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Privacy or Personalization? The AI and Consumer Paradox

AI’s continued growth is certain. What remains to be seen is how companies will leverage AI to deliver the experiences customers crave, and what lines will be drawn to protect consumer privacy.

Last year, the human-AI relationship was scrutinized when hundreds of Alexa owners reported hearing unprompted, “creepy” laughter coming from their smart devices. If I were to fall victim to the maniacal cackle, my reaction would have been anything but Zen (and a lot more like the copier scene from Office Space. But how consumers actually reacted sums up our complicated relationship with AI: after unlocking phones with a glance and dictating angry Tweets, they posted videos of their nightmarish experiences, tagging friends who also owned smart speakers … using artificial intelligence almost every step of the way. Amazon quickly fixed Alexa’s glitch and went on to set record-breaking holiday sales of its smart devices. The short-lived snafu encapsulated a larger paradox: despite fleeting flare-ups of AI-induced anxiety, consumers crave the convenience and personalization that only AI can provide.

The Rise of Everyday AI

It’s hard to overstate the reach of AI into our everyday experiences. We’re living in a loop where consumer expectations are constantly shaping and being shaped by AI applications that impact nearly every facet of life. Governments are pouring billions into the race for AI, funding everything from driverless car technologies, to facial recognition in airports, to smart cities that optimize traffic flow. Our communities are becoming smarter: Utility companies are equipping homeowners with apps that gather personalized data and make cost-savings recommendations, while police and fire stations use predictive models to optimize staffing levels and improve response times.

Our jobs and workplaces are being disrupted and transformed. Both white-and blue-collar employees are working alongside AI, as powerful algorithms help accountants uncover financial fraud and rolling robots take inventory and feed data to warehouse managers. In other instances, AI is creating entirely new jobs and hot new talent markets: Self-driving and electric cars will help create more than 100,000 US mobility industry jobs by 2030. As younger generations enter the workforce, they bring heightened expectations about having AI-enabled tools available in the office just as readily as in their personal lives. Those personal interactions with AI are becoming ubiquitous. You don’t need a personal robot or a $4,000 talking refrigerator to use artificial intelligence.

Most people reading this sentence have already engaged with AI numerous times today. We regularly read curated news feeds, ask Waze for the fastest route to work, listen to Spotify-generated playlists, use autocomplete to draft emails, and ask Siri or Google to settle arguments and set reminders for us. AI’s pervasiveness is growing, and so is our reliance on it.

The Persuasive Power of Personalization

As consumers become more deeply immersed in an AI-powered world, they expect brand interactions to be fast, flawless, and relentlessly focused on their needs. In the vehicles they drive, the retailers they buy from, the homes they live in, and the services they receive, they’re demanding a dynamic product offering that goes beyond their needs and adapts to their wants – in other words, they seek a product experience. And that experience is driving their decisions about where to spend their considerable purchasing power.

80 percent of consumers are more likely to do business with a company if it offers a personalized experience – and they’re three times as likely to show their appreciation with repeat business.

The intelligence may be artificial, but the impact on consumer behavior is anything but. Instant gratification and seamless experiences are the name of the game, as the practice of selling a one-size-solution is replaced by hyper-personalized 1:1 marketing. This presents obstacles for brands that lag behind the AI adoption curve, and creates opportunities for leaders to continue creating value, delighting customers, and outsmarting the competition.

The Privacy Paradox

Even as consumers pursue bespoke experiences, they face a harsh reality: AI only works because it feeds on their data. How much of that data are they willing to give away in order to enjoy the perks of personalization? It’s a pressing question in an age where “identity theft” reaches far beyond bank accounts. As AI relentlessly gathers information, it learns our political ideologies, religious affiliations, and ethnic backgrounds; it knows whom we find attractive, whether we’re white or blue-collar, and how likely we are to vote; it tracks not only our banking and health information but also our favorite route to work, how many times we’ve ordered takeout, and when and where we sleep.

Consumer response to breaches has been complicated and contradictory. (Despite public outcry over privacy scandals, 91% of us still don’t bother to read privacy policies.) But as AI expands into new high-stakes territory, it’s likely to face sharper scrutiny by consumers and government agencies alike. It’s one thing to have your Facebook account hacked; it’s quite another to put your trust in a driverless taxi at rush hour, or put your life in the hands of a critical treatment plan from a medical algorithm. Explainable AI may hold the key to easing the growing tension between personalization and privacy. Ushered in by the EU’s General Data Protection Regulation (GDPR), Explainable AI establishes the right to understand the reasoning behind a machine’s algorithm-derived decisions. This critical insight will require businesses to make more informed, responsible decisions, and help consumers better balance the trade-offs in exchanging their data for personalized experiences.

The Way Forward

AI’s continued growth is certain. What remains to be seen is how companies will leverage AI to deliver the experiences customers crave, and what lines will be drawn to protect consumer privacy. Businesses must be diligent in understanding how data is being used, educating consumers, and preventing breaches. It’s a daunting task, but Vectorform can help. The first step is to leverage human intelligence to evaluate how AI can transform your business.

We’ve pulled together a handbook that serves as an AI primer and a provocation for change. Our framework will help you assess how ready your organization is to integrate with AI and guide you through questions that will lay the foundation for your future success. Download the handbook here, or reach out to me on LinkedIn or at

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