Why Conversational Marketing is the Next Big Thing in Digital Marketing

Digital marketing is growing, with spending across search, display, video, and email expected to top $120B by 2021. But seismic shifts are happening, not least of which is a move towards digital experiences over digital media as well as a focus on surfacing consumer insights using artificial intelligence [Forrester Digital Marketing Forecast: 2016 To 2021]. And of course, all of this needs to be mobile-first. One emerging technology that meets all of the above criteria is Conversational Marketing, or the ability to use AI to have personalized one-on-one conversations with your customers, usually over mobile messaging apps like Facebook Messenger. People love chatting, and for millennia it’s also been the best way to get to know someone. Now for the first time, the rise of messaging as the dominant mobile use-case along with the emergence of practical applied AI is making this possible, and quite literally, giving brands a voice.

I’ve personally been working on conversational software since 2000, and after years spent working for companies that were trying to automate human call center agents out of a job or getting your smartphone to let you command it with your voice, I’m more excited about Conversational Marketing and the ability for brands to have conversations with consumers than I’ve ever been about any of those past projects. As our advisor Tim O’Reilly says, it’s lazy to think that AI is only about automation, and I’d add that it’s also not about removing “friction” from our already easy to use smartphones (having to tap buttons to order your pizza isn’t a problem people). Where things get really interesting is when you can make foundational improvements to industries and create whole new classes of jobs, both of which I think Conversational Marketing is capable of.

What’s wrong with current digital marketing?

Today’s Digital Marketing is really about monitoring people. Whether it’s pixels and cookies that follow you around observing the websites you visit or looking over your shoulder while you do searches, or tracking who you’re friends with, what you like, read, or what your political affiliations are, we all know that we can’t go online anymore without big technology companies spying on us. Now, as a technologist who appreciates all the free services that digital monitoring pays for, I’m not necessarily ethically opposed to this (though I don’t love it). However, as a business person, I am ethically opposed to the billions of dollars that brands spend for substandard customer communication as a result. Here are three examples:

  • Re-targeted display ads. These are the ads that follow you around the web or on social media, sometimes for days, reminding you of a search you did, or a website you visited, often times for something you didn’t even really care about that much. Even worse are the ads that show up the day after you buy something — for the product you just bought!
  • Intent-based search. For many types of brands and products, serendipity, advice, guidance, and recommendations matter far more than simply dredging up a set of search results. Search is best once I already know what I want, but it isn’t all that good at helping me figure out what that might be. In the image below, the response to my query about makeup techniques doesn’t answer my question and doesn’t anticipate my need to find related products and content. I’m left digging through results and crafting my own experience.
  • Spam email. Let’s just call it what it is, as marketers we may lovingly craft emails to our customers but, when we’re on the receiving end, we think of it as spam. It’s 2017 and most consumers are mobile, and most mobile consumers spend the bulk of their time in messaging applications. Email feels like work, and it’s an outmoded way to communicate with customers. Not to mention, email marketing is one-way!

Digital Monitoring

And isn’t that really the biggest flaw with all of these types of digital marketing? It all goes in one direction, relentlessly being shoved at consumers in an attempt to capture their attention and engage them. Even video which is the fastest growing digital marketing medium, and which undoubtedly feels more personal, is still all one way, and non-interactive.

Why is this? Is it possible that all this monitoring doesn’t really help us understand our customers that well? Is it possible that the websites you visit, the searches you do, and the content you view don’t actually represent a complete a picture of who you are or what you care about? Is it conceivable that maybe the big technology platforms don’t know us as well as they imply they do, and that it’s in their best interests to perpetuate the myth that our online behavior defines us?

What if you could just talk to your customers?

At Automat we pondered the above questions and came to a simple conclusion. If brands want to get to know their customers, they should just talk to them. Over the past two years, we’ve been testing our hypothesis with some of the biggest beauty brands in the world, including L’OréalCoverGirl, and others and we have learned the following:

  • Talk to your customers to learn about them in their own words. Websites and apps provide a fixed set of menus and buttons, and if a user can’t find what they’re looking for or wants something they don’t immediately see they have no easy way to let the brand know. When in conversation with a brand, a consumer can easily request things that aren’t on screen or ask questions and provide feedback about products. This not only creates a rich set of learnings about the individual consumer, it also helps drive new features, services or products based on insights gleaned directly from many consumers. Every interaction provides an opportunity to learn, and as we all know, test and learn is the way to succeed long term.
  • Personalize based on what you learn. This is where things get interesting. We’ve found that we can get a 40% higher response rate to notifications that we send to consumers when we use what we learn about them in prior conversations. To date we’ve been able to get nearly 30X higher engagement rate (measured by number of user sessions) when compared to current email marketing and a big part of that is personalizing the content we send.
  • Build ongoing relationships. Once you’ve opened a bi-directional conversation with someone, if you send them relevant, personalized, and contextual content you earn the right to continue the conversation. Messaging applications nearly always have push notifications enabled, and we’ve found that very few consumers block the messages you send when you take an interest in them, send them information they care about and don’t abuse the privilege.

Email marketing will be disrupted by conversational marketing

If you’re looking for a short-term business reason to get started with conversational marketing then there’s no better rationale than the following:

  • Conversational Marketing averages a 54% read rate compared to email’s 16% read rate.
  • Conversational Marketing averages a 26% response rate compared to email’s 3% response rate.
  • Conversational Marketing averages 11 messages sent for a total of 9 minutes of engagement compared to email which gets 4 page views and 3 minutes of engagement.

Conversational marketing - Results

In recent experiments, we’ve run since writing this article we’ve seen results as high as 60% read rate and 35% response rate, and we think there’s still room to improve. If you’re already doing email marketing then diverting some of your current email budget towards Conversational Marketing is probably a good idea so you can benchmark how much more effective it can be for you. It’s still early days for Conversational Marketing so it will take some time to build up your lists which means that if you already have a large database of emails you won’t reach the same scale with Conversational Marketing out of the gate, and most consumers are still a little wary about buying over messaging channels, but with engagement rates that are so much higher than email we think that’s bound to change.

The real reason to invest in conversational marketing

While there’s already amazing business benefits to investing in conversational marketing compared to email, we think the real reason to begin your conversational marketing journey is to build the voice of your brand and to use artificial intelligence to learn who to talk to, and how and when to talk to them. Let me explain.

For the past 25 years, big technology companies have slowly chipped away at brand’s relationships with their customers. Today the vast majority of brand interactions are mediated by Google, Facebook, Amazon, and others. Every brand we talk to wishes they had a closer connection to their customers. Here’s the good news; if you’re a beauty, fashion, luxury, or other type of brand that benefits from advice, expertise, guidance and personalized consultation, you have the opportunity to build a conversational data set that lets you talk to your customers in ways that Google and Facebook will never be able to.

After my almost 20 years building conversational software I believe the future belongs to highly specific, vertically oriented conversations on specific topics, not to the one-size-fits-all assistants we have today. If we both ask Siri a question we get the same answer because Siri is expected to know about everything and given the current technology we have she can’t personalize how she talks to each of us as individuals. However, if your branded AI only needs to know about say makeup and skincare (or handbags, shoes, jewelry, etc), there is a real opportunity to own that conversation and learn everything about it including how consumers want to be talked to as individuals.

At Automat we’ve dedicated ourselves to providing a cloud platform, proprietary AI and strategic services to help brands achieve just that. If you’d like to learn how we can help you, please reach out, we’d love to chat with you.