The commerce landscape is rapidly changing. And AI has emerged as a transformative force within it — revolutionizing how businesses operate and interact with customers. In fact, AI is key for commerce brands seeking to stay competitive and drive growth.
Let’s explore how commerce brands can effectively measure the ROI in their budding and evolving AI initiatives.
Why AI is essential in commerce
AI brings a multidimensional set of benefits to commerce, enhancing customer experiences, optimizing operations, and driving strategic decision-making. Companies that make use of AI in these spaces will certainly outpace their competitors.
Hyper-personalization: AI-driven personalization is crucial for enhancing customer engagement. It uses customer data to offer tailored product recommendations, increasing conversion rates and fostering loyalty. Personalized product recommendations can drive up to 31% of commerce site revenues. Moreover, AI helps in automating customer service through chatbots, improving response times and issue resolution.
Revenue growth: AI has been instrumental in boosting sales for commerce companies. According to a McKinsey report, integrating AI into marketing and sales strategies has increased business revenue for 79% of respondents, with some enterprises generating at least 20% additional revenue.
Operational efficiency: AI optimizes logistics and inventory management, reducing operational costs. AI also automates tasks, allowing businesses to scale without additional hires. AI-driven analytics help retailers predict demand more accurately, optimize inventory management, and streamline logistics. This not only reduces operational costs but also ensures that products are available when customers need them, enhancing customer loyalty.
Market size and adoption: AI helps create targeted marketing campaigns by segmenting customers based on their behavior and preferences. This leads to higher conversion rates and improved return on investment (ROI) for marketing efforts The AI in the commerce market is projected to reach $8.65 billion in 2025 and $17.1 billion by 2030, underscoring its growing importance. Over 50% of ecommerce businesses have already adopted AI technologies, with 84% either integrating AI or considering it a top priority.
Measuring ROI in AI initiatives
Calculating the ROI of AI investments is crucial for understanding their impact on business performance. Here are key strategies for measuring ROI:
Define clear objectives and KPIs: Establish specific goals such as cost savings, revenue growth, or customer satisfaction improvements. Identify quantifiable KPIs aligned with these objectives.
Financial gains: Measure the direct financial benefits of AI, such as increased sales or reduced operational costs.
Operational efficiency: Assess improvements in efficiency, such as time savings from automated data analysis or streamlined A/B testing.
Customer satisfaction: Evaluate enhancements in customer experience through faster service response times and personalized interactions.
Strategic and capability ROI: Consider how AI supports strategic goals like operational efficiency and enhances workforce capabilities.
Calculating AI’s commerce impact
Several businesses have successfully measured and benefited from AI in their ROIs. But what formula should you use to make sure you’re measuring ROI correctly? Here’s one you can use to calculate ROI for your AI rollout:
ROI = (Benefits + Gains) / Costs
Here’s an example:
A commerce brand estimates that their new AI software will increase revenue by 10% and reduce contact center costs by 5%. They also estimate an annual $100,000 cost to run their new AI. So placed into the formula, that would be:
ROI = (10% increase in revenue + 5% gains) / $100,000
In this example, the ROI of the AI investment is 15%. So, that commerce brand forecasts earning $1.50 in benefits for every $1.00 that it invests in the recommendation engine.
ROI = 15%
The ultimate return on intelligence
AI is no longer a novelty in commerce. It's a critical component for driving revenue, enhancing customer experience, and optimizing operations. As the commerce sector continues to evolve, brands must embrace AI to remain competitive.
By understanding how to measure the ROI of AI initiatives effectively, especially with tools like Gladly that break down your price per AI assist, businesses can ensure that their investments yield tangible benefits, both financially and strategically.
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