AI for eCommerce: Increase CLV and Drive Profitable Growth


Prudent AI investments will turbocharge an eCommerce business. It’ll remove costly inefficiencies, improve customer lifetime value (CLV), revolutionize customer service capabilities, and drive profitable growth.

Recent survey data shows that half of eCommerce businesses are already using AI and that an additional 33% are moving toward that goal. With nearly 9 out of 10 survey respondents reporting that their companies have either already implemented AI solutions or are actively taking steps to do so, it’s clear that investment in these technologies is rapidly becoming a cost of doing business.

Although half have already deployed the technology, the remaining half are still working through the roadmap. Wherever your organization resides on the journey, it’s important to build in the same level of rigor for measuring the ROI of AI investments that you’d apply to other tech investments.

Building robust measurement protocols in advance of deploying AI solutions ensures that you’re equipped to optimize and report on the performance of your AI tools. This process starts with gathering historical data and applying data visualization tools and analytics to surface correlations, patterns, and trends that could be useful for establishing a baseline and comparing metrics before and after AI deployment.

Defining KPIs, such as conversion rate, average order value, and customer acquisition cost, keeps your efforts on track for what matters most to your business. Once your AI tools are deployed, you can expect significant improvement in 3 key areas: operational excellence, customer lifetime value, and support services efficiencies.

See also: Customer Mastering: The Secret to Improving the Customer Experience

Achieve next-level operational excellence

AI solutions apply predictive analytics to forecast future demand based on historical data and current market trends. Advanced machine learning models learn and adapt based on new data to improve accuracy over time. Because AI processes structured and unstructured data, the technology can identify patterns and trends that traditional methods are unable to recognize.

Predicting demand fluctuations enables you to optimize inventory management by preventing stockouts and eliminating the carrying costs for excess stock. AI can

determine the appropriate level of safety stock based on multiple factors, such as lead times, demand variability, and market conditions, to build in a buffer to handle demand spikes and supply chain disruptions. Algorithms can also dynamically reroute orders based on inventory levels to the fulfillment center or supplier best suited to fulfill each order.

Because the algorithm can monitor competitor pricing in real time, AI tools can make dynamic pricing decisions based on changes in demand and market conditions. You can decide to create dynamic pricing rules based on predefined factors, such as demand, time of day, or promotional activity, or adjust pricing for specific services or time periods. Your competitors are likely segmenting their customers based on their preferences, behavior, and demographics to refine their pricing strategy on a more granular level.

When it comes to supply chain optimization, AI algorithms can optimize transportation routes based on multiple variables, such as traffic, weather, and delivery constraints, to reduce fuel consumption and improve efficiencies for transportation networks. AI-powered predictive maintenance will anticipate equipment failures before they occur to reduce downtime and extend the lifespan of the machinery. Inside warehouses, AI-driven robots and autonomous vehicles are optimizing operations by automating picking, packing, and sorting; this capability speeds up fulfillment while reducing errors.

These operational advancements will be transformative: experts predict that AI will boost eCommerce logistics productivity by more than 40% over the next ten years.

Increase customer lifetime value (CLV)

Experts also believe that applying AI lowers customer acquisition costs by up to 50%. Algorithms can analyze customer data to identify patterns and preferences and apply those to highly targeted marketing campaigns. Using this data will improve the relevance of your marketing outreach, which leads to higher conversion rates and increased retention.

By analyzing customer feedback, reviews, and social media mentions, AI can extrapolate customer sentiment to identify areas for improvement, address concerns, and increase retention. You can also use the algorithm to predict when a customer is likely to churn; AI can correlate key indicators, such as decreased purchase frequency, reduced average order volume, and low engagement with marketing outreach, to identify at-risk customers and take proactive measures, which could include targeted offers and communications.

AI can drive customer engagement by simplifying search and enhancing interactions on your website. For example, the technology can predict user intent and provide relevant autocomplete suggestions as customers type to improve the efficiency of the search process. Additionally, using the algorithm to dynamically tailor website content, such as product listings, articles, and promotions, will ensure that users see the most relevant information first.

Applying AI, you’ll create highly refined customer segments for various purposes to prevent attrition and increase customer lifetime value. For instance, you might decide to create segments for your outbound communications or use dynamic pricing to address the price sensitivities of various customer categories. You can also use the technology to optimize cross-selling and upselling efforts.

Automate customer service efficiencies

AI can significantly improve customer service response windows by automating tasks and optimizing the efficiencies of customer support processes. Algorithms can categorize and route customer inquiries to not only the appropriate department but also the person best suited to handle the inquiry. Because the algorithm predicts the urgency of customer tickets, you can automate the prioritization of the most pressing issues to ensure that critical matters are addressed promptly.

AI-powered chatbots operate around the clock, providing customers with real-time help with products, queries, and website navigation; the timeliness of this assistance drives conversions and reduces cart abandonment rates. Because chatbots can handle a high volume of inquiries independently, your customer service agents will be freed up to dedicate their time to more sophisticated tasks.

Chatbot technologies are particularly effective during peak times or when there’s a sudden surge in website traffic because — unlike human customer support teams — they’re equipped to scale on demand. Chatbots can play a transformative role in your customer service department, and it’s no surprise that survey results show that 80% of eCommerce businesses are already using them or planning to implement the technology soon.

Optimize profitable delivery

Profitable delivery relies on your ability to lower your costs while growing your business and profit margins — AI investments are uniquely suited to helping you accomplish these goals.

AI tools are agile, intelligent, and infinitely adaptable — you can apply them to nearly every aspect of your business. For example, predictive analytics takes the guesswork out of supply chain continuity, inventory management, demand forecasting, and pricing; this capability wipes out manual processes and the aggravation associated with lag time, errors, and revenue leakage.

When it comes to profitability, lowering customer acquisition costs is a critical part of the equation. Applying AI, you can establish customer profiles that are most likely to convert. When you’re laser-focused on who your most valuable customers are, your customer acquisition efforts will be successful.

For customer service teams, AI is a godsend; using chatbots, you can provide 24/7 coverage without human involvement. With AI taking care of the basics, your teams can apply their expertise to strategic initiatives that will help you increase customer retention and lifetime value.

All in all, prudent AI investments will turbocharge your business; you’ll remove costly inefficiencies, improve customer lifetime value, revolutionize your customer service capabilities, and drive profitable growth.

Ram Venkataraman

About Ram Venkataraman

Ram Venkataraman is the CEO of Kibo, where he leverages over 25 years of experience in the software industry to drive the company's growth and success. His leadership philosophy centers on nurturing individual and team well-being while passionately serving employees, customers, and partners. Ram's career encompasses a broad spectrum of roles, from guiding bootstrapped startups to steering functions in public companies. Prior to his tenure at Kibo, he was the CTO of NCR payment platforms, demonstrating his deep expertise in technology and product development.

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