The AI Economy: How AI Is Affecting Customer Engagement

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This week’s issue explores artificial intelligence’s impact on the brand-customer relationship. It’s a powerful tool for personalization, but, are brands really prepared to use it?

Read on to learn about the state of customer engagement. Plus, check out the 40+ most important AI stories you may have missed this week.

The Prompt

Companies are turning to artificial intelligence to improve customer relationships and increase sales. A new study finds that people spend way more with businesses offering personalized experiences. But the thing is, not many companies have the data needed to make this happen.

Twilio recently released its annual State of Customer Engagement Report, exploring how businesses use AI. More than 4,750 B2C executives and 6,300 consumers were polled across 18 countries. The cloud communications company believes we’re in an “age of individualization,” when the one-to-many personalization approach gives way to unique experiences made possible by AI.

70 percent of companies are already using AI to improve their marketing and those with “mature digital engagement” have seen a 123 percent increase in revenue.

In addition, 49 percent of consumers surveyed indicated they’d be more trusting of a brand if it disclosed how its AI uses their data. Overwhelmingly, 91 percent of companies say they are transparent with customers. However, that starkly contrasts with the 52 percent of customers who disagree.

“Customers today expect personalized experiences and want to understand how businesses use their data to shape those experiences,” states Kathryn Murphy, Twilio’s senior vice president of product. “It’s imperative for brands to be clear about how they use AI, ensuring that they balance how they deploy it with equally robust measures to protect customer privacy. Transparency is not optional — it’s a critical component of building and maintaining customer trust and loyalty.”

Twilio’s report highlights five main insights:

AI can boost customer engagement

Businesses may think they’re doing well in this area, but consumers don’t share this view — 84 percent of brands say they provide “good” or “excellent” engagement, but only 54 percent of consumers agree.

Twilio’s report shows that the more personalized a customer’s experience is, the more they’ll spend on a business. It recommends that companies “seamlessly integrate their data tools and technologies with AI,” which will create a “significant opportunity” over the competition since “approximately half of businesses have yet to incorporate AI into their tools.”

Consumer data protection is paramount to maintain trust

This is an unsurprising takeaway. If the AI uses customer data to provide a tailored experience, that information must be handled carefully to ensure security. The consumer is volunteering personal information to obtain free services, discounts, and other rewards for their patronage, so brands mustn’t violate the trust between them and the customer.

Among all the generational demographics, Baby Boomers are the most concerned about data protection (67 percent) and Gen Z is less concerned (56 percent). However, many say it’s the best way to earn their trust.

Brands acknowledge this concern and are working to find ways to have the best of both worlds: strong security or great customer experience. It’s one of the top three issues that will be debated over the next 12 months.

Brands still love cookies

These digital trackers have helped companies amass customer data for years thanks to Google and Facebook. However, brands are in a predicament due to Apple’s privacy push and Google’s shuttering of cookies this year. They need first-party data but don’t yet have a system in place. This is important because what data will be used to power AI?

53 percent of brands say their marketing strategies rely on third-party data. You can see how the demise of cookies can cause some distress.

But there is some good news: Twilio reports the number of companies saying they’re using mostly first-party customer data for marketing has grown to 48 percent, a 29 percentage point increase from last year.

Younger consumers want better digital experiences

Millennial and Gen Z consumers, both of whom are products of the internet and social media age, share a mutual preference for digital engagement and demand higher standards for their digital experiences. Survey respondents say they want “almost 70 percent of their interactions with brands to be digital.” However, a generational gap exists, as Baby Boomers are more skeptical and less content with brands’ digital engagement.

Even so, brands have set their sights on younger consumers, especially since there’s a higher Return on Investment when using technology for outreach. According to Twilio, “this may be because brands increasingly engage with channels favored by these demographics, such as SMS, chat apps like WhatsApp, and social media.”

Brands need to close the customer experience gap

Brands must act urgently to offer personalized experiences. 64 percent of consumers claim they’ll abandon a business if such experiences don’t exist — 40 percent of customers admit to searching for alternative products or services. Providing personalization gives consumers a sense of convenience and relevance. They want their shopping process to be made easier across their preferred channels.

Twilio emphasizes that businesses are moving quickly to streamline the buying process and eliminate friction points. Artificial intelligence will help businesses close this so-called customer experience gap.

▶️ Click here to read Twilio’s 2024 State of Customer Engagement report

Quote This

“The issue with not having a European champion is that the [AI] road map gets set by the United States”

— Mistral AI CEO Arthur Mensch discusses the significance of Europe having a strong AI company to compete against OpenAI and Google (The New York Times)

This Week’s AI News

💥 Disruption and Misinformation

AI chatbots will never stop hallucinating (Scientific American)
Meta’s new AI deepfake playbook: affix labels to a wider range of content but make fewer takedowns (TechCrunch)

End Output

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How AI Impacts Customer Engagement