Market Trends of Recommendation Engine Industry
Increasing Demand for Customization of Digital Commerce Experience Across Mobile and Web Drives the Market's Growth
- Enterprises are looking for ways and technologies to leverage the advantage that could be difficult for their competitors to imitate by providing highly personalized customer experiences. Such experiences use proprietary data to offer a better experience to millions of individual customers. The results depend on the execution. When executed well, personalized customer experience can enable businesses to differentiate themselves and gain customer loyalty and sustainable competitive advantage, which is much needed in the present scenario.
- Customers' decisions are no longer being made in a physical store but online on web browsers and mobile phones in front of the digital shelf. For the enterprises operating in the retail space, the price, place, and promotion of their products are no longer just being compared to products on neighboring shelves but to alternative products from retailers with websites worldwide. In this regard, technologies such as recommendation engines, using AI and ML, ensure customers' requirements are met and ensure that customers' needs and offerings are on the same level, enough to be one step ahead of their competitors.
- Over the years, many marketing professionals across organizations have increased their focus on enhancing customer experience due to the customers' growing demand. For instance, according to Adobe, companies with the most robust omnichannel customer engagement strategies could witness a 10% Y-o-Y growth, a 10% increase in average order value, and a 25% increase in close rates. Also, brands that adopted robust omnichannel customer engagement strategies and consumer service enhancement programs retain, on average, 89% of their customers, compared to 33% for brands with weak omnichannel customer engagement strategies.
- With a growing number of channels coming into play, technologies ensure that the brands provide a consistent message about their offerings across all channels. The growing demand for better customer service is expected to drive the demand and positively affect the market during the forecast period.
- Overall, the growing demand for personalized digital commerce experiences drives the recommendation engine market. According to Thales Group, the banking and financial sector was considered trustworthy for the security of consumers' information. Over 40% of consumers globally stated they trusted the digital banking and financial services sector with their data. Healthcare providers were the second-most trusted industry in the digital services sector, with 37% of the respondents indicating this sector as among the most secure. Businesses seek to leverage AI technology to deliver targeted customer recommendations, drive sales, and improve customer satisfaction.
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Asia-Pacific to Witness the Fastest Growth
- Led by countries like Australia, India, China, and South Korea, the Asia-Pacific region is expected to witness the fastest growth in the recommendation engine market.
- China is one of the major countries in Asia-Pacific with growing technological adoption. The country is home to one of the fastest internet bands and strong e-commerce players, like Alibaba.
- Moreover, China is the second-largest OTT market in the world after the United States. According to Instituto Federal de Telecommunications (Mexico), there were 68 subscriptions per 100 homes in China, and the rate of online video users is increasing effectively. However, the country is very strict in terms of regulations surrounding the industry and the data used, as well as the content that is allowed to be circulated in the country.
- The tripartite (iQiyi, Tencent, Youku) domination is further secured by the strict regulatory environment in China, which prevents international players, such as the FAANG (Facebook, Amazon, Apple, Netflix, and Google), from operating in the country. These international players use the recommendations engine at a large scale and drive other businesses through advertising. This leaves the region ample opportunities for domestic players, thus leading to moderate growth compared to the United States.
- Furthermore, one e-commerce giant, Alibaba, uses AI and machine learning to drive its recommendations. For instance, AI OS is an online platform developed by the Alibaba search engineering team that integrates personalized search, recommendation, and advertising. The AI OS engine system supports various business scenarios, including all Taobao Mobile search pages, Taobao Mobile information flow venues for major promotion activities, product recommendations on the Taobao homepage, personalized recommendations, and product selection by category and industry.
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