IN BRIEF:
• AI can significantly improve operational workflows and enhance consumer interactions within the consumer products and retail sector.
• The effective deployment of AI depends on the active engagement and expertise of human professionals.
• Developing a comprehensive governance framework is crucial for addressing risks related to data privacy, compliance, and ethical considerations.
The artificial intelligence (AI) market is projected to expand at a compound annual growth rate of 30% from 2023 to 2032, potentially exceeding $110 billion by 2032. AI’s ability to create original and realistic content — ranging from images to text — is revolutionizing how businesses engage with consumers, significantly impacting the consumer products and retail (CPR) industry.
According to the EY Future Consumer Index, which has monitored consumer sentiment and behavior over recent years, there is a growing acceptance of AI among consumers in the Asia-Pacific. This growing acceptance can lead to various practical applications within the CPR sector.
This article discusses the transformative potential of AI in enhancing operational efficiency, personalizing consumer experiences, and driving innovation within the industry.
APPLICATIONS OF AI IN CPR
AI has initiated a transformative phase in the CPR industry, altering business operations and enhancing the consumer journey. It facilitates a seamless omnichannel experience, merging online and offline interactions while laying the groundwork for the interactive dimensions of Web 3.0 and the metaverse.
FROM MASS MARKETING TO PERSONALIZED EXPERIENCES
AI signifies a significant shift for consumer-focused businesses, enabling them to move towards genuine personalization. It allows CPR companies to analyze extensive amounts of structured and unstructured data from diverse sources, including consumer behavior, preferences, and social media activity. By utilizing this data, companies can craft targeted experiences and customized content that align with consumer profiles — such as personalized product recommendations, marketing messages, and promotions — thereby enhancing consumer engagement. This technology empowers marketers to gain deeper insights into individual consumers, leading to the creation of highly targeted campaigns that improve conversion rates. AI-driven marketing technology startups in the region are providing integrated digital media workflows, allowing for precise audience targeting and optimized campaigns.
In particular, AI has revolutionized content and ad creation by personalizing content recommendations, and optimizing search engine optimization (SEO) strategies. For instance, a streaming platform uses AI to analyze user data for personalized content suggestions. In advertising, AI enables dynamic ad generation tailored to specific audience segments, as seen with a social media platform’s ad targeting. It also automates A/B testing, which is a method of comparing two versions (A and B) of something such as an ad to see which option performs better, for real-time campaign optimization.
The transformative capabilities of AI extend beyond data analysis; they also revolutionize consumer engagement through virtual try-on technologies. AI supports shopping tools that incorporate virtual try-on features into digital platforms, enabling consumers to visualize clothing on a range of representative models with varying sizes, skin tones, body shapes, and hair types. For example, a Japanese clothing company uses an app that allows its customers to take measurements using their smartphone camera for more accurate sizing options. An Italian luxury fashion company also allows customers to virtually try on the full range of eye and lip colors from its new beauty line through its website.
It may not be long before AI becomes fully integrated with marketing functionalities, allowing businesses to allocate budgets towards other strategic investments that enhance turnover and profitability.
REVOLUTIONIZING INNOVATION
By processing vast amounts of data in various formats, AI can reveal hidden insights and empower companies to generate innovative ideas, explore new avenues, and assess concept feasibility rapidly. Some businesses are already leveraging AI to identify gaps in flavors and taste profiles, which serve as valuable inputs for new product development. For example, a multinational beverage company used AI to develop limited-edition flavors in zero-sugar drinks inspired by gaming, music, and other trends.
As AI becomes integrated into the innovation process, it is anticipated to serve as a catalyst for accelerated and insight-driven innovation. Leading companies are employing AI to support research and development in product design by generating and visualizing design prototypes, conducting simulations, and exploring different configurations for quicker innovation. One Philippine multinational food processing company used AI to create product designs and prototypes for a recent brand and correlated it with focus group discussions to shorten their development timeline significantly. More advanced concepts can be rapidly tested with consumers online, and feedback can be incorporated into the AI system for more targeted innovations.
ENHANCING PRODUCTIVITY
AI can significantly boost employee productivity in various ways. By analyzing large datasets to provide quick insights, it enables employees to make informed and timely decisions, resulting in improved outcomes. This technology also presents opportunities to automate repetitive tasks, allowing staff to focus on more strategic initiatives that drive business growth.
Moreover, AI facilitates true conversational commerce for CPR companies. By utilizing advanced chatbots and virtual assistants powered by AI, businesses can effectively manage consumer interactions. Leading e-commerce platforms have introduced AI chatbots that function as personal shoppers, simplifying consumer engagement and enhancing productivity. This integration not only streamlines operations but also strengthens consumer relationships, ultimately improving efficiency and market competitiveness.
PUTTING HUMANS AT THE CENTER
While AI ushers in a new era of innovation, the role of human involvement remains critical. Leading organizations are redefining human roles by integrating AI into core functions, allowing employees to concentrate on higher-value tasks such as data interpretation and oversight of AI-generated outputs. This shift enables workers to transition from routine responsibilities to more strategic positions, enhancing their contributions to the organization. The concept of Human-in-the-Loop (HITL) emphasizes the importance of human oversight in AI systems, ensuring that human expertise is integrated into decision-making processes, which further enhances the reliability and ethical considerations of AI applications.
The success of AI outputs relies significantly on human interpretation and action. Continuous feedback from employees is crucial for training algorithms and improving the technology’s performance. By engaging with AI, employees can ensure that the outputs align with business goals and consumer expectations, maximizing the technology’s effectiveness. Furthermore, the recent release of the ASEAN Guide on AI Governance and Ethics aims to promote the interoperability of AI frameworks across different jurisdictions. This guide provides CPR companies and other organizations in the region with a valuable resource to foster trust among stakeholders through the responsible design, development, and implementation of AI that adheres to international standards. Locally, the Department of Information and Communications Technology (DICT) has a draft memorandum on the principles and guidelines for the ethical and trustworthy use of AI in the government under deliberation as of April last year.
As the landscape of AI evolves, CPR companies must prioritize human oversight to address risks related to data security, copyright, regulations, and ethical considerations. A comprehensive governance strategy that incorporates human input is vital for managing these risks and establishing clear boundaries for AI applications, ensuring that the technology is used responsibly and effectively.
TRANSFORMING CPR WITH AI
AI offers the CPR industry a chance to reshape operations and enhance the consumer journey. It enables personalized experiences and content for improved consumer engagement, revolutionizes innovation, and boosts employee productivity in various ways.
However, human involvement remains essential to further develop its capabilities, and a comprehensive governance strategy is necessary to manage potential risks for effective adoption.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.
Maria Kathrina S. Macaisa-Peña is a business consulting partner and the consumer products and retail sector leader of SGV & Co.