ARTIFICIAL INTELLIGENCE IN MARKETING

A Study on Impact of Artificial Intelligence in Consumer Behaviour

Author:
*Bhargavi H B
Assistant Professor
Department Of Management
Community Institute of Commerce and Management Studies, Bengaluru (Ph.
No:8884270581, Email ID- boondu.bhargavi25@gmail.com)

Co-Author
**Ashwini C Ashwath N S
Assistant Professor
Department Of English
Community Institute of Commerce and Management Studies, Bengaluru
(Ph. No:6362016622, Email ID:- ashwinimohan504@gmail.com)
A study on Impact of Artificial Intelligence (AI) in Consumer Behaviour
Abstract
AI has significantly impacted consumer behavior analysis, offering deeper insights into
purchasing patterns and preferences. By utilizing machine learning, natural language
processing, and big data analytics, AI systems can process vast amounts of consumer data in
real-time, uncovering patterns and insights previously unattainable. This enables businesses
to create highly personalized marketing campaigns, enhance customer experiences, and
optimize product recommendations.
AI-driven chatbots and virtual assistants provide instant customer support, improving
satisfaction and engagement. Additionally, AI can predict future consumer trends by
analyzing social media activity, reviews, and other online behaviours, helping businesses stay
ahead of market shifts.
AI also makes sentiment analysis tools which can scan social media, reviews, and customer
feedback to gauge the emotional tone of customer opinions toward a brand, product, or
service this creates dynamic and personalized loyalty programs that respond to individual
consumer behaviour with additional technologies such as I-powered AR and VR experiences
enable consumers to engage with products in innovative ways before making a purchase
The study uses bibliometric, conceptual network, and intellectual network analyses to
identify consumer demands and behaviours based on all the pros previously analysed. The
study also focuses on research clusters and presents a thematic framework covering consumer
acceptance and trust, interaction and engagement, attitude and personality, decision-making,
and adoption.
The integration of AI in consumer behaviour research also facilitates dynamic pricing
strategies, inventory management, and targeted advertising, leading to increased efficiency
and profitability. By automating routine tasks, AI allows marketers to focus on strategic
decision- making and creative tasks. The thematic framework and TCM-ADO analysis
suggest future research directions to advance theoretical development, impacting both
industry and society.

Key words: AI-driven chatbots, I powered AR and VR, bibliometric, conceptual

network, intellectual network analyses, TCM-ADO analysis, attitude and personality
Introduction
AI, or Artificial Intelligence, refers to the simulation of human intelligence processes by
machines, particularly computer systems. It involves the creation of algorithms and models
that enable computers to perform tasks that typically require human intelligence. These tasks
include learning, reasoning, problem-solving, understanding natural language, and perceiving
the world through sensory data.
Consumer behaviour analysis is the
study of how people make decisions
about products, services, or
organizations. It can help businesses
understand customer preferences,
habits, and needs, which can lead to
better marketing campaigns, product
updates, and customer experiences
Artificial intelligence (AI) is
revolutionizing how businesses
understand and meet customer needs. By analyzing vast amounts of customer data, AI
empowers businesses to deliver personalized experiences through sophisticated segmentation
and journey mapping. AI-powered chatbots and virtual assistants provide real-time, tailored
responses, enhancing customer interaction and allowing human agents to tackle more
complex tasks. Additionally, AI-driven predictive analytics forecast customer behavior and
trends, enabling businesses to make informed decisions. While AI offers numerous
advantages, ethical considerations, such as privacy and algorithmic bias, must be addressed to
ensure its responsible use in understanding consumer behaviour.
Artificial intelligence (AI) is also a transforming tool that ways businesses understand and
cater to customer needs. By processing extensive customer data, AI enables tailored
experiences through advanced segmentation and journey mapping. AI-powered chatbots and
virtual assistants offer personalized, real-time interactions, freeing human agents for more
complex tasks. Predictive analytics, driven by AI, forecast customer behaviours and trends,
aiding businesses in data-driven decision-making. Despite its benefits, AI use in consumer
behaviour requires ethical considerations, including privacy and algorithmic bias, to ensure
responsible implementation recommendations.
In response, this study endeavors to untangle the complexities of AI, CB and the integration
of this in business realms. The study scrutinizes the combination and impact on various
phases of consumers and their buying perceptions in the present marketing conditions and
trends with respect to Artificial Intelligence and Consumer behaviour through the intricacies
of the digitalization and creating a path for the favorable working condition with competitive
advantage.
Review Of Literature:
A) The Role of Artificial Intelligence in enhancing Consumer
Preferences and Buying Behavior
 Rajat Gera and Alok Kumar A (2000-2021)
“This study synthesizes empirical literature on AI in consumer behavior, providing
actionable insights and identifying future research directions. and aims to provide actionable
insights for academicians and practitioners and potential directionresearch.”

 Dipika Agarwal, Diksha Ladha, and Godwin Mano M 2021

“Examining The Influence Of Artificial Intelligence On Consumer Preferences And Buying
Behavior and AI innovations impact consumer preferences and purchasing behavior in the
retail sector, focusing on personalized suggestions, customization, trust, and privacy”.

 S.Manjula(2023)
“The impact of Artificial Intelligence in Consumer Behaviour" by This study examines the
impact of AI on consumer buying behaviors, highlighting how AI analytics can help brands
develop better selling techniques.”

 V. Jain, K. Wadhwani, and J. K. Eastman (2024)

“A Hybrid Review and Research Agenda" by This study provides a comprehensive review of
AI's impact on consumer behavior, focusing on personality, attitude, engagement, decision-
making, and trust. It uses a bibliometric and framework-based methodology to offers a
thematic framework for future research.”

B) The Role of AI-Driven Analytics in Optimizing Consumer Behaviour

and caputuring the Target Consumers

 Norhaslinda Kamaruddin Abdul Wahab Abdul RahmanKulliyah (2019)

“Enhancing Talent Development Using AI-Driven Curriculum-Industry Integration The
specific hiring needs render low-skill-based job-seeking invalid in coping with the nation's
economic development. There needs to be more graduate readiness for the industry's needs.
This paper explores the transformative potential of Artificial Intelligence (AI) in fostering a
symbiotic relationship between academic curricula and industry demands, aimed at building a
robust talent pool for the future.

 Mohammed ali Akbari Trust in AI: progress, challenges, and future

direction(2020)
Trust and distrust in AI serve as regulators and could significantly control the level of this
diffusion, as trust can increase, and distrust may reduce the rate of adoption of AI. Recently, a
variety of studies focused on the different dimensions of trust and distrust in AI and its
relevant considerations. In this systematic literature review, after conceptualizing trust in the
current AI literature, we will investigate trust in different types of human–machine interaction
and its impact on technology acceptance in different domains.

 Thomas Heinrich Musiolik, Raul Villamarin Rodriguez, Hemachandran

Kannan(2019)
AI Impacts in Digital Consumer Behavior In the ever-evolving landscape of digital
innovation, businesses grapple with the challenge of deciphering dynamic consumer
behavior. AI Impacts in Digital Consumer Behavior is a pioneering exploration tailored for
academic scholars seeking insights into the profound influence of artificial intelligence on
consumer dynamics.

 Bing liu (2020) Sentiment Analysis and Opinion Mining

Sentiment analysis or netizen's online behavioral characterization has become a fundamental
part of business systems, especially to serve numerous purposes including corporate business
decisions, event-based designs and redesign services and/or decisions, product/service
recommendation engines, political analytics etc.

Research Methdology
RESEARCH OBJECTIVE:
The objective of this presentation is to explore the transformative role of artificial intelligence
in shaping consumer behavior by improving personalization, engagement, and decision-
making. It will also assess the effectiveness of AI-driven analytics in optimizing operational
processes, streamlining workflows, and managing risks in IoT environments. Furthermore, the
presentation will delve into innovative ideas surrounding AI interoperability, examining the
technical challenges and potential solutions for seamless integration of AI technologies, while
also addressing critical privacy concerns and ethical implications involved in these
advancements.

SCOPE OF THE STUDY

This study aims to explore various aspects of consumer behavior with the application of
Artificial Intelligence (AI). It will analyze how frequently customers engage with businesses,
where they shop, and their reactions to marketing campaigns. The study will also examine the
psychological and social factors that drive consumer decisions. Additionally, it will focus on
identifying customer pain points, highlighting issues customers face with products or services,
and determining which customer segments are most likely to convert.
To analyze consumer behavior using AI, the following methods will be employed:
 Data Collection: AI-driven systems will gather data on customer interactions with
products, services, and marketing efforts, providing valuable insights into their
behavior.
 Customer Segmentation: AI tools will group customers into segments based on
demographics, values, challenges, and life stages to better understand their unique
preferences and needs.
 Pattern Identification: AI algorithms will identify and analyze behavioral patterns,
allowing researchers to explore the underlying reasons behind customer purchasing
decisions.
 Qualitative and Quantitative Data Analysis: The study will leverage both
qualitative and quantitative data to assess current consumer behavior and forecast
potential future trends.
 Continuous Evaluation: AI-based systems will continuously evaluate and refine
strategies by analyzing real-time data to enhance future decision-making and improve
customer engagement
SOURCES OF DATA:-

The Secondary data has been collected

from various journals, websites,
newspapers, articles, videos, thesis etc

It is
descriptive
in nature

Recent Trends in the Impact of Artificial Intelligence, Internet on things in

Consumer Behaviour
1. AI-Driven Data Analytics in Customer Experiences:
Artificial Intelligence (AI) refers to the use of advanced technology that mimics
human cognitive abilities to influence and enhance the consumer experience. AI-
driven systems enable businesses to better understand and anticipate customer needs
by analyzing data and behaviors. For instance, digital assistants like Siri and Alexa can
assist consumers by performing tasks such as making calls or setting reminders,
improving convenience and satisfaction. Recommendation engines, powered by AI,
analyze a consumer's past preferences to suggest products, services, or content, thus

shaping their purchasing decisions and engagement. Additionally, AI-based spam

filters protect consumers from unwanted emails, creating a more streamlined and
positive user experience. Through these applications, AI plays a significant role in
shaping how consumers interact with products, services, and digital environments.
2. Internet on Things in Customer Experiences:

The Internet of Things (IoT) in the context of consumer behavior refers to the network
of connected devices that gather, exchange, and analyze data to influence how
consumers make decisions about products and services. By using IoT technology,
businesses can gain deeper insights into consumer preferences, habits, and needs,
allowing them to offer more personalized experiences and targeted solutions. For
example, smart home devices like thermostats or refrigerators can track consumer
behaviors, such as temperature preferences or product usage, and then make
recommendations or automatically adjust settings based on this data. This allows
companies to better understand customer patterns, improve product offerings, and
enhance the overall user experience. IoT-enabled devices thus play a crucial role in
consumer behavior analysis, helping businesses refine marketing strategies, optimize
services, and strengthen customer relationships.

The integrated impact of Artificial Intelligence (AI) and the Internet of Things (IoT)
on consumer behavior is profound, as the combination of these technologies creates a
seamless, personalized, and data-driven experience for consumers. When AI and IoT
work together, they can gather real-time data from connected devices and analyze it to
predict, understand, and influence consumer actions more accurately.

Here’s how this Integration impacts consumer behavior:

1. Personalization and Customization: AI analyzes data collected from IoT devices to

offer personalized recommendations and services. For example, smart home systems
can learn a consumer’s daily routines and preferences, adjusting lighting, temperature,
or even suggesting products based on usage patterns. This level of customization can
significantly influence purchasing decisions, as consumers feel that products and
services are tailored to their needs.
2. Improved Customer Experience: With IoT devices constantly collecting data and AI
algorithms processing that information, businesses can anticipate customer needs and
address them proactively. A smart fridge, for example, could monitor inventory levels
and automatically order groceries when supplies run low. This streamlined,
frictionless experience enhances customer satisfaction and can increase brand loyalty.
3. Behavioral Insights: IoT devices generate vast amounts of data about consumer
habits and interactions. AI can analyze this data to reveal patterns in consumer
behavior, helping companies fine-tune their marketing strategies. For example, if AI
identifies that a consumer consistently buys a particular type of product after a specific
event (e.g., a sale or holiday), businesses can target them with tailored offers during
that time to increase sales.
 4. Enhanced Decision Making: AI combined with IoT enables real-time data analysis,
allowing consumers to make better-informed decisions. For instance, a wearable
fitness tracker can use IoT to monitor health metrics, and AI can analyze this data to
recommend specific products like fitness equipment or dietary supplements based on
the individual’s health goals.
5. Automation and Convenience: The combination of AI and IoT leads to greater
convenience for consumers. Devices can operate autonomously, making everyday
tasks easier and more efficient. For example, a smart thermostat adjusts the home’s
temperature based on the user’s routine without them having to lift a finger. The
convenience of these AI-powered IoT devices can directly affect consumer
preferences, increasing the likelihood of repeat purchases or brand loyalty.

How Consumer Behaviour Analysis adopts Artificial Intelligence

1. Data Collection

AI and IoT work together to gather data from a variety of sources. AI collects
information from social media, e-commerce platforms,
customer feedback, transaction records, and web
browsing behavior, while IoT devices, such as
smart home appliances and wearable technology,
capture real-time data like temperature, motion,
location, and usage patterns. This data is
integrated and managed using AI-powered CRM
systems, creating a comprehensive dataset for
further analysis.

2. Data Preprocessing

Before analysis, the collected data must be cleaned and normalized to ensure quality and
consistency. For AI, this involves removing noise and irrelevant information, standardizing
data formats, and performing feature engineering to create relevant attributes from raw data.
IoT data undergoes filtering to remove redundant or unnecessary information and edge
processing to reduce latency and bandwidth usage by performing initial data processing closer
to the data source.

3. Data Integration

To create a unified dataset, AI and IoT data are combined into a centralized storage system,
such as a data lake or warehouse. A unified data model is developed to ensure compatibility
and seamless integration of data from both AI and IoT sources. This integration provides a
holistic view of consumer behavior, enabling more accurate analysis and insights.
4. Data Analysis

AI and IoT data undergo thorough analysis to uncover patterns, trends, and anomalies. AI
utilizes descriptive analysis and machine learning models, such as clustering, classification,
and regression, to analyze consumer behavior. IoT data is
analyzed in real-time to identify immediate
patterns and trends, providing contextual
insights based on location, environment,
and usage patterns. This
comprehensive analysis helps businesses
understand consumer preferences and behavior
more effectively.

5. Predictive Analytics

AI leverages historical data to forecast future consumer behaviors using predictive models.
These models predict outcomes like purchase likelihood, demand trends, and customer churn.
IoT data enhances these predictions by providing real-time information on device usage and
behavior, allowing businesses to anticipate consumer needs and preferences proactively.
Predictive analytics enables businesses to make informed decisions and stay ahead of market
trends.

6.Real-Time Decision-Making

AI and IoT enable real-time decision-making by providing dynamic and personalized

recommendations. AI-driven dynamic pricing adjusts prices based on demand,
competition, and consumer behavior, while recommendation engines offer personalized
product and content suggestions. AI chatbots provide instant customer support and
tailored recommendations. IoT devices contribute real-time data, enhancing the accuracy
and relevance of these recommendations and adjustments.

7. Consumer Segmentation

AI segments consumers based on demographic, behavioral, and

psychographic factors, while IoT provides additional insights
through usage-based and environment-based segmentation. This
segmentation allows businesses to target specific consumer
groups with personalized marketing strategies and product
recommendations. By understanding different consumer
segments, businesses can cater to their unique needs and
preferences more effectively.
8. Performance Evaluation

The performance of AI and IoT-driven strategies is continuously monitored using key

performance indicators (KPIs) and metrics. A/B testing helps optimize different approaches,
and a feedback loop ensures that models are updated and improved based on new data and
insights. This continuous evaluation helps businesses measure the effectiveness of their
strategies and make necessary adjustments to achieve better outcomes.

9. Ethical Considerations

The integration of AI and IoT in consumer behavior analysis raises important ethical
concerns. Data privacy must be protected, and businesses should comply with relevant
regulations. Algorithms must be regularly checked for biases and transparency maintained in
AI processes and decisions. Addressing these ethical considerations is crucial to building trust
with consumers and ensuring responsible use of AI and IoT technologies.

Leverage of Artificial Intelligence to Consumer Behaviour

1. Personalization

AI enables businesses to offer highly personalized experiences to consumers by analyzing

their preferences, behaviors, and past interactions. This leads to more relevant product
recommendations, customized marketing messages, and tailored customer service, enhancing
overall satisfaction and engagement.

2. Real-Time Insights

AI processes vast amounts of data in real-time, providing businesses with immediate insights
into consumer behavior. This enables quick decision-making, dynamic pricing adjustments,
and real-time personalized recommendations. Real-time insights help businesses respond
promptly to changing consumer demands and market conditions.

3. Enhanced Customer Support

AI-powered chatbots and virtual assistants provide instant and efficient customer support.
They can handle routine inquiries, resolve issues, and offer personalized suggestions 24/7.
This improves the customer experience, reduces wait times, and allows human agents to
focus on more complex tasks.

4. Improved Segmentation

AI can segment consumers into distinct groups based on various factors such as
demographics, behavior, and preferences. This segmentation allows businesses to target
specific consumer groups with more relevant marketing campaigns and product offerings,
leading to higher conversion rates and customer loyalty.

5. Sentiment Analysis

AI uses natural language processing (NLP) to analyze textual data from reviews, social media
posts, and feedback. Sentiment analysis helps businesses understand consumer opinions,
emotions, and satisfaction levels, enabling them to address concerns, improve products, and
enhance brand perception.

6. Operational Efficiency

AI automates repetitive and time-consuming tasks, such as data entry, analysis, and reporting.
This increases operational efficiency, reduces human error, and frees up resources for more
strategic initiatives. Automation streamlines processes and improves productivity across
various business functions.

7. Enhanced Marketing Effectiveness

AI helps businesses create more effective marketing campaigns by analyzing consumer data
and identifying the most impactful messaging, channels, and timing. This data-driven
approach ensures that marketing efforts are targeted and relevant, leading to higher
engagement and return on investment (ROI).

8. Competitive Advantage

Leveraging AI in consumer behavior analysis provides businesses with a competitive edge by

offering deeper insights into consumer preferences and market trends. This enables companies
to differentiate themselves, innovate, and better meet consumer needs, ultimately leading to
increased market share and profitability.

Fusion of Artificial Intelligence and Consumer Behaviour Progress with Special

Reference to Indian Markets

E-commerce and Retail

 Personalized Shopping Experiences: A report by Capgemini Research Institute

found that 71% of Indian consumers want AI integrated into their shopping
experiences. This is driven by the preference for hyper-personalization and seamless
digital experiences2.
 AI Influencers: AI-generated avatars and influencers are gaining popularity, with one
quarter of consumers trusting them and making purchases based on their
recommendations.
 Social Commerce: Platforms like Instagram and TikTok are reshaping retail, with
over half of Gen Z learning about new products through social media influencers.
2. Financial Services

 Enhanced Customer Experiences: Financial institutions are leveraging AI to offer

personalized products, targeted marketing campaigns, and real-time support. For
example, HDFC Bank's AI-powered chatbot, Eva, provides instant assistance on a
wide range of banking services1.
 Financial Inclusion: AI is being used to assess creditworthiness and extend credit to
small businesses that lack traditional credit histories. Aye Finance, for instance, uses
AI to analyze alternative data sources for credit assessments1.

3. Smartphones and Consumer Electronics

 AI Features in Smartphones: Indian consumers are the biggest users of AI features

such as voice assistants and personalized recommendations. Samsung, for example,
has seen strong adoption of its Galaxy AI features in India3.
 Productivity and Entertainment: AI is enhancing productivity by assisting in
document creation and offering personalized entertainment options.

4. Challenges and Future Outlook

 Cybersecurity and Regulatory Hurdles: Despite the enthusiasm for AI, challenges
like cybersecurity and regulatory hurdles remain. Companies are focusing on
upskilling their workforce to harness AI's potential4.
 Sustainability: Consumers are increasingly conscious of sustainability, with many
preferring to buy from sustainable brands.

Overall, Indian consumers are embracing AI across various sectors, driven by the desire for
personalized experiences, enhanced efficiency, and innovative solutions. This trend is
expected to continue as AI technologies evolve and become more integrated into daily life.

Challenges and Solutions in Implementing AI for Customer Analysis

While the benefits of AI-driven customer behavior analysis are undeniable,

implementing this technology does come with its own set of challenges. One major
concern is data privacy. With the increasing reliance on customer data, ensuring its
security and compliance with regulations is crucial. You must prioritize transparency
and establish robust data protection measures to address these concerns and build trust
with your customers.
Another challenge lies in the shortage of AI skills and expertise within your business.
Developing and deploying AI models requires specialized knowledge and technical
proficiency. To overcome this hurdle, you can explore partnerships with AI-driven
platforms like Graphite Note. Graphite Note is a no-code predictive and prescriptive
analytics tool that empowers businesses to leverage AI for customer behavior analysis
 without the need for extensive technical expertise.
AI changes the way you understand your customers, providing you with accurate,
comprehensive, and real-time insights. Using AI, you can gain a competitive edge,
adapt to changing customer preferences, and uncover new opportunities for growth.
The future of customer behavior analysis lies in the hands of AI, and businesses that
embrace this technology will undoubtedly thrive in the ever-evolving market.

Conclusion
To Conclude It is evident that AI has revolutionized the way businesses understand and
engage with their customers. From personalized recommendations to predictive analytics, AI
empowers companies to make data-driven decisions, enhance customer experiences, and drive
growth. However, with great power comes great responsibility. It is crucial for organizations
to maintain ethical standards, protect consumer privacy, and ensure transparency in AI-driven
practices. As we move forward, the integration of AI in consumer behavior will continue to
evolve, presenting both opportunities and challenges.
By embracing innovation and upholding ethical principles, we can harness the full
potential of AI to create a future where consumers and businesses thrive together. the
adoption of artificial intelligence in consumer behavior analysis has significantly transformed
how businesses understand and engage with their customers. The integration of AI
technologies has enabled companies to gain deeper insights into consumer preferences,
personalize marketing strategies, and enhance customer experiences.
The adoption of artificial intelligence in understanding and influencing consumer behavior has
marked a significant shift in the Indian markets. With a burgeoning middle class and a rapidly growing
digital landscape, AI has enabled businesses to tap into diverse consumer segments and deliver highly
personalized experiences. From smart chatbots to advanced predictive analytics, AI is driving
efficiency, fostering innovation, and enhancing customer satisfaction. However, it is imperative for
Indian businesses to balance technological advancements with ethical considerations, such as data
privacy and unbiased algorithms. As we look to the future, the synergy between AI and human
ingenuity holds immense potential to redefine consumer engagement in India, paving the way for a
more connected and empowered marketplace.

Reference and Bibiliography

 Rajat Gera and Alok Kumar A (2000-2021)
“This study synthesizes empirical literature on AI in consumer behavior”
 Dipika Agarwal, Diksha Ladha, and Godwin Mano M 2021
“Examining The Influence Of Artificial Intelligence On Consumer Preferences”
 S.Manjula(2023)
“The impact of Artificial Intelligence in Consumer Behaviour
 V. Jain, K. Wadhwani, and J. K. Eastman (2024)
“A Hybrid Review and Research Agenda"
 Norhaslinda Kamaruddin Abdul Wahab Abdul RahmanKulliyah (2019)
“Enhancing Talent Development Using AI-Driven Curriculum-Industry Integration
 Mohammed ali Akbari Trust in AI: progress, challenges, and future direction(2020)
“Trust and distrust in AI serve as regulators and could significantly control the
level of this diffusion, as trust can increase”
 Thomas Heinrich Musiolik, Raul Villamarin Rodriguez, Hemachandran Kannan(2019)
“AI Impacts in Digital Consumer Behavior”
 Bing liu (2020) Sentiment Analysis and Opinion Mining
“ Sentiment Analysis and Opinion Mining”