Artificial Intelligence is unlikely to become sentient and take over the world, but it may very well take over consumer decision making. AI will likely have one of the biggest impacts on how we as consumers make our purchasing decisions, and the change will happen fast.
The Reality of Consumer Irrationality
My 17-year-old son is currently studying Economics in high school. In the consumer behaviour chapter, he was recently reading, he listed the assumptions by which the models of standard Economics function, one of which is that ‘consumers will act rationally.’ As a conceptual model, it is a wonderful idea, but of course consumers are far from rational beings.
A more realistic understanding of consumer behaviour comes from Behavioural Economics, a field of study concerning itself with the psychology of decision making. It is a fascinating social science exploring and influencing the irrationality of the human mind. The decisions we make relating to what, why, how, and when we buy are all governed by Behavioural Economics, far more than they are by the linear economic theory we teach in school and university classrooms.
Humans are rarely rational and the things we want to buy are many and varied. One of the latest trends in China are ‘fake belly button’ temporary tattoos. Placed a few inches above the navel, it gives the appearance of longer legs. I’ve ordered 3 packs.
Our purchase decisions are hugely affected by expectations, perceptions, social norms, and the psychology of self. The human brain is a fascinating organ, Woody Allen once describing it as ‘his second most favourite organ of his body.’ But what if we are heading into a future where AI replaces our purchase decision making?
In consumer decision making theory, we teach a simple linear model.
For everything we buy, we do so to solve a problem, and those problems do not need to be purely functional. You buy a genuine Gucci handbag not for its storage and functionality but for the peer status it imbues. A stick-on fake belly button solves a problem I didn’t even know existed.
We search for various products that might meet our needs, evaluate them against one another using relevant criteria, decide to purchase, make that purchase and then evaluate it against the product performance.
The Paradox of Choice
For routine purchases, we often shortcut this process by buying known brands, with some businesses confusing this for brand loyalty. Just because I buy the same brand of coffee every fortnight in a supermarket does not mean I am loyal to it, it just means that I do not want to go through the effort of comparing all the offerings on the shelf – the price points, formats, weights, flavours, richness. I just buy the brand I already know and like, by-passing the ‘search and evaluate’ phase. It is not loyalty, it is effort-avoidance.
One of the big Behavioural Economics secrets is that we, as humans, hate the effort of making decisions. The easier you make it for me to decide, the more likely I will do so. Barry Schwatrz wrote an entire book (The Paradox of Choice) about how the more options you give, the less likely it is a consumer will buy.
Men and shampoo are a great example. The average man does not want to stand in the health & beauty aisle of a supermarket or drugstore, trying to work out which of the 400 bottles he needs. If there was one product that said ‘This shower gel is also a shampoo, conditioner, shaving gel and you can even eat it as a protein snack’ that would do him nicely, he’d just buy that forever. Consumers are all busy people and we would all rather divert our brain power elsewhere.
Clever marketeers prey on this of course. Who ever really understands health insurance levels, cell phone bundles, or broadband deals. Sometimes options are made deliberately complicated and confusing so that the consumer loses the will to live and simply buys ‘something’.
AI to the Rescue: Making Decisions Easier
But here comes the fun part, AI is about to solve all our problems.
What if someone else did all the heavy lifting for you? What if instead of having to read the 400 shampoo bottles, your AI assistant already knew what you like, what you need, what you use? What if over time your AI assistant learned in a way you are yet to witness and experience compared to the clunky Netflix and Amazon algorithms we know today as consumers.
Even with the Netflix algorithm running, how many of us can relate to the graph below? Sometimes with too much choice comes decision paralysis.
Today, the algorithms on Amazon, Spotify or Netflix monitor your behaviour and interests and serve up product they feel might ‘kind of’ fit. Think of that as version 1.0. Having witnessed what is coming behind the scenes, prepare yourself for AI 2.0. The level of personalisation on its way will make those algorithms of today look like a 1980s game console.
The application of quantum and better learning models are set to catapult AI assistants into our every day. Why does this matter? Well, it changes everything. It changes how we bring any product to market. It changes the search/evaluate piece of the consumer decision making process forever.
Trusting AI: A Leap of Faith?
The first question most people ask here is about TRUST. How could we ever trust a piece of technology to make our decisions, our purchases, to be in such control in all aspects of our lives?
Well, that genie is somewhat already out of the bottle. LinkedIn already tells you where to work, Tinder who to love, Instagram who to be friends with, Netflix what to watch, Amazon what to buy. The algorithm is already running a lot of the show behind the scenes. However, the trust element is about to get significantly dialled up.
If we look at the 2023 data for consumer AI use, there are two interesting findings. Firstly, look at the SECOND biggest area consumers are using AI for in their every day – Companion Apps
Now look at how quickly this type of use is accelerating. Over the last 12 months, inter-personal AI has had a surge of consumer use.
The top 3 AI apps being used by consumers today are Chat GPT, Bard and Character.ai
Most people I talk to have used Chat GPT, many have heard of Google’s BARD but few seem familiar with character.ai. This last one allows a user to have a conversation with historical figures and fictional friends. While it is great fun chatting to Billie Eilish or Leonardo di Vinci in real time, the fiction element is more interesting. As we get more comfortable with natural language interaction. The AI becomes less ‘bot’ and more ‘besties’. The ‘will we ever trust AI’ argument is crumbling. AI is already becoming our best friend and companion.
A Day in the Life with Your AI Assistant
So, project yourself a year or two down the road. You have daily conversations with your AI assistant. They are likely a face-to-face deep fake, deeply personal in the interaction, all interaction through spoken voice.
They tell you that your 12-month household broadband contract is up tomorrow (you would never have remembered) and so they have searched new providers, found you a better deal based on your data use over the last 3 months, and will switch you automatically. You say great, do it. They run all the admin, form filling, they just require your vocal authorization. Then they do the same with your health insurance, your car insurance, your household utilities. Then they plan your meals for the week, buying the correct ingredients and having them delivered on a day and time to match your schedule. But wait, you’re running 5-minutes late in traffic – no problem. They open the digital door lock for the delivery driver as they know you are only around the corner, all with your authorization as needed.
AI: A Game Changer for Customer Experience
This might seem creepy, far-fetched, or futuristic but we will all lean in to this new reality faster than you think. Every time you need to book a holiday or flight, every purchase decision no matter how small or big, your personal, friendly AI assistant will be there for you, and do it faster, more effectively and only show you the options that are right for you.
But it fundamentally changes the nature of marketing and CX. Customer Experience will need to be AI fuelled and centred. We will get so used to everything being easy, seamless, and absolutely frictionless that we will not tolerate any wait, any friction. Customers will develop zero tolerance.
It is an exciting future for consumers and a daunting one for brands. Cutting through will require genuine purpose, strong authentic brands, and human-centric businesses. It will change the conversation about what brand loyalty really means.
However, in the meantime, if you take nothing else from this article, buy a fake belly button tattoo for instant longer legs. Honestly, the things you learn on this blog …
Ken Hughes is known as the King of Customer Experience. The above blog content is drawn from his internationally renowned keynote on AI and the future consumer.
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