How AI is Changing Retail Marketing

When used with intentionality, AI in supply chain management can directly support and promote retail marketing initiatives.

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Digital transformation has touched every industry and changed how we understand marketing and selling. With e-commerce at the forefront of our spending habits — in 2020, a $4.28 trillion habit (subscription required) — business and marketing strategy must also transform to accommodate this change. Because of this, I believe artificial intelligence (AI) is the next phase in digital transformation.

Many companies are still discovering the practical uses of AI and how it can transform their industries. McKinsey surveyed multiple industries to determine AI adoption across the world in 2020. According to the firm's findings, artificial intelligence is most used in "product- or service-development and service-operations functions." In marketing and sales, AI is most commonly adopted in customer-service analytics (17%) and customer segmentation (14%). In other industries, like supply chain management, AI accounts for 9% of logistics-network optimization and 9% of the inventory and parts optimization.

AI is transforming both industries, separately, but there is a cross-section between the two that is often neglected.

When used with intentionality, AI in supply chain management can directly support and promote retail marketing initiatives. Today's tech companies, such as and Retalon, provide artificial intelligence-based solutions that enable consumer products and retail companies to optimize their supply chains. While the technology primarily serves supply chain managers, marketing teams can benefit from the insights provided by AI in the supply chain.

Marketing Becomes Proactive

Marketing and supply chain management have this in common: they are often cost-focused initiatives. But this doesn't hold up in the digital age. The lifecycle of a product — and a marketing campaign — moves along more rapidly than ever before. Customers, in response to this ever-quickening retail cycle, expect faster, personalized shopping experiences. This rapid pace makes it challenging for retailers to predict and mitigate risks. Historically, in a slower-paced retail environment, this may not have been as problematic. But now, without proactive risk management, companies are not always able to keep up when customer demand changes overnight or a global event (think Covid-19 or the collapse of the power grid) impacts the supply chain.

This is why marketers must take a proactive role by building strategies based on supply chain predictions. With a supply chain management system, business leaders can make accurate forecasts and anticipate demand, and marketers can use this data to inform their strategies. With supply chain data in hand, marketing becomes proactive because initiatives are structured around anticipating the supply chain needs and demands long before they hit. Overall, this helps companies mitigate risk, optimize sales and maximize profits — the primary objectives of both marketing and supply chain management teams.

More Accurate Forecasts Lead to More Focused Campaigns

In the consumer products and retail spaces, artificial intelligence helps companies make more accurate forecasts. Buying patterns and habits are considered alongside the production processes and supply chain limitations. With more accurate forecasts — ones focused on risk mitigation and product optimization — marketers can craft campaigns that support these predictions. This is essential when considering the lifecycle of a product, from its first appearance on the shelf to the process of discounting and promoting it. Accurate forecasts can help marketers determine the best timing of these processes so that profit is optimized and loss is minimized.

AI is transforming retail marketing by taking the guesswork out of consumer demand. Data-driven campaigns can act as risk mitigation for retail and consumer product companies, creating a more stable business environment and meeting customer demand with greater accuracy. The customer is at the center of any marketing strategy, and accurate forecasts help marketers anticipate the demands of the customer.

Supply Chain Accuracy Reveals Customer Intent

An accurate understanding of customer intent helps marketers know how, when and where to interact with consumers to optimize sales. Supply chain management, with AI-driven data, supports this initiative. Historical data, market trend analysis and detailed predictions make it possible for marketers to understand where customers are looking and what they're looking for. In 2021, this is a key component of marketing success because consumers prefer personalized shopping experiences. Marketers cannot offer personalized experiences without data, and AI can provide the information needed.

For example, artificial intelligence can help companies determine where to send products to meet demand. If a retail company needs to send a set of blue T-shirts to a particular geographic region, AI can help determine how many shirts, what sizes and even how many of those shirts will be bought online and returned to the store. This reduces waste and maximizes profits. These geographical insights can also help marketers determine which advertisements to serve to various geographic markets because they have a better understanding of customer intent.

Strategic, Experience-Based Marketing

It's not just about marketing the products anymore; it's about selling the end-to-end experience of the purchase. Think about eyewear companies that allow customers to try on multiple pairs of glasses at home, or the online shopping order and return process. This requires a detailed understanding of supply and demand, company inventory and trends. AI is essential in this field because it gives companies a detailed understanding of their inventory, what stock will be unavailable for a time (while buyers are trying out a product, like glasses, but not necessarily purchasing) and how to price items to make up for the cost of experiential selling.

Ultimately, artificial intelligence makes accurate predictions about the supply chain and serves the goals of marketers by creating more accurate forecasts of customer behavior. This is more sustainable for companies, especially in the digital age. Not only does it cater to true sustainability initiatives — accurate projections reduce waste — but it makes it possible for companies to focus their marketing and efforts on areas that will yield the greatest reward. By reducing the amount of wasted time, effort and materials, artificial intelligence has already transformed retail marketing and made it more accurate and impactful — and this is just the beginning.

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