Marketing in the Age of Virtual Assistants: Reaching Grocery Shoppers
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Marketing in the Age of Virtual Assistants: Reaching Grocery Shoppers John Molson School of Business, Concordia UniversityMark 305 Section APresented byDaniyella Sritharanathan #40008893Eric Farmer #40005462Jason-Jude Rocha #40003595Kieran Sanders #40014499Tim Harris #27788940Executive summary word count: 1499November 27th, 2017Table of ContentsMotivation 3Trend and Industry Analysis 3Consumer Analysis 5Methodology 7Major Findings 7Annotated Bibliography 8Methodological Appendix 12Appendix A 18Appendix B, Full Questionnaire 19MotivationThis report analyzes the growing trend of artificial intelligence, specifically voice interfaces. The growing use of these interfaces has particular implications in retail and how marketers will reach consumers through a speaker. How will they continue to market in this new age? The focus of the report will be on Amazon’s interface: Alexa, and its impact on the grocery industry.Trend and Industry AnalysisAccording to Amy Webb, CEO of the Future Today Institute, author, business professor at NYU, and widely respected tech forecaster, in her 2017, and 2018 report on tech trends, a trend is “a new manifestation of sustained change within an industry sector, society, or human behavior. A trend is more than the latest shiny object” (Webb, 2017). In this report, she outlines how AI is a major trend to watch for in 2018, more specifically, voice interface usage. As we enter this new age, she says “you can be expected to talk to machines for the rest of your life.” (Webb) This is not something coming decades from now, this needs to be properly addressed as “by 2023, 50% of interactions North Americans have with machines, will be using their voice” (Webb). While many of these voice interfaces exist, Amazon’s Alexa is gaining dominance in the market “with thousands of companies integrating Alexa into their products and services” (Webb). According to emarketer, a leading market research company, the use of voice-activated assistants will be up 128% over last year, Amazon’s Echo powered by Alexa, will have 70% of users, which is already over 35 million consumers. (emarketer, 2017). The increasing adoption of voice interfaces allows consumers to carry out complex tasks, one of which is purchasing. According to a Business Insider Intelligence report, voice payment adoption “is set to grow from 8% to 31% in US adults by 2022.” (BI Intelligence, 2017) factors leading to this growth include: the rapid increase of these devices, generational gains in AI, and a solid value proposition offered to the consumer through voice payment (BI Intelligence). Another driving force is conformity. The use of smartphones in Canada rose from 40% to 70% between 2013 and 2018 (Statista, 2017), our brains are “wired to make us crave new technology” according to Sundeep Teki, a neuroscientist at Oxford University (Time, 2016). The need for social status, as we saw in smartphones, will make way for voice interfaces to be the new gadget everyone is after.
The grocery industry will be vastly affected by this trend. With Amazon’s recent purchase of Whole Foods, they now own over 465 physical stores throughout the US, Canada and UK. This caused a major transformation in the industry. According to an article in Global News, “Rivals are scrambling to keep up,” Kroger is testing online grocery delivery. While Walmart, an industry leader, is expanding its online grocery ordering and has partnered with Google to allow customers to order through Google’s virtual assistants (Global, 2017). With the growing movement of voice interface, the five prerequisites needed for successful adoption outlined in the textbook are also met. Automation will be compatible with consumer’s lifestyles as we move toward this trend. Trial runs will make it easy for people to test the service. The service will be low in complexity as it will complete the entire process for you. It will also be easily observable and offer a strong relative advantage over the alternative of traditional grocery shopping as it will save consumers time and money (Solomon et al., 2016). Although “online shopping has yet to emerge as a widely accepted mode for buying groceries. Likely changing over the next five years as more enterprises enter the industry and consumers become more familiar with the channel’s format” (IBIS World, 2017). Emphasized by the grocery industry moving towards more online options paired with Americans becoming more comfortable purchasing goods online. Euromonitor recorded a 57% increase in food and drink sales online in the past 5 years, and it expects another 60% growth in the next 5 years (Euromonitor, 2017). This illustrates that consumers are becoming increasingly comfortable shopping for their groceries online, which will inevitably be done through virtual assistants.Consumer AnalysisThe current use of virtual assistants is primarily driven by individuals between the ages of 25 and 34, representing 26.3% of virtual assistant users (emarketer, 2017). In Figure 1 (Appendix A), we see the generational breakdown of users, with millennials dominating the market. In Figure 2 (Appendix A), the percentage of internet users interested in virtual assistants remains constant at 35% for all age groups. Americans between the ages 20 and 29 who buy groceries online doubled in the past three years (Michelle Grant in Euromonitor, 2017). Euromonitor clearly defines the user of online grocery shopping as “affluent, younger, urban parents” (Euromonitor, 2017). The demographic of users is currently limited due to a few factors. However, as prices decline and services expand, the adoption of this service will be widespread geographically and generationally as our data shows.