Blog Post - Hugh Fletcher, Jun 28 2017

Artificial Intelligence & IOT Transform Retail

Artificial Intelligence & IOT Transform Retail

Hugh Fletcher, Global Head of Consultancy and Innovation at Salmon discusses IOT in a recent WPP publication SMART SHOPPING and how artificial intelligence is transforming the retail conversation.

In particular, Hugh talks about AI and loyalty in an age where machines make your decisions.

The seeds of our digital and automated future have already been sown; be it Nespresso’s Bluetooth-connected coffee machine, the Brita Infinity Wi-Fi connected pitcher that reorders your filters based on usage, Tesla’s over-the-air upgrading of its software or the entrance of Amazon and Google into the connected home market with their Alexa and Home solutions; the future of digital and digital commerce is on the cusp of a revolution.

Our retail future will be much more based on interactions with machines, which will make purchasing decisions on our behalf, based on pre-determined permission and parameters. This trend lies at the crossroads between connected devices, AI, and consumers’ increased comfort with sharing their data.

The rise in subscription models, Amazon Dash, Nest and the self learning thermostat - all of these trends point to a future in which data and machines will play a more prominent role and where consumers will be able to be less proactive. This fundamentally changes the rules of customer acquisition and loyalty.

Loyalty 2.0

In the digital age, purchase decisions are heavily driven by ease and convenience, as well as by money saving. Research about automated purchasing conducted by Salmon in summer 2016 showed that 37 percent of customers see time-saving as the key benefit to automated purchasing. The same percentage identifies money saving as an advantage of a connected shopping experience, and 25 percent identify convenience as the top benefit. Just look at the rise of Amazon Prime as a clear signal of the demand for faster, more convenient delivery. Brand and product aren’t what’s driving this trend.

Is brand loyalty dead, then? No, but it could be that future loyalty will depend more heavily on the service that a brand provides than the equity of the brand itself.

Brands and customers that are “locked in” – through automated ordering – to mutually beneficial relationships will win, while brands that are “locked out” will need to work much harder to regain traction.

How can AI help brands turn these risks to their advantage?

There are many ‘must do’s’ for brands in this new era of loyalty. These include pushing to own as much of the relationship with the consumer as possible, as Nespresso does with its coffee machines, coffee capsules and ordering service. At the same time, where there are gaps in expertise, brands should form smart partnerships with other brands and manufacturers; food brands working with fridge producers, for instance.

But there are two pressing obligations for brands that lend themselves to the deployment of AI.

1. Investing in service

With loyalty to service increasing, the obvious thing to do is invest in service. That could be anything from delivery to customer handling. If AI can shorten waiting times for help online, or help consumers find what they need more easily, use it.

2. Creating better relationships, becoming less transactional

Brands that add value through personalisation or loyalty schemes should fare better in a world of automated commerce. AI offers brands and retailers the chance to tailor everything – from the product itself to delivery and after-care – to an audience of one. For customers already in relationships with brands, there is an opportunity to deepen that link beyond convenience; if not, it may increase a brand’s chances of breaking their existing “locked in” relationship.

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