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With the use of artificial intelligence (AI) proliferating across the business world, one area it has particularly proven to excel in is customer service. In fact, 52% of consumers say they are interested in AI that helps them through a web experience, while 47% are interested in getting personalized deals, and 42% appreciate AI-driven recommendations. In other words, AI has a huge role to play in elevating eCommerce businesses.
In this article, we explore how AI recommendation systems work and discuss which industries should take advantage of their many benefits. Keep reading to learn more.
What Is an AI Recommendation System?
AI recommendation systems use machine learning to understand a user’s preferences in order to promote products–or content–accordingly. Although the parameters that AI recommendation systems consider may differ between models and sellers, they generally analyze previous purchases, wish list items, interests, and demographic information. AI recommendation systems can be used across several industries, but are especially useful in eCommerce and social media. For instance, if you’ve ever heard a social media marketer refer to “the algorithm,” this is the system they’re talking about.
How Do AI Recommendation Systems Work?
Like all machine learning algorithms, AI recommendation systems are based on large datasets; most notably, user preferences determined by their purchase or watch history, depending on the platform. This information is then cross-referenced with data gathered on individuals with similar interests, helping the algorithm predict what content or products the user will enjoy based on their preferences and statistical averages from other consumers.
If you watched a horror film on a streaming service like Netflix, for example, it will identify that you like horror movies and recommend more horror movies rather than, say, comedy flicks. However, what makes AI recommendation systems sophisticated is their ability to take your preferences and cross-reference them with the preferences of other consumers in your demographic. So, if after watching the same horror movie as you, another consumer watches and enjoys a different horror movie, the algorithm may recommend it to you based on the penchant of your demographic.
Alternatively, if you start to watch fewer horror movies in favor of rom-coms–an admittedly drastic change, though some might say just as abominable–the algorithm will update your preference profile and start to show you more light-hearted content. This is because, as time goes on and you consume more content or purchase more products, the AI recommendation system will continue to monitor your behavior and refine its understanding of your preferences.
Who Should Use AI Recommendation Systems?
There are three main types of businesses that stand to gain from AI recommendation systems, they are as follows.
eCommerce Companies
At the beginning of this article, we noted how important AI recommendation systems are for eCommerce companies. This is thanks to the role they play in improving sales and creating a better overall experience by connecting customers with products relevant to their needs and interests. For instance, endlessly searching through a retail website for a particular product is frustrating, but AI recommendation systems make it easy by bringing products directly to the customer’s attention.
Because AI recommendation systems are extremely common on eCommerce platforms, many third-party solutions and APIs are readily available for you to implement into your eCommerce website. Amazon, for example, offers “Amazon Personalize” technology that provides developers with a smooth framework to integrate recommendation systems into websites. Of course, when shopping on Amazon itself, users can also discover various personalized product recommendations based on Amazon’s intuitive technology.
Social Media Platforms
Social media platforms use AI recommendation systems to connect users with content relevant to their interests. Essentially, it determines a user’s preferences by monitoring which posts they like, comment on, and generally engage with; then similar content is presented to them within their social media feed. On many platforms, this methodology is combined with paid content, i.e., posts promoted by businesses.
For example, on Instagram, you can pretty much guarantee that the first two posts you see will be content from someone you know–and have interacted with recently–and a paid ad relating to an interest of yours. These two posts are not the two most recent posts by users you follow, they are what the algorithm has identified as the best two posts to keep you using the app, based on your interests.
Streaming Services
Earlier, we discussed how streaming platforms like Netflix might use an AI recommendation system to connect viewers with film and TV shows to their taste. Similar to social media platforms, streaming services leverage an AI recommendation system to provide highly targeted content that’s likely to keep viewers happy and more inclined to use their streaming service over others.
Benefits of AI Recommendation Systems
Throughout this article, we’ve touched on several benefits of artificial intelligence recommendation systems. Let’s now take a closer look at some of the top benefits of using this type of system in your business.
Improved Sales
By suggesting products perfectly matched to each user’s interests and purchase history, AI recommendations convert passive browsers into active buyers. Hyper-personalized product recommendations increase add-to-cart rates, average order values, and overall sales volumes.
For example, if a customer purchases hiking gear, the engine can serve suggestions for hiking trails and camping equipment tailored specifically to them. This drives sales that you may have otherwise missed without personalization.
Improved Customer/User Experience
AI recommendation engines enhance customer satisfaction and loyalty by presenting personalized content or product suggestions to each user. This is because recommendations based on purchase history and interests help customers feel that you understand their preferences, increasing their overall satisfaction with your business and fostering brand affinity.
For example, if a user favorites a certain recipe on a cooking app, the recommendation engine can highlight similar untried recipes according to user preference. With the right recommendations, you can reinforce the idea that your business cares about customer needs, maintaining a positive consumer experience.
Improved Efficiency
AI recommendation engines can work 24/7, tirelessly determining optimal products or content to suggest for each visitor in real-time. This automated personalization provides consistent results at scale without ongoing human effort. It also frees staff from manually curating suggestions to focus on higher-value tasks.
For instance, engineers can spend time improving algorithms rather than compiling rules for recommendations. The automated nature of AI allows continuous refinement of suggestions even for traffic surges, without fatigue or lapses from exhausting manual recommendation creation.
Challenges of AI Recommendation Systems
Despite these impressive advantages, however, AI recommendation systems are not without their challenges.
Lack of Information
Without sufficient data on each user’s preferences, purchase history, behaviors and context, the recommendation engine cannot accurately discern their interests. This will result in generic one-size-fits-all suggestions that won’t effectively catch a user’s attention. For instance, if the only data captured about a user is a single book purchase, book suggestions may be repetitive and not broad enough.
Unpredictable Behavior
If underlying machine learning models are not robust, performance may degrade rapidly in unpredictable ways, potentially causing incorrect and sporadic recommendations. This means rigorous ongoing testing, tuning, and training is required, using customer feedback loops to avoid fluctuations and maximize relevance.
AI Solutions From Idea Maker
If you’re looking to implement an AI recommendation system into your platform, whether it be a streaming, eCommerce, or social media website, you’re in the right place. At Idea Maker, we have a team of dedicated machine learning and artificial intelligence experts ready to help make your project a reality. So, schedule a free consultation with us today to learn more about how we can help.
