The consumer packaged goods (CPG) market has historically been inclined toward tremendous growth, and thanks to AI, it shows no signs of slowing. Given that it’s worth billions in the United States alone, the CPG industry has fueled a tremendous sense of competition between brands. Yet it can be hard for a company within this crowded space to stand out. That’s why so many CPG businesses — including legacy giants — are turning to AI for assistance.
This shouldn’t come as a shock: AI has become a standard resource and household word. However, it’s not being used by all businesses, which is giving an edge to the organizations willing to become early adopters. In fact, a 2024 survey conducted by CompTIA showed that only around a third of all organizations have brought AI into their processes. But nearly half are investigating the potential benefits of AI adoption, so the “first to implement” window is closing.
For brands within the CPG ecosystem, the benefits of adopting AI are myriad; they’re especially pertinent within the areas of marketing, sales, and retention. Why? With AI, brands can connect in new and exciting ways with existing and future buyers. As a result of these connections, they can increase their revenue and achieve long-term retention goals.
How exactly is AI helping CPG brands unlock their potential and drive financial returns? Five techniques stand out as highly useful: personalization, price optimization, loyalty-focused engagement practices, trend tracking, and tailored (albeit automated) one-to-one content.
Grabbing (and Holding) Attention Through Deep Personalization
Today, consumers by and large have become accustomed to receiving personalized treatment from companies. For the majority, receiving personalized messages is a baseline expectation. Case in point: According to McKinsey and Company reporting, 71% of people say they want personalization from brands; around three-quarters aren’t pleased when they don’t receive it. Though a low level of personalization was achievable before the advent of AI advancements, AI has made the personal touch easier, more efficient, and more economical for CPG brands to implement.
For instance, AI can gather insights about an individual consumer and then make individualized product recommendations to that person. As AI-driven consumer engagement platform provider GENESISX explains, this type of customization refines and improves the customer journey.
For example, Starbucks relied on a GENESISX AI product to identify customers who were near Starbucks stores and alert them through their mobile devices. As a result of this geotargeting approach, Starbucks was able to improve its sales by 15%. This kind of AI-backed level of hyper-personalized advertising and engagement is not only possible — it’s also profitable.
Optimizing the Price of CPG Products
CPG brands are finding out that AI can help them more accurately determine the best price for their merchandise, too. Some are even moving to dynamic pricing structures, enabling them to compete on cost in real-time.
Ecommerce platform provider EtailSolutions notes that AI can drive dynamic pricing by considering multiple factors at once. This makes the pricing more accurate and not simply demand-based. On the contrary, AI-fueled dynamic pricing relies on variables from large, diverse sets of data. Consequently, CPG brands that lean into dynamic pricing have a better chance to move inventory for the right price at the right time to their target audiences.
Interestingly, dynamic pricing isn’t just used in digital sales. It can be used in physical store environments, too. For instance, while browsing in Target, shoppers may find that the prices they encounter are different from those they saw on their mobile app while they were still outside the store.
While this type of dynamic pricing phenomenon may sound strange (e.g., seeing one price on your phone after parking and seeing another price when you’re in a store,) it makes sense from a consumer behavior perspective. After all, depending on where and when a consumer shops for an item, the consumer may be willing to pay more or less for what he or she needs.
Boosting Loyalty and Repeat Business
Brand loyalty is getting more difficult to achieve than ever, especially from younger generation consumers. It’s hardly a secret that GenZ is notoriously fickle when it comes to doling out their loyalty. A McKinsey and Company report shows that half of GenZ consumers would opt out of purchasing a favorite brand if another brand offered a similar product at a lower price.
With AI systems, CPG brands can connect with all buyers and stay top-of-mind to encourage repeat business. And as consumers buy again and again, their loyalty (and customer lifetime value) will be more likely to grow. That’s appealing, given that retaining just 5% of a business’s customer base can improve its bottom line revenue by up to 95%.
What types of AI approaches can prompt loyalty between consumers and CPG brands? AI-powered branded apps can be one kind of solution. With sophisticated apps like those created by McDonald’s, brands can reward their customers for every dollar they spend. These rewards encourage loyalty by making consumers feel like they’re getting little “wins” for being brand loyal.
Another way that AI can be used to further loyalty is by gathering constructive feedback after purchases occur. Having an automatic way to collect useful insights from consumers post-sale can further the relationship between the brand and consumer. At the same time, the practice brings more data into the business for AI to leverage.
Identifying and Tracking CPG Trends
Being able to see “around the corner” is valuable for any company. After all, what’s trending in the CPG world right now may not be trending next year (or in an hour.) Therefore, staying on top of what’s hot (and what’s not) is critical.
AI systems are capable of being able to track and predict trends in ways that humans are not. Although traditional marketing used data to determine trends, many marketers worked on a sense of “instinct” as their guiding force to decide what would be relevant to the public. AI takes away the risk of putting too much faith in human guesswork.
For instance, AI can be programmed to constantly monitor social media platforms for specific hashtags and keywords. As pointed out by one AI consulting firm, AI has the capacity to both spot and evaluate patterns and anomalies. These are often data points that might be overlooked or unrecognized by humans. The AI system can then feed its discoveries to marketers who can use their expertise to consider the meaning behind those findings.
This isn’t meant to imply that AI is infallible in terms of its predictive capabilities; it can make mistakes as well. Nonetheless, it also can highlight hidden trends. At the same time, AI can keep a watchful eye over a CPG brand’s competitors 24/7, which provides assurance that the watchful brand won’t experience too many surprises.
Delivering Content That Feels and Sounds Tailored
There’s a more specific type of AI that’s making its way into the CPG brand marketing realm: generative AI. Products like ChatGPT and Bard have shown the world that algorithmic-based content-on-demand can sound remarkably human-like. While human editing is still a necessity, businesses can confidently hand over some of their content creation and deployment tasks to AI tools.
For example, advertisements can sometimes be automatically produced by generative AI. And generative AI can make communicating with chatbots feel like communicating with another person. If nothing else, generative AI can at least be used as a way to brainstorm headlines, fetch image recommendations, and construct content outlines.
It’s worth noting that generative AI seems to be improving as far as its accuracy and voice are concerned. Is it a perfect substitute for human writing or ingenuity? Not quite. Still, it’s showing great promise, as outlined by McKinsey and Company in a piece showing the emerging abilities made possible by generative AI’s speedy evolutionary progress.
The Importance of High-Quality, Accurate Data
There’s one topic that deserves mentioning alongside AI’s advantages for CPG brands: The importance of having reliable data. Here’s why: With AI, CPG brands can move faster and capture more of the market. However, AI depends on data — and lots of it. For that reason, CPG companies that intend to use AI for their sales and marketing efforts need to put a few measures in place to ensure that their data is clean and usable.
First, teams should ideally centralize and regularly scrub their main data stores. Having one location where all their data lives makes it simpler to find by an AI product. As a side benefit, data warehousing allows marketers to find and share their corporate data from anywhere.
Secondly, capturing new data is always essential. Remember: The newer the data, the better the performance of an AI tool. AI can only draw conclusions from the data users provide. If businesses don’t keep data updated, the AI system’s reports or suggestions will likely be out of date, too.
Next, data must be structured. When data is unstructured, it can’t be parsed by all AI programs. (One exception is generative AI software that’s programmed to make sense of unstructured data sets like chats and texts.) Perhaps somewhat ironically, AI programs exist to help structure unstructured data sets.
Finally, marketing teams should stay open to using their company’s data in fresh ways. The possibilities are always expanding when it comes to AI’s usefulness. By knowing the opportunities on the horizon, marketers can make sure their brands stay on the leading edge.
CPG brands that are serious about competing shouldn’t ignore AI. Quite the opposite, actually. They need to embrace AI in its many forms. Doing so will help them remain future-forward operationally and give them a stronger likelihood of forming lasting (and revenue-producing) customer bonds.
