AI Personalization Improves ROI?

Summary

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

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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

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Transcript

[Benjamin Shapiro]

The Martech Podcast is a proud member of the I Hear Everything Podcast Network. Looking to launch or scale your podcast, I Hear Everything delivers podcast production, growth and monetization solutions that transform your words into profit. Ready to give your brand a voice? Then visit iheareverything.com.

[David Edelman]

From advertising to software as a service to data across all of our programs and clients, we've seen a 55 to 65% open rate.

[Benjamin Shapiro]

Getting brands authentically integrated into content performs better than TV advertising. Typical lifespan of an article is about 24 to 36 hours.

[David Edelman]

If we're reaching out to the right person with the right message and a clear call to action, then it's just a matter of timing.

[Benjamin Shapiro]

Welcome to the Martech Podcast, a member of the I Hear Everything Podcast Network. In this podcast you'll hear the stories of world class marketers that you technology to drive business results and achieve career success. Here's the host of the Martech Podcast, Benjamin Shapiro.

Welcome to the Martech Podcast. I'm your host, Benjamin Shapiro and today we're going to discuss customer strategy in the AI era. Joining me is David Edelman, who is a Senior lecturer at Harvard Business School and the Executive advisor to Edelman Advisory Services. He is also the author of the Personalized Customer Experience in the Age of AI. And today David and I are going to talk about the history of personalization. All right, Dave, I want to move on to our lightning round. This is where we're going to answer some Martech questions that are specific to the topic that we're covering this week, which is personalization and artificial intelligence. Are you ready for a couple of questions?

[David Edelman]

Of course.

[Benjamin Shapiro]

All right, first, one Trend or trash? Artificial intelligence Personalization improves roi.

[David Edelman]

I think that's definitely 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.

[Benjamin Shapiro]

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. And I'm interested to hear you mentioned Shopify. Like, how do brands think about the right way to use artificial intelligence for personalization? Instead of floundering, trying to figure out what works and what doesn't, what we.

[David Edelman]

Have looked at as part of the research for the book that we wrote, I did that together with a guy named Mark Abraham. He's the head of the marketing practice at BCG. We researched 200 companies who were more advanced in doing personalization. And 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. Nespresso was not taking the customer's point of view. So you have to think about how you want to actually change that experience. So I'll give you just another example of a company that maybe overdid it. A few years ago, Howard Schultz said he wanted Starbucks to be the most personalized brand in the world. He said this at an investor meeting. He said personalization is going to be one of the keys to our growth. And 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. And well over 40% of their orders now are coming in through that app. Now you have to have the backend operations, and the stores have been overloaded from that. But he was thinking about the customer and simplifying the whole ordering experience. That's the mindset.

[Benjamin Shapiro]

All right, that wraps up this episode of the Martech Podcast. Thanks for listening to my conversation with David Edelman, the executive advisor and senior lecturer at Harvard Business School. If you'd like to get in touch with David, you could find a link to his LinkedIn profile in our show Notes. Or you can visit his company's website, which is edelmanadvisoryservices.com you can also find his book at personalizedthebook.com if you'd like a summary of this podcast or if you'd like to be our next guest speaker on the Martech podcast, head over to martechpod.com you can also find us on YouTube, Twitter, Instagram, or even on TikTok now. And if you'd like to contact me, let's connect over on LinkedIn. My handle is Benjschapp. B E N J S H A P and if you haven't subscribed yet and you want a daily stream of marketing and technology knowledge in your podcast feed, hit the subscribe button in your podcast app and we'll be back in your feed tomorrow morning. All right, that's it for today, but until next time, my advice is to just focus on keeping your customers happy.

[David Edelman]

Foreign.

[Benjamin Shapiro]

Thanks for listening to the Martech podcast, and I hear everything. Production Looking to launch or scale a podcast like this one for your brand? Then visit iheareverything.com.