MarTech Podcast ™ // Marketing + Technology = Business Growth

Episode: AI Personalization Improves ROI?
Release Date: January 7, 2025
Host: Benjamin Shapiro
Guest: David Edelman, Senior Lecturer at Harvard Business School and Executive Advisor at Edelman Advisory Services

Introduction

In the January 7, 2025 episode of the MarTech Podcast™, host Benjamin Shapiro delves into the transformative role of artificial intelligence (AI) in marketing personalization and its impact on return on investment (ROI). Joining him is David Edelman, a seasoned expert in personalized customer experiences and an academic authority from Harvard Business School. The episode explores the effectiveness of AI-driven personalization strategies, best practices for implementation, and real-world examples of success and challenges in the field.

AI Personalization and Its Impact on ROI

Lightning Round: Trend or Trash?
Question: Does artificial intelligence personalization improve ROI?

David Edelman ([02:05]):
"I think that's definitely a trend. And what I have seen in companies that use it well is that they are using it to drive more personalized experiences versus overwhelming people. So it can be trash if it's just leading to a tragedy of the commons where you're just throwing more crap at people. But if you're using it smartly, I have seen companies like Shopify, for example, the example I just said, get a 400% improvement in the ROI on their conversion rates by using AI to manage the way they're going to market."

Edelman underscores that AI personalization is a significant trend with the potential to vastly improve ROI when applied thoughtfully. He emphasizes the importance of enhancing customer experiences rather than inundating them with irrelevant content.

Benjamin Shapiro ([02:40]):
"You hit the nail on the head. Trend could be trash, right? It depends on the usage. And to me, an understanding of how to use artificial intelligence is very important before you start to try to use it specifically for personalization because it can be a very powerful tool, but also when misguided, can lead to some horrendous user experiences."

Shapiro echoes Edelman's sentiments, highlighting the dual nature of AI in personalization and the necessity for a strategic approach to harness its benefits effectively.

Best Practices for Implementing AI Personalization

Customer-Centric Approach
Edelman discusses findings from his research, co-authored with Mark Abraham, which analyzed 200 advanced companies in personalization. A key takeaway is the emphasis on starting with the customer value rather than merely leveraging data.

David Edelman ([03:17]):
"What became very clear is that they don't start from the data. They actually start from the customer value they want to create. What is the use case that they want to enable by using AI and personalization to create value for the customer as opposed to just manipulating them. They start from that. They're taking the customer's point of view."

This approach ensures that AI-driven personalization aligns with customer needs and enhances their experience, fostering loyalty and engagement.

Case Studies and Examples

Shopify's Success with AI Personalization
Edelman cites Shopify as a prime example, where intelligent AI application led to a 400% improvement in ROI on conversion rates. This achievement was possible by using AI to tailor marketing strategies precisely, thus driving more effective customer interactions.

Starbucks' Personalized App Experience
Another illustrative case is Starbucks, where CEO Howard Schultz aimed to make the brand "the most personalized brand in the world." By developing an app that responds to user data in real-time—such as location, time of day, loyalty points, and past orders—Starbucks simplified the ordering process, resulting in over 40% of orders being placed through the app.

David Edelman ([04:30]):
"They created an app that is incredibly personalized. You open that app in 300 milliseconds, it knows where you are, who you are, time of day, are you at work or somewhere else? How many loyalty points do you have? What do you tend to order at that time of day? Do you get food? Do you buy a discount, all of that. And it dramatically simplifies your ability to just simply place an order of what could be an endless, complex range of variables."

However, Edelman also points out challenges, such as backend operations and store overloads, highlighting that even well-intentioned personalization efforts require robust infrastructure to support them effectively.

Conclusions and Takeaways

The episode concludes with a reinforced understanding that AI personalization, when executed with a customer-centric strategy, can significantly boost ROI. Both Shapiro and Edelman advocate for thoughtful implementation, emphasizing that the success of AI in personalization hinges on its alignment with customer value and the infrastructure supporting it.

Benjamin Shapiro ([05:00]):
"My advice is to just focus on keeping your customers happy."

By prioritizing customer satisfaction and strategically leveraging AI technologies, businesses can navigate the complexities of personalization to achieve sustainable growth and enhanced customer relationships.

Key Quotes

• David Edelman ([02:05]):
  "Companies like Shopify... get a 400% improvement in the ROI on their conversion rates by using AI to manage the way they're going to market."

• Benjamin Shapiro ([02:40]):
  "An understanding of how to use artificial intelligence is very important before you start to try to use it specifically for personalization."

• David Edelman ([04:30]):
  "They created an app that is incredibly personalized... and it dramatically simplifies your ability to just simply place an order."

• Benjamin Shapiro ([05:00]):
  "My advice is to just focus on keeping your customers happy."

Additional Resources

• David Edelman's LinkedIn: LinkedIn Profile
• Edelman Advisory Services: edelmanadvisoryservices.com
• Book: Personalized Customer Experience in the Age of AI (personalizedthebook.com)
• MarTech Podcast: martechpod.com

For more insights on the intersection of marketing and technology, subscribe to the MarTech Podcast™ and join host Benjamin Shapiro as he uncovers strategies and success stories from leading industry experts.