How is Gen AI evolving consumer experiences both today and in the future

Generative AI is poised to evolve from a technological marvel to an integral facet of everyday business, promising advancements in operational efficiency and a revolution in customer engagement.

In brief

• Consumer engagement with generative AI is increasing, with applications in personalised experiences and customer service automation, but trust levels vary among consumers, with only a minority deeply understanding AI and its potential benefits.
• Consumer adoption of AI is categorised into four groups—Experimenters, Enthusiasts, Skeptics, Indifferents—with varying levels of trust and usage, presenting challenges and opportunities for businesses to tailor AI-driven solutions for different segments.
  
• Organisations that can integrate GenAI to better personalise and tailor customer experiences as part of all customer touchpoints to drive a seamless buying, support and return journeys will be able to stand out from the crowd.

If 2023 was seen as the breakout year for generative artificial intelligence (AI), then 2024 is the year it’s expected to become mainstream, integrating into a vast array of business processes and applications. 

With the rise of breakthrough capabilities there has been an increase in investment from large companies to integrate these AI tools to drive end - to - end operational efficiencies and enhance consumer experiences. Organisations are primarily looking to invest in AI as a means to boost productivity and improve growth, with 47% of CEOs agreeing this is a top priority according to the EY CEO Outlook Pulse. Looking out over a three-year horizon, this priority focus is expected to shift to decarbonising of businesses and protecting revenue growth.

There are also increasing applications of Generative AI integrating into consumer engagement, focusing on an enhanced customer experience, personalised and targeted campaigns, dynamic product displays and automation of customer service.

One thing that is clear is that AI is a priority agenda item of many CEOs, and they remain optimistic about their growth and profitability, leveraging AI to do so.

There continues to be growing optimism surrounding AI. With this comes an imperative to act now, to review and continuously iterate your AI strategy to adapt to the evolving landscape so you can capitalise on opportunities and manage risk effectively. 

GenAI will drive new consumer behaviours disrupting relationships.

It is easy to focus on the business implications of GenAI, but the impact that it has on consumer behaviour and how consumers engage with businesses could ultimately be more significant.

Today, consumers are increasingly engaging with AI technology to enhance their own experiences. However, the experiences so far are still fragmented, inconsistent and fraught with risks that aren’t fully understood, which could both scare or overwhelm some consumers.

Are consumers willing to accept experiences offered by AI?

According to the latest EY Future Consumer Index, while 96% of Irish consumers are aware of AI, only 16% have a deep understanding. When it comes to trust levels in AI's application, Irish consumers show limited trust in AI for managing finances (70%), altering or enhancing images for marketing purposes (71%), and giving medical advice (66%). However, 65% of Irish consumers have complete or moderate trust in AI to offer personalised deals and promotions.

When it comes to AI adoption, we can categorise consumers into four categories¹:

Experimenters and Enthusiasts are active users of emerging technology - and so represent the largest opportunity for companies. Skeptics and Indifferent consumers do not trust AI yet and will need significant convincing and increased understanding before openly integrating this technology into their lives.  

Furthermore, the research reveals that just 8% of Irish consumers believe AI significantly enhances online shopping, indicating a gap between what AI can do and what consumers expect, pointing to an opportunity for businesses to improve understanding and trust in AI.

How are consumers currently adopting the technology?

Many companies are using Generative AI for personalised media content and enhanced product experiences. In retail, Generative AI is a driver of an emerging “retail as media” industry enabling retailers to integrate Generative AI tools with customer databases to create personalised media content as a B2B service for brands (and retailers) to target consumers. In consumer products, initial use cases have focused more on developing marketing campaigns that encourage consumer co-creation of content to enhance product experiences. 

Some of the notable first movers in this space putting Generative AI into action across their marketing, sales and operations include:

• Tesco leverages AI-led sophisticated algorithms to accurately predict customer demand and optimise its distribution, price, and promotions.
• Nestlé used DALL-E 2 to create a new artwork imagery of an existing “oil-on-canvas” masterpiece over 350 years ago for its yoghurt product La Laitière.
• Coca-Cola launched a marketing campaign called “Create Real Magic,” enabling consumers to use ChatGPT and DALL-E tools to create ads for the company.
• Levi’s parent LS&Co partnered with digital fashion studio Lalaland.ai to display online products using AI generated hyper-realistic models of multiple body types, ages, sizes and skin tone.
• Ralph Lauren is leveraging existing AI use cases to test Generative AI across a range of supply chain functions along with copy editing, graphics, and computer programming.
• IKEA design agency Space10 has been exploring Generative AI for creating new furniture designs and training its employees on its efficient operational usage.
• Wayfair is exploring the potential of Generative AI capabilities in areas such as customer services, personalisation, sales & marketing and crafting code.
• JD.com, Chinese e-commerce giant develops in house chatbot for its service platform (ChatJD) focussed on the fields of retail and finance.
• LG introduced a Generative AI called "Captioning AI" that can describe an image within 10 seconds in five sentences.

How could Generative AI evolve in the future?

As consumers ask GenAI for recommendations, brands and retailers must rethink their customer engagement. There will be both short and longer-term implications of Generative AI over the coming years. 

• Today and over the next 12 months, Generative AI is applied primarily into content creation for marketing and consumer engagement. This aims to deliver more personalised and intuitive experiences for consumers and easier interactions with brands across multiple channels.
• Over the next three years, Generative AI will build a layer over other AI and analytics tools to inform a more real-time understanding of operational and market data at scale in digestible formats. The utility of Generative tools will move beyond consumer engagement as we see it today to offer enhanced use cases such as automation of multimedia experiences. Consumers will increasingly: use Gen AI assistants to automate basic buying activities, leverage AI nudges to inform healthier, better life choices, and engage with more personalised products, media and experiences. Despite increased reliance from AI there is an expected growth in the generational gap in trust and adoption, and further potential risk for consumers as the lines between real vs synthetic media becomes blurred.
• In the future, Generative AI will become embedded across a range of technologies to act as an intuitive user interface between humans and machines or even machine to machine. A significant proportion of consumers are likely to embrace, or passively adopt GenAI solutions by delegating decisions to AI-powered tools and allowing AI to curate media content, products and services for them. Many may hand over management of their financial or social affairs to AI, trusting that it will act in their best interests and optimise their lives. Basic purchase decisions by consumers could be governed by AI, as consumers will engage with brands through channels curated by their own AI tools. Business models such as D2C could evolve into AI2AI as brands develop GenAI tools tailored to AI-powered applications that the consumer trusts as much as for the end consumer.

What is next?

Organisations that can integrate GenAI to better personalise and tailor customer experiences as part of all customer touchpoints to drive a seamless buying, support and return journeys will be able to stand out from the crowd.

Think personalisation on a more granular level. High levels of personalisation on product, price and service will become table stakes, with customer segmentation delivering insights at the level of individual consumers rather than broader demographic groupings. 

Engage users in what matters to increase trust. Increasing consumer trust in AI-generated content and experiences brings an opportunity for companies to engage and convert current non-users. Leveraging AI along the value chain to deliver on what consumers value (e.g. cost and health) could be a way to accelerate AI consumer adoption. 

Don’t neglect existing channels and values. At the lower end of the AI adoption spectrum, Skeptics will continue to actively avoid using AI to curate their lives, preferring to embrace physical and traditional experiences, and make their own choices. Serving them will mean a reversion to longstanding brand values to establish authenticity and trust through physical touchpoints.

Ethical Considerations: Fairness, accountability, transparency should be foundational to the AI's operation. By clearly indicating when AI systems are being used, the extent type and reasons for data collection and appropriate privacy guardrails will ensure a level of comfort for customers to adopt these experiences.