POV

What is the AI framework for marketing leaders to drive sales, enhance customer experience, and maximize ROI in a challenging economic climate and frantic holiday season?

Holiday shopping, believe it or not, is already in full swing. A Google-Ipsos survey[i] recently found that over a third of shoppers had already begun their holiday shopping this summer (34% in July 2024, up from 28% in July 2023). And with the recent improvement in consumer sentiment in many markets including the US, we can expect a busier holiday shopping season than ever. However, holiday trends will vary by category and consumer segment, and marketers face unique challenges and opportunities given the rise of AI and the shift towards first-party-data-driven communications.

Our recent consumer sentiment report, A Slow Recovery for Consumer Confidence, shows that while there is growing optimism with consumers loosening their wallets in select categories like big-ticket items, they postponed purchases of cars, luxury items, and experiences like travel; and they are cutting back or spending more selectively in areas like food and apparel. Gen Z in particular are spending less on dining out and limiting fast-fashion purchases. We expect these trends will impact holiday gifting as well.

The AI-powered Holiday

This holiday season, in the age of AI, CMOs and marketers are presented with three unique challenges and opportunities:

1. Cutting through the noise. First, the election season has made already expensive digital ads even more cost-prohibitive, so standing out is even tougher. It also doesn’t help that Thanksgiving falls especially late this year, so all brands will have a curtailed window for the final push to convert holiday shoppers. This – combined with an increasing need to move towards first-party-data-driven advertising with the continued decline of third-party cookies – makes fully leveraging owned channels (email, SMS, web, push, app, etc.) and precision-targeting paid media a critical part of any successful holiday strategy. Our recent CMO survey indicates that personalized communications are the next frontier for scaling AI, with CMOs making investments in both better predictive AI models to target high value holiday shoppers, as well as in creative testing aided by generative AI to tailor relevant communications to them. Leading brands, like Pandora in jewelry, have long been using personalized journeys to nurture gifting-oriented customers differently from those purchasing for themselves. We expect these trends to go on turbo-charge.
2. GenAI-aided holiday shopping. Second, virtual assistants powered by GenAI will gain even more prominence this holiday season. In 2023, they were widely used by consumers for generating ideas, with 60% of Gen Z consumers stating that they recently had a positive experience with a virtual assistant they knew wasn’t human. This season, with the rise of conversational commerce aided by chatbots, we expect consumers to also complete more of their transactions using these tools. Consumers will also increasingly shop for personalized experiences, such as gifting travel experiences that involve multiple components such as flights, hotels and destination experiences using tools such as Expedia’s Romie or start-ups such as Mindtrip. We also expect this trend towards buying something personalized to play out in beauty and skincare, with leading players like L’Oreal launching genAI assistant Beauty Advisor.
3. Loyalty and rewards. Finally, with many retailers such as Target, Macy’s, Nordstrom and others having recently relaunched their loyalty programs, expect a focus on signing up loyalty members and engaging them with points-based offers during and immediately after the holidays. The data thus collected will aid brands with their precision-targeted ad strategies and also delight promotionally sensitive customers looking for a great deal to justify spending.

Setting up the Holiday Mission Control

Given these fast-evolving trends and the realities of early holiday spending, marketers are already launching virtual “mission control rooms” to drive fourth-quarter growth. One large multi-brand fashion retailer we are working with is applying four simple strategies to drive outsize growth during the holiday season.

1. Bring together a small, cross-functional team of doers. Empower a core team of less than a dozen people to make decisions (while consulting with other experts as needed) and drive an engine of constant testing and tailoring. Instead of long-lead time efforts with lots of handoffs, put creatives, marketers, marketing operations, channel execution (spanning owned and paid channels), analytics, martech tech experts and legal/regulatory support all in “one room (even virtually).” The fashion retailer we are working with also focused on tapping its top talent at junior and mid-levels for this cross-functional team, generating excitement for it as a career accelerator.
2. Strive for a personalized touch: Our fashion client is using knowledge of past buying behavior, to generate ideas based on what they can infer based on style preferences, family status, gifting needs, etc. Analytic-oriented AI tools in most CRM systems can create clusters of people based on commonalities, and genAI tools can spin up ideas for different creative to test. Teams should constantly ask themselves how much more relevant can they be, how helpful to the customer, how to tell a story that the brand is actually empowering them.
3. Arm them with rapid measurement and AI tools. With automated dashboards that show real-time measurement of engagement data, daily/weekly sales data, and at least weekly data on test vs. control experiment results, our fashion client can make the rapid decisions needed to keep driving better performance. Increasingly, the main marketing tech stack tools enable easier self-service, so teams can analyze root causes and identify actions to take, without relying on analysts who can otherwise become a bottleneck. Generative AI tools can quickly generate many variants of creative copy to test, but work out robust approval and QA processes in advance to enforce legal, regulatory and brand guardrails without slowing things down.
4. Focus on in-campaign optimization every week to drive incremental improvements. The mission control team should understand the levers at their disposal across creative testing, targeting, channel and timing optimization and other areas as well as the time to impact each lever. By planning ahead and minimizing the time to make decisions and the number of handoffs, teams at our fashion client are increasing the cycle time of campaign optimization by over 10x (cutting what once was an 8-10+ week process to just a few days).

With this mindset, marketers can make the most of the holiday season, regardless of the state of their current data and tech stack. Along the way, they can also identify critical bottlenecks to unblock with further data and tech investments, as well as continued process improvements, in 2025.