Ever wonder how Amazon seems to know exactly what you want next? That kind of personalization is no longer exclusive to tech giants. Thanks to affordable AI tools, small businesses can also offer personalized, white-glove customer experiences, without a massive headcount or expensive computing infrastructure.

Personalization is increasingly important to your customers. According to a recent McKinsey report: “71% of consumers expect companies to deliver personalized interactions—and 76% get frustrated when this doesn’t happen.”

Read on to learn how AI tools can help you personalize interactions with your customers.

The Personalization Pay-off

AI personalization tools were once too complex and expensive for most small businesses. But now, a new generation of affordable solutions levels the playing field. Investing in personalization can lead to improved loyalty, retention and customer lifetime value (CLV). One report from the video commerce company Firework found that:

  • 91% of consumers are inclined to shop again after a positive personalization experience.
  • 80% of customers are more likely to remain loyal to brands that offer personalized experiences.
  • 65% of businesses that implement personalization strategies report higher customer retention rates.

AI and machine learning algorithms are central to hyper-personalization, allowing businesses to analyze vast amounts of data to predict customer behaviors and preferences. ​AI-powered data analysis also enables companies to move beyond static personalization to real-time engagement. This includes automatically adjusting content and personalizing offers based on user interactions.

Hyper-personalization is reshaping customer engagement strategies across industry sectors. Retailers, for example, are utilizing hyper-personalization to enhance customer experiences through incentivized product recommendations, dynamic pricing and tailored marketing messages. 

Manufacturers are using AI and customer data to enable personalized production. Some footwear brands, for instance, combine 3D printing and customer foot scans to facilitate hyper-personalized shoe fits and styles.

Personalization can provide significant benefits in  terms of customer satisfaction and business performance. That’s because fostering loyalty and retention means that your customers are more likely to buy, spend more, and stay with your brand. In one study, personalization based on customer preferences led to a 33% increase in CLV. Moreover, customers with a strong emotional connection to your brand have a 306% higher lifetime value than average customers.

AI Personalization Tools for Small Businesses

Three potentially valuable personalization solutions for your business are Klavio for marketing automation, Intercom for customer service and Shopify Magic for a suite of AI productivity tools.

Klaviyo: Marketing Automation

Klaviyo touts itself as the only customer relationship manager (CRM) built for B2C brands. It features a data management platform that uses AI for predictive analytics, product recommendations, benchmarking against competitors, and analyzing customer sentiment. Its Gen AI engine can help with tasks like creating automated flows for personalized marketing and writing subject lines for email content and SMS campaigns.

Pricing: Klavio pricing starts at $60 per month for its Email plus SMS plan.

See it in action: Harney & Sons, a family-owned tea company based in Millerton, New York, uses Klavio’s CRM platform for marketing and customer engagement. The tea company replaced its fragmented legacy systems with an automated solution that supports email, SMS, customer reviews, and customer loyalty programs. This enabled the company to streamline its operations, to implement targeted SMS sign-ups for specific customer segments, and to seamlessly incorporate customer reviews into emails and its Shopify storefront. In addition to improving operational workflows, the Klaviyo CRM helped Harney & Sons deliver more personalized and relevant communications to its customer base.

Intercom: Customer Service 

Intercom’s AI agent, called Fin, is designed to provide human-quality customer service that can either be integrated on your platform or used via Intercom’s platform. Fin provides instant, accurate answers for your customers 24/7. It also helps to personalize every interaction and can even take action on behalf of your customers by, for example, scheduling a follow-up call or transferring someone to a live agent.

The Intercom platform also includes Copilot, which provides instant, always-on assistance for support agents, and AI Analyst, which offers holistic AI insights and recommendations for decisionmakers. It’s a dynamic machine learning system in which every customer conversation helps to improve the system.  

Pricing: Intercom pricing starts at $0.99 per Fin resolution and $29 per seat per month for the Essential plan, which include the Fin AI Agent.

See it in action: Stuart, a last-mile delivery platform in Europe, uses Intercom for automated, on-demand customer communication and support. AI helps Stuart manage over 3,500 clients and 30,000 partner-couriers. Using Intercom’s messaging system, Stuart improved response times and reduced operational costs—leading to better efficiency and enhanced customer satisfaction. Since 2017, Intercom has helped Stuart manage 40,000 conversions a week, onboarded 17,000 customers and boosted marketing engagement by 60%.

Shopify Magic: E-commerce

Shopify Magic includes a suite of AI automation tools to handle repetitive tasks, tedious workflows, and creative roadblocks as you navigate the world of e-commerce. Shopify Magic AI tools can also help with content creation and customer service. For example, Shopify Magic can help personalize email content as well as recommending what time of day recipients are most likely to engage with your content.

The Shopify solution also can help small companies optimize online storefronts with automated design and content. You can use AI to write product descriptions and deliver personalized browsing experiences—including targeted discount offers—to existing customers and prospects.

Pricing: Shopify Magic tools are free for all Shopify merchants. Plans start at $29 per month.

See it in action: Klatch Coffee is one example of how Shopify Magic can help automate tasks such as writing product descriptions and generating personalized discounts and pricing strategies. Harnessing the power of AI has helped the California coffee roaster manage its online store more efficiently. Automation was especially valuable during the high-demand holiday season. Klatch is also using AI to respond more quickly to variable operating conditions—enabling it to quickly shift promotions, update listings and better manage inventory.

Trust, Transparency and Privacy

As personalization becomes more prevalent in digital marketing, concerns about overstepping privacy boundaries have grown. Instances where companies use detailed personal data without clear consent can sometimes lead to a “creepy” perception among consumers. 

Meta, for example, came under fire in 2024 for its plans to share user data from Facebook and Instagram in training its AI models. Critics pointed out that the opt-out process was convoluted and involved hidden forms and unnecessary steps—raising concerns about user consent and data privacy

Small businesses using AI should create policies that prioritize transparency and user control. Some best practices include: 

  • Emphasize respectful personalization by carefully handling details related to private information, such as someone’s income or relationship status.
  • Be transparent about how data is collected and used by clearing explaining how you use personal information to improve the shopping experience.
  • Build trust by aligning with privacy regulations, and by enabling customers to view, edit or delete their personal information from your system.
  • Offer opt-outs for AI-generated suggestions by giving users away to turn-off personalized feeds or bot-driven chat support.
  • Avoid personalization that feels intrusive, such as referencing off-platform behavior or personal information.

Enhance Personalization with an Assist from AI

The hyper-personalization market is projected to grow by more than 18% this year, fueled by increased internet usage, e-commerce expansion and rising consumer expectations for personalized experiences.

Small businesses don’t need to guess what customers want anymore. AI is helping make data actionable, service scalable and messaging personal. Customers expect personalized service, and AI makes it achievable for businesses of any size.

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