Alexa, how deeply can you embed yourself in our lives?

Local tech lab explores 'conversational commerce'

CINCINNATI -- Some of us never really adapted to shopping by computer before mobile-marketing strategists turned our smart phones into tools for browsing and buying.

Now there is new way to buy, thanks to digital assistants like Amazon Inc.’s Alexa and Google Home by Alphabet Inc. And that has marketers all over the planet scrambling to learn the ropes of what’s been dubbed conversational commerce.

“My 5-year-old son uses Alexa to play music and videos and even do his homework. ‘Alexa, what’s five plus two?’ I didn’t tell him to do that. He figured it out on his own,” said Alex Yastrebenetsky, CEO of InfoTrust, a Blue Ash-based digital analytics firm.

Companies are not yet extensively using Alexa to sell directly to consumers, but Yastrebenetsky thinks that’s only a matter of time.

“If Alexa is already sitting on the counter in the kitchen,” he asks, “why would you want to push a button on the phone?”

Clearly, the idea is gaining traction. Consider:

  • Domino’s Pizza Inc. CEO Patrick Doyle said told investors Feb. 20 that he sees the “emergence of voice and Amazon Alexa as a growingly popular ordering option.”
  • On the same day, San Jose, Calif.-based Orderscape Inc. announced “full-menu ordering certification by Amazon for Fazoli’s restaurants.” Orderscape’s promotional graphic boasts: “Pick a restaurant. Talk to Alexa. Order your food. Charge your card. BAM. Food is delivered or ready for pickup!”
  • Procter & Gamble Co. has developed at least five Alexa skills, which are apps that deliver information to consumers. P&G’s NyQuil and DayQuil brands, for example, developed a skill that offers weekly flash briefings on flu outbreaks, sourced by the Centers for Disease Control. Tide has an Alexa skill that offers laundry advice. “Because voice is still an emerging opportunity, we consider these small-scale experiments to help us learn how consumer behavior is similar and/or different on voice compared to online, in-store, etc. As voice grows in users and applications, we’ll be positioned to grow within the platforms as well,” said P&G spokeswoman Tressie Rose.
  • Coty Inc., which bought P&G’s beauty brands in 2016, told investors Feb. 8 that it developed a new skill for Amazon’s Echo Show, an Alexa device with a Bluetooth speaker and 7-inch video screen. “Let’s Get Ready is a personalized beauty offering tool that can deliver over 2,000 unique combinations of hair, eye and skin color, curated looks and visual tutorials, along with recommended products from the Coty Consumer Beauty portfolio that users may add directly to their Alexa shopping list,” said Coty CEO Camillo Pane, in a conference call with Wall Street analysts.

No one is exactly sure how conversational commerce will evolve in the years to come. But it’s pretty clear already that Alexa will lead the change.

Amazon had 20 million Echo devices in U.S. households as of last September, while Google Home had an installed base of 7 million homes, according to a January report by Consumer Intelligence Research Partners. That’s a commanding lead for Amazon, but the U.S. has 120 million households, plenty of room for Google and Apple Inc.’s new HomePod to catch up to the market leader.

In the meantime, brands a turning to marketing firms like VML to navigate the murky waters of voice-enabled commerce.

“If you really take a look at what it is being used for, frankly it’s a repurchase technology – not a first-time purchase technology,” said Michael Stich, chief business officer for VML, formerly known as Rockfish. Both agencies were combined by their parent company, the global advertising conglomerate, WPP. “Ordering online itself is like the 12th most popular application on Alexa. It falls behind, ‘Tell me a joke.’ There’s music, weather, news, traffic. All these things rank much more highly.”

But Stich sees great potential for brands to lock in consumer loyalty through conversational commerce in the same way that the Amazon Dash allows consumers to re-order Tide detergent by pushing a button attached to their washing machine.

“Voice is especially powerful at reminding you or sensing that you’re about to run out of something because of your purchase frequency,” Stich said. “If you are super loyal to Head & Shoulders and I know that because you’re a consistent consumer that buys every six weeks, that gives me the right to say, ‘Hey, I think you’re running out of shampoo soon. Can we just take care of that for you?’ or ‘Can we put that on subscription?’ That’s the endgame here. That’s why voice is so tantalizing.”

And that’s why VML built a “technology lab” into its local headquarters at the base of Mt Adams. It’s developing new ideas that could turn voice-enabled tools into money makers for consumer brands and retailers. Here are some examples:

  • “OK Google, talk to Shop Caster,” Technology Specialist Jeremy Daley told his smart speaker. “Welcome to Shop Caster, brought to you by the brilliant minds at VML,” responded the app, which the agency has pitched to Google and Walmart. “Would you like to search for an item or browse what’s trending?” Next came a series of questions, a tutorial on a popular hairstyles and a purchase offer for all of the products needed to create that look. At the end of the conversation: “Your purchase is complete and your items are on their way.”
  • VML also developed a tool called Keg Stand, which monitors the amount of beer that remains a keg and dispenses that information to cell phone apps or an Alexa skill. It also delivers information about the beer itself. Daley thinks it could be sold to local breweries or directly to consumers for use in their homes. “Alexa, ask Keg Stand what’s on tap?” Daley asked his creation. “Currently on tap is Eric’s Coffee Stout, made by Listermann Brewing Company,” Alexa responded. “It’s a stout, other, at 6.7 percent alcohol and an IBU of zero.”
  • Another idea, now being pitched to brands that cater to new parents, is a shelf top device that monitors the temperature and humidity in a baby’s room. Code-named Rosy, the unit can be fashioned into any shape, including a brand’s logo, by the agency’s 3D printer. It’s equipped with lights that change color when the room’s conditions fall outside a pre-set range. It can also be set up to order product refills when you pick it up or tilt it. Rosy could be offered as a free gift to consumers by makers of baby lotion, blankets or diapers – giving them a unique relationship with new moms and a way for her to re-order their products.
  • Finally, VML developed an Alexa skill that can retrieve performance data from solar panels and display it on the Echo Show. VML Technology Director Jason Webb said the Solar Pro app can also send data to cell phones, TV screens or wearable devices. He thinks it could be sold to water, gas and electric utilities as an easy way for customers to keep tabs on their usage. “This app was kind of done because we were already in the solar space but you could easily take this app and map it across different industries,” he said.

Stich said brands will open with these kinds of service offerings to get consumers used to interacting with voice-enabled devices. But eventually, he expects Amazon and others will use the data collected by those interactions to target consumers with purchase offers they’ll find it hard to ignore.

“What’s happening is we’re pulling the information that we use on our screens, our phones and on our computers into our lives,” Stich said. “We’re able to talk to things and they can talk back intelligently with us. So it’s a whole bunch of different kinds of technologies coming together and embedding themselves in different parts of our lives.”

That could be both a blessing and a curse for Cincinnati. Amazon’s rise is fueling massive job growth in Northern Kentucky as it builds a cargo hub to handle its ever-expanding e-commerce empire.

But its expansion into groceries and apparel puts the company on a collision course with Cincinnati-based retailers like Kroger Co. and Macy’s Inc. Both have their own digital strategies, but can Kroger’s ClickList and Macy’s loyalty programs compete with a shopping robot on the kitchen counter?

“Certainly, a lot of retailers will be creating alliances with Google Home” to go after the 90 million U.S. households that have yet to purchase a digital assistant, Stich said. “The good news is, you’ve got an additional (market) that you can meaningfully address."

For P&G, Amazon’s rise has enabled rapid growth in e-commerce. P&G’s Tide brand grew online revenue 48 percent in 2015, thanks in large part to its “Subscribe and Save” offering on Amazon, according to the research firm, 1010data.

But Amazon Basics, a private-label brand, is rapidly emerging as potential rival to consumer-product companies, including P&G.

The 2017 Internet Trends report by Mary Meeker, partner in the venture capital firm, Kleiner Perkins Caulfield Byers, showed Amazon’s private label baby wipes had an online market share of more than 15 percent in August of 2016, ranking third behind Huggies and Pampers. Amazon Basics batteries ranked first with a 30 percent share, ahead of P&G’s former Duracell brand, more than double that of Panasonic and Energizer.

“Amazon is collecting so much data about purchasing behavior, it makes it that much easier for them to come out with generics to compete against branded products,” Yastrebenetsky said. “When you order toilet paper, you’re not going to say I need P&G paper. I think that’s going to help Amazon.”

But this is the digital economy, where the game is always changing and no advantage is everlasting.

“The next big thing is Internet-enabled refrigerators,” Yastrebenetsky said. “If the refrigerator knows what you need, what’s inside, the expiration date and so on, it can order for you. Or it will have a nice screen or voice prompt to remind you. So in my mind, the best bet for Kroger would be to figure out how to build those refrigerators.”

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