Digital marketers are using AI to identify and market to consumers with similar preferences. The more merchant data the machine learning software receives, the better its predictions. Pet wellness online retailer Finn is casting a wider net to reach new customers without overspending. Pet food retailer Mars Petcare invested in AI-based image analytics technology, resulting in a 30% jump in conversion. And music equipment retailer Sweetwater uses AI’s predictive abilities to figure out how to entice consumers to open its marketing emails and make a purchase.

Online retailers are investing in digital marketing to increase conversion, according to Digital Commerce 360’s February 2023 retailer survey. More than half of retailers (55%) said they plan to focus on digital marketing investments in 2023. Plus, 40% of retailers said digital marketing remains key to driving conversion.

Retailers shouldn’t wait to implement machine learning technology into their marketing strategy, says Michael Renz, global retail technology leader at consulting firm Ernst and Young.

Renz recommends retailers start by having a customer data platform in place. A CDP is marketing software that collects first-party customer data to build a single view of each customer.

“The second step is to have a marketing automation platform in place to track the success of marketing campaigns with analytics,” Renz says. “Then retailers can create a relationship with consumers. And AI helps retailers understand shopping behaviors and can [predict] the probability that he or she will respond to a certain marketing campaign, open an email or purchase something afterwards.”

Artificial intelligence is all about using large amounts of data to make decisions. Finn is tapping into Proxima’s data from more than 15,000 businesses and retailers that have shared customer database information with one another. Smaller brands pooled their customer data together. Retailers also provided Proxima access to encrypted data from their email service and SMS providers.

Merchants also provide encrypted transactional information from a retailer’s web store through the payment processors, such as Stripe Inc., PayPal Holdings Inc. and Venmo, among others. The information is encrypted and coded so it can be recognized when shared with Meta, TikTok, or other social media platforms, allowing Proxima’s algorithm to track progress.