Last updated: September 18, 2023
Unless you’ve been living under a rock, or in the desolate wilds of rural Montana without access to the internet, chances are you’ve heard of a little buzzword called “AI”, or “Artificial Intelligence,” in the past year.
While AI is nothing new (and has been the subject of a multitude of movies, books, and subpar office watercooler conversations for several decades), OpenAI launched the term back into the mainstream media with the launch of their ChatGPT product in November 2022.
While ChatGPT is largely an AI assistant capable of “generative AI,” AI has a multitude of additional use cases beyond asking it to do your homework or writing a text message to your friends inviting them over to hang out.
One such use case is the enormous capability of AI to transform the ecommerce industry. As the ecommerce industry continues to evolve, and more money shifts from traditional retail into ecommerce stores, there is a tremendous opportunity to leverage AI to optimize your traffic, product offerings, shipping and fulfillment, and much more. But first, let’s define what AI really is, and perhaps more importantly, what AI is not.
What is AI?
Artificial Intelligence, or AI for short, is the creation of computer applications capable of performing complex tasks commonly associated with intelligent beings (aka most humans, but not all).
AI has been around in computing for decades, but only recently has entered the mainstream in an easily understood way with readily visible outputs. In the past, machine learning algorithms allowed computers to identify patterns and build upon them without explicit instructions from a programmer or human. Machine learning was extremely helpful in analyzing vast sums of data that would take a human or team of humans extremely long to analyze themselves.
Perhaps one of the largest opportunities for AI is in leveraging AI in subscription management. Because ecommerce subscription companies have a long-term relationship with their customers, they also have access to considerably more data on these customers than one-time customers who may complete a transaction and move on. Each subscription transaction offers the opportunity for businesses to gather more data to further refine the customer experience.
When done well, AI can enhance the customer experience, providing more value to them, in addition to more value in the way of increased revenues and cost savings to the business. This increased value perceived by the customer will result in increased brand loyalty, and a longer relationship with the business. This longer relationship with the customer allows the business to collect more data to continually refine and expand the customer experience, leading to a flywheel effect. Let’s look at some of the various use cases of AI in subscriptions and how this can be applied to create the flywheel effect.
Use Cases for AI in Ecommerce Subscriptions
- Predictive analytics. AI is excellent at identifying patterns and synthesizing large amounts of data and trends that would be impossible for even the best data analyst to identify. If AI is able to predict the trend of where certain fashions are going, for example, your clothing subscription business could offer these new styles to your customers before they’re able to get them from anywhere else, leading to increased value for you and your customers. Another example is predicting when a customer will need to reorder, for example, if you run a pet food subscription business, AI can determine down to the exact day when similar pets would be due for a new bag of food, and when to ship it so that it gets to the customers doorstep on time. Nobody likes a hangry dog!
- Reducing churn. By analyzing your overall customer base, AI can predict the signs of a customer about to churn, giving you and your customer service team time to get out ahead of any issues that may be preventable. AI could recommend, for example, that similar customers may churn to a competitor due to a new customer deal that the customer is offering, giving you time to create a competitive deal to keep your existing subscribers happy. AI could also help to identify overstock, when customers have too much product on hand and may need to adjust their order frequency.
- Improved payment management. Every subscription business deals with payments being declined, or other issues at renewal. AI can help by alerting customers when their cards are about to expire, or offer incentives for customers who submit multiple payment options in case their primary payment option fails.
- Personalization. AI can analyze large data sets and provide personalized subscription offers to your customers based on their browsing history, account settings and preferences, purchase history, behavior, and much more. These personalized experiences are a great way to differentiate your products and brand from the competition.
- Customer service. AI powered chatbots are one of the most visible use-cases for AI, but are a great way to provide personalized customer service at scale and allow customers to reach solutions to their problems as quickly as possible. AI can even aggregate common customer service issues and then create documentation or resources for customers to use to allow them to self-serve without the need to chat with a bot or customer service rep.
- Shipping and fulfillment. Based on the complexity of fulfilling and shipping orders, AI can help to predict bottlenecks and identify potential delays in shipping and fulfillment before they happen. Even better, AI can help to optimize shipping, by identifying certain days or times of the year that may be more convenient or cheaper to ship.
- Supply chain. AI can help to identify supply chain issues or even opportunities based on outside factors like the price of materials or increases/decreases in manufacturing costs. For example, if AI is predicting an influx of orders around the holiday season, it can help you plan your inventory ahead of time to avoid paying higher prices closer to the holidays.
AI is here to stay, and the businesses that find new ways to leverage this technology will thrive and grow as their customers continue to expect a more personalized and relevant experience. Subscriptions are a great way to start leveraging AI due to the large amount of data available to subscription-based companies, as well as the long-term relationship subscribers maintain with the business.
If you’re looking to get started with subscriptions or are looking to pivot your existing business to a subscription model, reach out to Upscribe today to learn more about our Shopify subscription platform!