THE BLOG

Will AI Make The January Sales Obsolete?

21/12/2017 14:15 GMT | Updated 21/12/2017 14:15 GMT
A K Walker

A huge wave of automation coming. To everything. It will be socially and economically disruptive, especially as human jobs are replaced by AI and robotics. However, there’s also potential for this new breed of technology to soften hard-nosed traditional commerce, in particular, the ham fisted way many brands set prices and subsequently discount them with promotions and sales. It’s no exaggeration to say that the psychologically double-edged sword of paying too much, or bagging a bargain, could disappear and we’ll find ourselves living in a world of personalised pricing that makes commerce - especially retail shopping - better for your mental health. No kidding.

Here’s the problem. Who hasn’t kicked themselves after paying full whack for an item that subsequently goes on sale? It sounds like a small thing in the scheme of things, but it’s a curiously shaming experience. And shame is bad for your mental health. After all, who doesn’t enjoy bragging to their friends about getting a great (cheap) deal? That’s just the flip-side of the same psychology of pricing. Imagine if every penny you spent felt like a rip-off (or a bargain)…the cumulative effect on your mental wellbeing shouldn’t be underestimated.

Last October, I bought a new jacket. I liked it so much I asked my wife to buy me another one, different colour, for Christmas. Like many people, I decided alternating two jackets would keep them both looking smarter for longer than wearing the same one all the time. That reasoning is one of the psychological roots that underpins marketing. We’re all cognitively biased towards the illogical idea that having multiple items (that you can’t use simultaneously) is better than buying just one, wearing it out, then buying another sequentially. It plays on anxiety about scarcity, the irrational fear that when we come to replace an item, it might no longer be available. And the manufactured notion of convenience, too. Save time, buy more now. It’s why we keep food in freezers that we never actually defrost and eat, and cupboards full of tins we never open.

Marketers use these psychological triggers to encourage people to buy things they don’t really need. Everybody knows that. And when marketers want to shift leftover stock, they use another psychological tool: the sale. Selling surplus stock (cheaper than it used to be) also encourages unnecessary consumption. We buy things we don’t actually want, and call them ‘bargains’. It’s buy-one-get-one free, bulk discount, special offer psychology. And it’s very effective.

But then, I discovered my wife paid half what I paid because the jacket went on sale. I felt like a sucker. It’s a complex problem for brands, because making people feel like a sucker is bad. This happens all the time. You buy something, then a few months later you get an email promo offering you big savings on similar stuff that you paid full price for. It’s so psychologically dissonant that when it happens to me, I decide never to shop at that store again because they’re either ripping me off, or I’d be better off waiting. Except, waiting is no good, because when you want something, you want it now. So now I shop around, for everything, searching for the cheapest deal, and my customer loyalty is at an all time low. Sales and discounts destroy loyalty. They turn humans into clicks and products into commodities, in a race to the discounted bottom. It’s a big problem for brands in the era of next day delivery, multiple supplier, competitive online retailing.

AI will change that. I’ve seen prototype systems that use retail AI brains to study user behaviours and adapt their pricing - and the deals they offer people - based on predicting how keener prices and personalised deals will extend your lifespan as a loyal customer. These systems are evolving rapidly, but sadly they’re not widely used, yet. They enable brands to build commercial strategies around customer lifetime revenues, effectively creating custom made prices for everyone. It shifts products by building loyalty, not merely slapping sale stickers on leftover stuff. It’s the commercial expression of empathy, and it will kill ‘the sale’.

This psychological shift in commercial logic puts the potential of AI and robots into perspective. There are serious risks from automation, it will force societies to rethink the traditional rules of commerce, industry and employment or risk far-reaching social distress that will break the economy. Then again, the economy isn’t doing so great and there’s no shortage of social distress now, either. Fairer pricing and more incentives for loyal shoppers seems like a positive step. And will I feel empathy when a robot replaces the marketing bod who mailed me a discount voucher for something I’d recently paid full price for? Hmm. So long, sucker.