Say Hello to the AI-Powered Consumer

There is no shortage of talk about where and how Generative AI will be used by the enterprise. ?

Perhaps we’d be wise to spend equal time thinking about the impact of Generative AI on consumer behavior.

And the business impact of a new, AI-powered consumer.

Because an understanding of that impact – and those behaviors – may well separate winners from losers in the years ahead.

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Nearly a year ago Thomas Friedman of the New York Times described the advent of Generative AI as a “Promethean Moment,”?a reference to the Titan in Greek mythology who stole fire from the heights of the Olympian gods and gave it to lowly humans.

Prometheus democratized fire, and the world was never the same. OpenAI and numerous other Gen AI innovators have democratized artificial intelligence.

That democratization is not just about passing the flame of AI from the IT department techno boffins to the don’t-know-code marketers. It’s also about the passing of Generative AI fire into the hands of every consumer.

Get ready.?

We are about to hit another inflection point in consumption decision-making, one of equal or greater impact than that of the internet and smartphone.

Consider:

The web gave consumers visibility to new levels of enterprise knowledge.

Products and prices could now be compared. Consumers could see peer opinions and ratings. Competitive knowledge – previously shielded from view – was now in the open. The opaque shield of a brand – behind which rested proprietary information and margin – was now increasingly transparent.

Mobility meant consumers could access the newly transparent business knowledge anywhere and anytime.

And now, center stage: artificial intelligence, and more specifically, generative AI. Analysts suggest that this represents yet another “platform shift,” one that will change consumer behavior and lift consumer expectations.?

Because it will – here’s a hypothesis – further tilt the knowledge balance, and entirely toward the consumer. ??Especially in the retail and consumer goods industries.

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Awareness – and use – of generative AI goes well beyond the walls of the enterprise.

The November 2023 AI Consumer Index, a superb piece of primary research by the conversational AI firm Vixen Labs and research partner Delineate, found that nearly two-thirds of all US consumers had not only heard of generative AI, but claimed some understanding of what it was and what it did.? ?And, at the time of the survey – less than a year after OpenAI’s initial announcement – 45 percent of US respondents reported that they were currently using ChatGPT.

A September 2023 report from Salesforce noted that generative AI users represented a generational wave.? Across a survey of online populations in the U.S., U.K, India, and Australia, 65 percent of generative AI users were either of the Millennial or Gen Z cohorts.

Of Generation Z – those individuals born 1997 or later, who have never known life without the internet, and who are now entering their primary employment, household formation and consumption years – the Salesforce report found that 70 percent were using generative AI, and 52 percent trusted the technology to help them make informed decisions. ?In addition, this cohort is exploring the wide range of generative AI LLM options. Some 33 percent of college students are said to be aware of Perplexity AI, the generative AI “answer engine” that not only provides responses, but relevant sources and citations.

Get ready.?

Several days ago I was privileged to share a hot beverage with AI futurist, entrepreneur, and author Steve Brown (me, coffee, and Steve, a proper English tea), to discuss the impact of generative AI on consumer behavior.

Seven thoughts emerged.

The first four might be perceived as the next steps on the trend line. They’re in work today.? (Are you planning your response?) ?The final three are plausible and probable.

• Search is redefined. Say goodbye to a list of links. ?The AI-enabled consumer will prompt with a nuanced question, and instead of the links, there may be a singular, complex answer – or a table of comparisons – or a bespoke recommendation built from an increasingly deep understanding of needs, wants, and preferences. According to this good article, generative AI will become a layer that sits between every consumer and the search experience.? SEO will morph to CBO – chatbot optimization. ???????
• Reviews are redefined. Industry research suggests that nine of ten shoppers check online reviews before their purchase decision.? Generative AI will irretrievably change reviews.? No more scrolling through dozens of comments, all in search of an opinion from someone like me. Now the consumer will request and receive a personalized review summary of all relevant reviews. Not just from the host retailer, but across all retailers carrying this product and across all similar products. (And that might lead to a bespoke recommendation.)? ?
• CX interaction? Today’s FAQ bot will be nowhere good enough for the AI-enabled consumer. Think problem-solving conversation.? There will be a growing expectation for real-time, 24-7, problem-solving conversations that will go well beyond the FAQ responses of interactive voice response. The new normal will be a dual marriage: on the tech side, a marriage of natural language understanding, processing, and generation (be it text or voice) to generative AI, with connections to general-purpose, domain-specific, and brand-specific LLMs.? And, on the process side, a marriage of these new bots with human agents – with the bots infusing human decision-making with detailed information, reviews, and recommendations.
• Personalization? We’ve only just begun.? Start with personalized product descriptions, increasingly personalized recommendations, and conversations that speak (and respond) to individual interests instead of generic cohort needs.

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But this is just the start. As Steve pointed out,

• With generative AI, every consumer is a potential creator, designer, and/or director. ??Think about it: ?with generative AI capabilities empowering natural language and imagery (as well as enabling natural language prompts to result in imagery), consumers can now bring – even speak -- a new shoe, a new frock, a new appliance, even a new transportation concept to visual life. Consumers can prompt a film script, an advert, a video game, even a film to life. Consumers can choose the characters, the looks, the final scene, the denouement.

Implication: ?Generative AI is rocket fuel for fan-fiction, fan-game development, and the members of one or more Stan communities.? It further democratizes fashion of all types, from apparel to technology to transportation; brand designers will follow their constituents, not the other way around.

• With generative AI, the business value of influencers will rise to new levels.? ?Let’s say you’re an influencer, and you’ve tens, even hundreds of thousands of Instagram and TikTok followers. Why shill for others when you can – at the sound of your voice or with a few QWERTY taps – generate unique ideas that can be turned into high-margin production runs at contract manufacturers with 3PLs managing D2C distribution??

Implication:? Everyone’s a brand, everyone’s a retailer, everyone’s a manufacturer.? Imagine the product and profit possibilities for a popular singer with 282.9 million Instagram followers . . . ?

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• With generative AI, individual consumers will – in time -- be represented in the marketplace of commerce and ideas by AI agents. Far-sighted retailers will develop their own branded agents – and may develop personal agents for their best customers.? The branded agents will reflect the brand voice and tone (and provide value in their solving of consumer problems); consumer agents will emerge from the copious amounts of personal data now resident in retailer and Big Tech databases.
• Agents will communicate (most likely, in natural language) with each other using technical interoperability standards that are now in development; consumer agents will be able to scan the entire marketplace for products, services, and best deals (availability + price + delivery); brand agents will scan the marketplace for customers and expressions of interest.??
• The vocabulary is important here. An agent goes well beyond an assistant (think today’s Alexa) in that an agent will be able to operate independently on behalf of its human, and in accord with the human’s direction.
• A far distant prospect? Hardly. Steve believes the first personal AI shopping agents are 12-24 months away; the author is aware of concepts that are approaching minimally viable product (MVP) status. ??As noted, agents will be built from natural language processing, generative AI, and – most important -- mountains of personal data.? Those personal data peaks exist; consider, for a moment, how much Google, Apple, Meta, or Amazon currently knows of your behaviors, your interests, your likes and dislikes.

Implication:? an eventual shift in consumer trust and dependence -- from a favorite retail brand (or brands) to one’s personal agent.? ?It will be the agent that will be trusted to deliver high quality, lower cost, delivery-fulfillment as desired, and style aligned with personal taste (be it high or low.)?

Which means a redefinition of business models and an industry.??

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Get ready.?

Here it comes.? Here they come.

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Your thoughts?

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I’m Jon Stine, 35+ years in retail business and technology.

I read, I write, I advise.

[email protected], +1 503 449 4628.

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This article also published at j.christopherccv.com.