultimately assistants are about engagement.  Sometimes to get work done.  Sometimes for fun. Sometimes to engage with others.  Some narrow goals, some very broad.   Right now it organizes and delivers my music.  Controls aspects of my smart home.   Manages a conversation to deal with commands,  responses.  Delivers or not,  if it has the intelligence.   Teaching sounds like a good general goal.    And driven by fun or learning progress with game-like accomplishment provides strong motivation.  Can it be done?  Look forward to seeing the attempt.

Here is Amazon's announcement of this effort for developers:
Introducing Custom Interfaces, Enabling Developers to Build Dynamic Gadgets, Games, and Smart Toys with Alexa
August 15, 2019
By Karen Yue ....

Amazon is trying to make Alexa-enabled gadgets more fun
The new API could let Alexa teach you to play the piano.
 By Igor Bonifacic, @igorbonifacic in Engadget

A variety of new Alexa-enabled gadgets, games and smart toys could soon flood the market thanks to Amazon's latest developer tool. On Thursday, the company detailed "Custom Interfaces," a new API within its Alexa Gadgets Toolkit SDK that allows developers to create interactions between Alexa and their own internet-connected products. Amazon is positioning Custom Interfaces primarily as a way for third-party manufacturers to leverage Alexa to create fun and quirky experiences.

For example, Amazon envisions the manufacturer of a WiFi-enabled indoor basketball hoop using Custom Interfaces to create an experience in which Alexa chimes in anytime you score a basket. In another potential scenario, Amazon suggests Alexa could work in tandem with a smart mini keyboard to teach you how to play the piano. Of course, as with any API, its potential is only as good as the developers working with it. It will be up to them to create interesting experiences with Amazon's new tool, something that's not a given. ... " 

Millie the Avatar Tests Interaction

Testing the idea of what kind of 'human' engagement works in what context.

Meet 'Millie' the Avatar. She'd Like to Sell You a Pair of Sunglasses  By Bloomberg in ACM

Toronto, Canada-based startup Twenty Billion Neurons (TwentyBN) has created a life-size digital avatar to help retail brands looking for ways to boost falling in-store sales in the face of growing competition from e-commerce.

The Millie avatar appears on a slightly-larger-than-life screen, seemingly making eye contact with customers and tracking their movements with her gaze; Millie is also able to tell where in the store a customer is looking and respond accordingly.

The system is equipped with speech recognition and natural language processing software, which allow Millie to understand and answer simple questions or have a basic conversation with a shopper.

The avatar also uses facial-recognition software to learn to recognize people it sees often by name.

Natalie Berg of U.K. consultancy NBK Retail observed that there is a fine line between cool and creepy, adding that “While this kind of tech is still novel, it is a way to get people into the store, but it might not be for everyone.”    .... " 

From Bloomberg via CACM.

Artificial Empathy Needed

Also includes engagement.   Gets back to the nature of a conversation.   Does it engage, promote understanding, remember past interactions, help?   All those lead to a minimum amount of empathy.  If a conversation does not have those, it can't get much further.   Human-like is fine, once you get past helping.

AI Challenge: Achieving Artificial Empathy

As AI is woven deeper into different types of software and business processes, the success of it, particularly from customer experience and personalization standpoints, depends on its ability to recognize emotion and act accordingly. Will machines be able to achieve artificial empathy? Have they already? Following are some of the challenges and opportunities.

Businesses of all kinds are investing in AI to improve operations and customer experience. However, as the average person experiences on a daily basis, interacting with machines can be frustrating when they're incapable of understanding emotions.

For one thing, humans don't always communicate clearly with machines, and vice versa. The inefficiencies caused by such miscommunications tend to frustrate end users. Even more unsettling in such scenarios is the failure of the system to recognize emotion and adapt.

To facilitate more effective human-to-machine interactions, artificial intelligence systems need to become more human-like, and to do that, they need the ability to understand emotional states and act accordingly. .... " 

What People See in Robot Faces

A reminder of work we did using brand equity to represent assistants on the Web.   We assumed that a well known ad character would an ideal way to engage, with an otherwise chatbot-style interaction. This could have been good input to the project.  Much more at the links below.   Be glad to chat.

What People See in 157 Robot Faces 
in IEEE Spectrum   By Evan Ackerman

University of Washington in Seattle researchers conducted a study of robot faces--157 in all--across 76 dimensions, to determine the distinct ways people experience them. Among the study's insights was that robots whose faces were rated less-friendly lacked a mouth and pupils, but had eyelids; eyebrows also were deemed to be indicators of intelligence. Although no robot faces were rated as significantly more likable than the baseline face, the robot that possessed irises was the most liked by survey participants overall. "I think our work helps to elucidate what kind of effect certain design choices have, and while these results are by no means definitive, I think they do help prime our thinking about design consequences," says the University of Washington's Alisa Kalegina. The work was presented in March at the ACM/IEEE International Conference on Human Robot Interaction (HRI 2018) in Chicago, IL.  ... " 

Using Analytics to Improve Customer Engagement

Always thought this was obvious, and it did not have to be artificial anything, just had to promote understanding  and efficiently leveraging shared data.   Survey analysis here.

Organizations that turn data into insights are gaining competitive advantage through improved connections with consumers.
by: Sams Ransbotham and David Kiron

The 2018 Data & Analytics Global Executive Study and Research Report by MIT Sloan Management Review finds that innovative, analytically mature organizations make use of data from multiple sources: customers, vendors, regulators, and even competitors. The report, based on MIT SMR’s eighth annual data and analytics global survey of over 1,900 business executives, managers, and analytics professionals, explores companies leading the way with analytics and customer engagement. .... "

Retailwire on AI's Role in Customer Engagement

From Retailwire:

Why artificial intelligence is becoming instrumental for unifying in-store and online experiences ... After decades of intense development, AI is coming into its own in retailing.

AI is a technology poised to exercise tremendous influence on the way businesses operate, inspiring retailers to reimagine what their enterprises can accomplish.

Download your copy of this new digital whitepaper from RetailWire to learn how retailers are putting AI to use for natural language processing, predictive analytics, building shopper profiles based on their behavior, pattern recognition and more.

See this m•Paper for insights on:

AI’s growing influence in retail
What we’ve learned from digital commerce
AI in the store — a data explosion
AI and the mobile experience
How AI is driving omnichannel  ....  " 

Amazon Pays for Popular Skills

One time small payment, it seems,  so does not seem sustainable.  The incentive is to get you to go back to the device.  Classic engagement.   While I have been impressed by the number of skills available, their quality and interest still seems low.  A stronger memory of your visits ... personalization ... gamification...  Competition ....   real surprise in results.     Would all seem to be better suited to generate an ongoing repeat experience.

Amazon will pay more developers who make popular Alexa skills
Payment is being expanded into more categories
by Thuy Ong@ThuyOng   In the Verge

Gamification as Tactic

Has started to come up more often as a tactic to deliver results.    A long followed approach.  Make sure you have the values and the culture of the participants right.  In Retailwire: 

Gamification reaches the next level
by Guest contributor  COLLOQUY staff

Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty-marketing publishing, education and research since 1990.

For some brands, gamification has emerged as a productive tactic in an era when keeping customers engaged has become increasingly difficult. Though the approach has been in practice for years, the new wave of brand-based gaming builds on learnings from previous campaigns.

Recent launches by major brands demonstrate increased sophistication, investment and commitment to engaging consumers:  ... " 

Where are the Users? in Apps. Fascinating Stats

In Inc.  Overall stats were not surprising to me, the details are fascinating, at the link. Facebook, YouTube, Google Maps, Google Search   lead.

People Now Spend Half Their Online Time in Apps. Here's Why.
Apps are now 50% of all U.S. digital media time spent and the top apps are mostly platforms. Learn why the business model dominates.  by Alex Moazed

Platform businesses have reached a major milestone. Smartphone apps are now 50% of all U.S. digital media time spent. The top 15 mobile apps that make up the lionshare of consumption and user engagement are mostly all platform businesses, except for Pandora and Apple Music. I've bolded the platforms that round out the top 15 and their unique number of visitors (000, July 2016): ... " 

Brand Loyalty and Shared Values

In Inc.   Importance of ongoing interaction with your customer.

Why Real Brand Loyalty Starts with Shared Values
Most customers don't want to 'engage' with your company. Here's what you can do about it.
Ever since the term "engagement" snuck into the picture, business publications have been talking big about how important it is to regularly interact with customers, touting the untold benefits of regular contact.

While there is a lot of value in marketing to current customers through content, customer success, and customer education, marketers may be missing the forest for the trees.  ... " 

ROI of Customer Engagement

Always looking for new ways to measure.   But it takes lots of trials in different contexts, to understand the implications of measurement.

Calculating the ROI of Customer Engagement by Rachel Happe
We know that customer engagement matters. Yet much of our thinking about engagement remains simplistic. Most current definitions of engagement are bimodal – someone is either engaged or they’re not. But this is a limited view that hampers our ability to manage engagement in meaningful ways.

A more sophisticated understanding of engagement allows community managers to effectively influence and change it, and even to calculate an ROI for engagement. ... " 

Real Pins for Pinterest

In AdWeek:  Pinterest's Real-World Pins Let In-Store Shoppers Save Real Items to Virtual Boards DM9DDB tests the app in Brazil's biggest furniture store By Tim Nudd

I like the deal of connecting the real world to the virtual.  Here is an interesting real world retail test example.  Not sure this would work.  Reminds me of tests we did that got people tactically involved with design layouts, which seemed to have better engagement.

Authentically Engaging Your Customers

From Kellogg Insight: 

" ... For decades, one-off marketing campaigns were the biggest game in town.
Since the rise of the internet, however—and, in particular, the rise of social media— customer behavior has changed dramatically. Not only has social media become an essential tool for any marketing strategy (almost half of Facebook users have “recommended” a brand), customers today also expect their relationship with brands to go beyond the use value of their products. 

For Mohan Sawhney, clinical professor of marketing and McCormick Foundation Chair of Technology at the Kellogg School, that means it is time for marketing leaders to embrace a different approach. ...  "

More Virtual Reality Consumer Engagement

Kellogg sponsors Captain America VR game
Kellogg is capitalizing on the box office success of "Captain America: Civil War" by sponsoring a mobile virtual reality game. Loyalty program members who make purchases from partner outlets can receive a Marvel-branded cardboard VR headset. .... " 

Still find the use of VR viewers uncommon among consumers.