What are the benefits of AI product recommendation systems in e-commerce?

Whether it’s the first time that you’re learning about artificial intelligence (AI) product recommendation engines, or you’re already familiar with them, you’ve doubtless interacted with them all over the internet.

When you’re shopping online and a product pops up that you need — whether you know it or not — that’s the result of an AI product recommendation.

When you finish up a film or series on Netflix and it suggests other shows that you’ll probably like, that’s another example of a product recommendation system at work.

It sounds so simple, right? Yet this easy tweak to Netflix’s platform brings in around $1 billion per year.

You didn’t read that wrong. $1 billion dollars.

Product recommenders have helped businesses to grow by more than tripling sales and engaging customers — but what exactly are they and why are they so important?

What are AI product recommendations and how do they work?

An AI product recommendation engine uses artificial intelligence and machine learning algorithms to make specific product recommendations to customers based on their behaviour and preferences.

It uses data points such as search history, past purchases, similar customer behaviour, and many more to determine which products you’re most likely to want or need at any given moment.

Here are some examples of product recommendations that you’re probably familiar with:

  • Similar products to this
  • We think you might like
  • Trending
  • Bestsellers
  • Hot right now
  • 42 other people are checking out this listing right now
  • Recommended for you
  • Recently viewed
  • More titles based on your watching

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Now that you’re up to speed on what AI product recommendation engines are and how they work, let’s dive into all of the benefits that customised product recommendations can bring to e-commerce businesses.

6 Benefits of using AI product recommendations for your e-commerce website

Using AI product recommendations is a simple way to make your online business a success. Here are some of the benefits of using this innovative technology.

1. They increase sales and conversions

AI product recommendations are proven to increase conversions on e-commerce websites. In a survey of more than 600 retail and travel businesses, those that used personalised product recommendations had a 10 times increase in conversions.

Timing is everything when it comes to the sales funnel. Your product recommender can show customers the items that they’re most likely to want to purchase at that exact moment, leading to a surge in conversions.

2. They increase the average order value (AOV)

Not only can AI product recommendation engines increase sales, they can also increase the average order value of those sales by up-selling and cross-selling.

Let’s imagine that a customer is purchasing a new phone online. Chances are, they’ll need a phone case and a charger to go along with it, but it might just slip their mind.

Once they’ve added a phone to their basket, a product recommendation engine would infer that they’ll need the case and charger — based on similar user behaviour — and suggest these products to them.

Rather than forgetting the extra accessories and potentially shopping with a competitor at a later date, your customer will spend more with you.

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3. They improve the customer experience

It’s great that AI product recommendation systems can help e-commerce stores drive up their sales and revenue, but it’s also a win for the customer.

Continuing on with our example of the phone, case and charger, the product recommendations actually did them a favour.

It would’ve been a hassle to have checked out and forgotten the extra bits that they needed.

The product recommender conveniently reminded them of what they needed right when they needed it — helping to make their day a little bit easier!

4. They improve customer retention

With a good customer experience comes loyal customers or users.

Customer loyalty is worth a whole lot of money — remember our Netflix example earlier? That $1 billion in savings comes from retaining their customers and driving repeat subscriptions or purchases.

Not only do retained customers result in a greater return on investment (ROI), but they also cost businesses between 5 to 25 times less than a new customer.

5. Customers can discover new products

It’s quite possible that AI product recommendation engines know us better than we know ourselves…

Just kidding, but they can get a pretty good grasp on what we’d like.

Ever discovered your new favourite song through a Spotify or Apple Music suggestion? Their AI product recommenders were working away in the background, analysing the kind of music you enjoy listening to and found one that they knew you’d like.

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The same can apply to e-commerce retailers. Your AI product recommender can show your new products to the customers who are the most likely to buy it, without them ever even having to look.

6. It requires no extra work

The best part about all of these benefits? It requires no extra work from you.

Your AI product recommender works away in the background, passively increasing revenue for your business.

You just need to find the best AI product recommendation system (hint — you’re so close to finding it).

Prioritizing website performance and user experience can help you attract and engage visitors, regardless of whether you use product recommendations.

With AI-generated insights from Flowpoint, you can detect and resolve user experience problems that may be causing visitors to leave your site.

Enhancing these aspects can improve your website's conversion rates and attain your business objectives.

Therefore, to elevate your website's performance, begin by prioritizing user experience and optimizing performance, as recommended by Flowpoint.

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