Customer experience in the age of AI

In the ever-evolving landscape of customer experience, artificial intelligence has emerged as a game-changer.

Forget trying to remember customers’ birthdays or purchase history, it’s the new age of artificial intelligence (AI) and customer experience (CX) is about to get a whole lot more personal. With artificial intelligence rapidly transforming how businesses interact with consumers, the future of customer service is one of predictive recommendations, frictionless interactions, and an unprecedented level of understanding between brands and their audience. But with this exciting potential comes a wave of questions. How can small or medium-sized enterprises leverage AI to craft exceptional customer journeys? And what are the potential issues to avoid on the path to AI-powered CX success?

In today’s highly competitive business landscape, providing exceptional customer experiences and leveraging data-driven insights have become paramount for organisations to thrive. It’s fairly well known that New Zealand banks use AI-powered chatbots to provide 24/7 customer support and resolve queries in real-time. Countdown leverages AI-driven sentiment analysis to monitor customer feedback and improve in-store experiences. And Auckland Transport utilises AI-powered virtual assistants to help customers plan their journeys and access information. 

AI is being utilised across industries to enhance customer experiences. AI algorithms analyse customer data to provide personalised recommendations and offers, improving relevance and driving conversions and engagement.

Adnan Khan, Managing Partner of Stitch, a leading consultancy specialising in AI-powered customer experience solutions, says that AI is reshaping the way SMEs engage with their customers.

“AI has emerged as a game-changer for SMEs, enabling them to access sophisticated technology that was once exclusive to enterprise-level organisations.” Adnan highlights the transformative impact of AI on streamlining operations and reducing costs, citing examples such as Prosaic, a New Zealand startup automating tax processes, and Matter Studios, which utilises AI-generated backgrounds to cut the production cost associated with complex photo shoots.

Stitch was born out of the vision to bridge the gap between advertising technology and marketing technology, serving as a conduit between the IT, sales, and marketing teams. By leveraging customer data infrastructure, Stitch aims to seamlessly blend various elements to create superior customer experiences akin to those offered by industry giants like Amazon or Uber.

“There’s plenty of AI tools out there that you can buy off the shelf which allow you to customise for example a chatbot that is powered by ChatGPT that’s specific and gives recommendations to a person whether you’ve got an e-commerce website or some kind of other product or service offering. You can start to deliver a better customer experience using AI by competently engaging with your customers when you’re asleep. That’s another way to think about it,” says Adnan.

AI systems, particularly large language models (LLMs), are becoming increasingly sophisticated, capable of understanding complex instructions and generating creative content, and this opens up new possibilities for SMEs. By analysing large datasets, AI can identify patterns and make predictions about customer behaviour, preferences, and future needs. This information can be used to optimise product offerings, marketing campaigns, and customer service strategies, resulting in a more suitable and proactive customer experience. 

Chatbots and virtual assistants powered by natural language processing (NLP) and machine learning enable efficient customer service interactions. These AI-driven systems can understand customer inquiries, provide relevant information, and even handle simple tasks or transactions, improving responsiveness and customer satisfaction.

AI-powered advertising platforms use machine learning for targeted ads across channels, improving campaign effectiveness, and AI analyses customer data to identify patterns and segment customers based on characteristics, enabling businesses to tailor marketing, offerings, and experiences.

AI analytics tools are being used by companies like Trade Me and Z Energy to gain valuable insights into customer behaviour, preferences, and pain points, enabling data-driven decisions and optimised CX strategies. And for all SMEs these are all relatively basic AI tools that they can leverage to manage customer inquiries, provide information, and even perform simple tasks or transactions, improving response times and offering 24/7 support – even with limited resources.

AI-powered images 

In addition, AI-powered image generation tools can create visual content, such as product images, illustrations, or graphics, based on textual descriptions or prompts, enhancing the visual appeal of a company’s branding and communication efforts. Meanwhile, tools that use NLP to analyse customer feedback, reviews, and social media conversations, can detect positive, negative, or neutral sentiments, helping businesses gauge customer satisfaction.

Predictive analytics is another area where AI can help. There are tools that leverage machine learning algorithms to analyse data and make predictions about customer behaviour, demand patterns, or future trends, enabling data-driven decision-making.

AI-powered tools can streamline and automate repetitive tasks such as email campaigns, lead scoring, and lead nurturing, providing more targeted marketing at scale. AI-powered analytics can help organisations anticipate customer needs, identify potential churn risks, and forecast demand patterns, enabling more efficient operations at scale.

On top of all this, there are the benefits associated with optimising advertising campaigns. AI algorithms start by optimising ad targeting, bidding strategies, and creative elements in real-time, maximising the effectiveness of marketing campaigns and adspend while scaling reach and impact.

As reported in Campaign, Microsoft Advertising recently underwent significant restructuring in March 2024 and is now part of a new division called Microsoft AI, marking a pivotal integration of AI across all company operations, not just in advertising but throughout Microsoft. “Our vision for Copilot, integrated across all Microsoft products like Windows, Excel, and PowerPoint, is to assist users in more efficiently managing their tasks. Many in our industry rely heavily on Excel, which can be cumbersome unless you’re skilled in creating macros,” explains Nick Seckold, the regional VP for APAC at Microsoft Advertising.

Today, AI is playing a crucial role in helping businesses unlock the full potential of their existing customer data, clustering customers into meaningful segments based on shared characteristics, behaviours, or preferences. At the same time, LLMs can analyse historical customer data to make predictions about future customer behaviour. What a boon for customer retention, cross-selling, and inventory management!

AI-powered recommendation engines can provide highly personalised product or content recommendations, increasing customer engagement, and conversion rates, while customer lifetime value (CLV) modeling will help prioritise retention efforts.

While many large corporations like Fonterra, Spark and Air New Zealand are leveraging AI for customer experience improvements, a significant number of SMEs in Australia and New Zealand are utilising AI to enhance their CX. In New Zealand, however, small businesses have shown a relatively slower adoption rate compared to Australia. A survey conducted by the Peninsula Group found that 65 percent of New Zealand SMEs have not yet used AI, while almost a quarter of small businesses using AI reported a positive impact on their business. 

Imagr, for example, is a New Zealand AI-powered image recognition platform that enables businesses to extract valuable data from visual content, such as product images, for better inventory management, product recommendations, and personalised shopping experiences.

Who is already using AI?

Conversational AI are digital assistants used to conduct face-to-face conversations. Tower Insurance uses a chatbot named Charlie to answer 10,000 inquiries daily. Simplicity NZ, the issuer of the Simplicity KiwiSaver Scheme and the Simplicity Investment Funds, is using a chatbot, called Artie, while personal loans company, Harmoney, is using AI to assess credit risk. 

Data Genius in Christchurch offers clients various AI solutions, and Dexbit provides big data analytics for visitor attractions to local companies like MOTAT. Meanwhile, Wellington software company, GleeTech, is offering services such as natural language processing, predictive modelling, and deep learning.

Ambit, in Auckland, provides a conversational AI development platform that can be used to build chatbots to automate conversations, Plexure provides in-store customer insights solutions for customer experience management, and Uneeq is a New Zealand-based company that specialises in creating digital humans for customer experience and employee engagement. Its platform uses AI and machine learning to create highly realistic and interactive digital humans that can be used across various industries.

Uneeq’s digital humans can be integrated into various channels, such as websites, mobile apps, and social media, to provide 24/7 customer support, answer frequently asked questions, and even help with complex transactions. 

One of Uneeq’s clients is Kiehls.co.nz. Kiehl’s uses AI in several ways, including a virtual skincare tool that uses a photo assessment and questions to identify skin concerns and areas of strength, and a derma-reader, which is an in-store technology that analyses skin concerns below and on the surface. A chatbot developed by Octane AI that can lead conversations about skincare tips, product ingredients, and skin concerns, gives AI-based personalised recommendations for customers.

Advancements in areas such as conversational AI, computer vision, and explainable AI will enable more natural and intuitive interactions, while privacy-preserving machine learning techniques will allow for more secure and ethical data analysis. Moreover, the integration of AI with other emerging technologies, such as the Internet of Things (IoT) and augmented reality (AR), will open up new avenues for immersive customer experiences.

Of course, there are some potential pitfalls to avoid on the path to AI-powered CX success. As the adage goes, “garbage in, garbage out”. Inaccurate or biased data can lead to AI systems that perpetuate negative stereotypes or offer irrelevant recommendations. Overly complex AI models can be difficult to understand, making it hard to identify and address bias in their decision-making. 

It’s important not to replace human interaction entirely. AI should augment human capabilities, freeing agents for complex issues and fostering genuine connections. AI chatbots can be frustrating if they can’t handle complex queries. Good operators ensure a seamless handoff to human agents when necessary and are transparent about how AI is used in any CX strategy. They let customers know when they’re interacting with AI and offer the option to speak with a human if desired. 

Adnan says that a massive barrier to AI adoption by small business is education and fear. “If anyone sits here and calls themselves an AI expert, they’re simply lying. No one is an expert at AI. A lot of the engineers at OpenAI don’t even actually know why large language models behave the way they do.”

AI tech can be exciting but there’s always a danger of getting bogged down in the latest AI iteration. It’s better to focus on how AI can solve specific customer pain points and measure its impact on key CX metrics. Tracking the effectiveness of AI-powered CX efforts is essential. Are customers satisfied? Are resolutions faster? Analyse data to continually improve your AI implementation.

“As AI continues to evolve at a rapid pace, SMEs have a unique opportunity to leverage these advancements to stay competitive in the digital age,” Adnan says. “By embracing AI as a tool for innovation and efficiency, businesses can unlock new possibilities and chart a path toward sustainable growth.”

This article was originally published in the June 2024 issue of NZBusiness magazine. To read the issue, click here.