Since Amazon Echo’s 2014 launch, conversational commerce has been a hot topic of conversation in retail (pun intended). The biggest question: How can conversational commerce improve shopping experiences? For the last decade, the answer seemed to be it doesn’t. Consumers struggled to leverage these tools to shop, unless they were reordering a previous purchase.
Conversational commerce’s shortcomings were twofold: humans didn’t know how to talk to artificial intelligence and, up until now, AI didn’t understand humans because it only depended on structured queries or “prompts.” Luckily for consumers and retailers alike, technological advancements in large language models (LLMs) and natural language processing (NLP) allow humans to now speak to AI in their natural language. This AI evolution means conversational commerce can finally deliver on its mission to create breakthrough shopping experiences.
Conversational Commerce in Action
With the help of NLP and machine learning (ML), modern conversational commerce technology advances retail by optimizing product recommendations, enhancing search functionality, and tailoring content to meet individual customer preferences.
In the past, merchants had been at the mercy of pre-determined business rules that leveraged only a few parameters or data points (margin, inventory level, price) to merchandise product results pages for both search and browse. Now, organizations have the computing power to create category and product detail pages that are personalized for every consumer, engaging in a digital conversation through every step of a shopper’s journey. Retailers will continue to embed assisted shopping capabilities into their web experiences to facilitate these conversations.
Conversational commerce capabilities extend to the merchandising practices of cross-sell and upsell, leveraging the same technologies to present better product recommendations, product comparison engines and buying guides. In fact, with generative AI and conversational commerce, a consumer buying guide can be assembled “on the fly,” including multiple variations for a more personalized experience.
Sizing Up Conversational Commerce’s Business Benefits
For consumers, the benefits of conversational commerce are simple: immersive shopping experiences that truly understand their intent and deliver on it with personalized attention. It’s the translation of consumer expectations into reality. On the retailer side, conversational commerce drives key business benefits, from efficient customer service functions and satisfied, repeat customers to increased conversion rates and lower shopping cart abandonment rates. The technology is a win-win for both consumers and retailers alike.
Safeguarding Privacy and Bolstering Customer Satisfaction
Personalization is the holy grail of modern e-commerce, yet a lot of consumers are worried that their data will be used for evil rather than good. A 2022 Forrester study finds that companies are doubling down on personalization technologies. Yet, 36 percent of consumers indicate that “nothing will motivate me to share more personal information.” So how can brands provide the hyperpersonalized shopping experiences consumers demand when many aren’t open to sharing personal information?
The future of conversational commerce and GenAI will leverage consumer queries, search and zero-party data that’s explicitly shared during the shopping journey to improve personalization without tapping into the sensitive issue of personal identifiable information. Conversational commerce doesn’t rely on data that’s stored in a customer data platform, but rather leverages the signals and inputs from a consumer “in the moment,” such as their search queries combined with contextual signals.
Conversational AI Wakeup Call
According to the 2023 The Future of Ecommerce report, 69 percent of consumers go straight to the search bar when they visit an online store. This statistic should serve as a wakeup call for retailers: the time is now to optimize search to facilitate more relevant conversations. Conversational commerce technology provides a direct line to customers’ preferences, leading to the most important goal for retailers: increased customer lifetime value.
Michael Klein is principal of Klein4Retail Consulting.
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