Businesses worldwide are embracing the potential for artificial intelligence (AI) to provide personalised customer experiences, but customers remain cynical. That’s according to the fourth annual State of Personalisation Report from Twilio (NYSE: TWLO), the customer engagement platform that drives real-time, personalised experiences for today’s leading brands.

This year’s report shines a light on how businesses are experimenting with AI to differentiate and drive business growth, and provides guidance on how to get this right, starting with the critical need to raise consumer confidence in the technology.

Stark disconnect in AI confidence

To power even more sophisticated real-time customer experiences, businesses are turning to AI to harness high volumes of real-time data and power their personalisation efforts. 

According to the report, 92% of global businesses are now using AI-driven personalisation to drive business growth. Four in five (81%) organisations also believe recent AI technology has the potential to positively impact customer experiences.

However, a disconnect exists between this enthusiasm and the comfort level of consumers: only 36% of European consumers are comfortable with companies using AI to personalise their experiences, and under half (49%) trust brands to keep their personal data secure and use it responsibly. 

Quality and Privacy: Getting AI-driven personalisation right

AI-driven personalisation is only as good as its underlying dataset and, without robust data, customer experiences will likely miss the mark for consumers. 

It’s a real challenge: half (50%) of global companies report that getting accurate data for personalisation is a struggle, an increase of ten percentage points compared to 2022, and 31% of businesses cite poor quality data as a major obstacle in leveraging AI. Further, four in ten (42%) European business leaders cited data silos as one of the biggest challenges to personalisation, compared to 26% globally.

Encouragingly, almost all the companies surveyed (97%) are taking steps to address consumer privacy concerns, demonstrating a commitment to responsible data use. The most popular step is investing in better technology, such as Customer Data Platforms, to manage customer data.

To maximise the potential of AI thoughtfully and responsibly, companies need to invest in data quality, leveraging effective, real-time data management tools and continuing to increase their use of first-party data. Sam Richardson, Customer Engagement Consultant at Twilio comments:

“AI has the potential to enhance the toolkit of every marketer and CX professional so they can meet growing customer demand for personalisation. However, there is still a lot of work to do for brands to reassure consumers and they must prioritise building trust and transparency. Real-time, first-party data will be key here for brands to maximise the potential of AI thoughtfully and responsibly.”

Appetite for AI: Gen Z call for AI-infused experiences

As digital natives, Gen Z are both more influenced by personalisation and more willing to embrace AI. In fact, a third of Gen Z consumers already expect AI to be used in their experiences with brands. For example, nearly three quarters (72%) of Gen Z consumers say that personalised experiences have influenced them to make a purchase. This compares to 66% of millennials, 57% of gen X and 42% of boomers.

Meanwhile, only 15% of Gen Z consumers report being uncomfortable with AI being used to help brands personalise their experiences. This is notably lower than millennials (24%), gen X (34%) and boomers (43%).

The benefits of AI-driven personalisation

This year’s report underscores the value of an AI-driven personalisation strategy for brands looking to both retain existing customers and acquire new ones, especially in today’s competitive market. 

Sixty-two percent of business leaders cite customer retention as a top benefit of personalisation, while nearly 60% say personalisation is an effective strategy for acquiring new customers. Consumers also increasingly confirm the value of personalisation, with over half (51%) of European respondents saying they will become repeat buyers after a personalised experience. 

Richardson concludes: “There is a big opportunity for brands to build customer loyalty and lifetime value by engaging consumers with tailored experiences. And, ultimately, companies that provide a clear understanding of how customer data is being used will be best equipped to establish a strong foundation for successful personalisation efforts.”

The full State of Personalisation Report can be downloaded here.