“I’m a sucker for being a first adopter,” says Ian Leslie, chief marketing officer at Industry West.
So when Leslie heard about an artificial intelligence chatbot that could negotiate prices with its online shoppers, he was immediately interested. Automated negotiation technology is not widely used in North America, and Leslie knew it could help his small online furniture business of about 50 employees.
“It hits at a time when we are all talking about AI and what it means for so many verticals and for so many functionalities,” Leslie says.
In the furniture industry, the margins are often healthy and prices are sometimes negotiated, Leslie says. Consumers may be used to negotiating for a larger furniture purchase at the store, when interacting with a sales associate. Online, however, some shoppers may be more apt to look for discount codes. Others may try to contact customer service for a discount. As an online merchant, Industry West wants shoppers to have some wiggle room on price — if that’s what it takes to convert. But it doesn’t want to continually broadcast a sale, Leslie says.
“At the end of the day, we’re all trying to preserve our brand and not always saying you are on sale, but with ecommerce you have to be constantly on sale,” Leslie says.
Industry West has a pop-up on its site that offers 20% off for first-time customers who share an email address. It also will send a 20% discount code for shoppers via email for abandon carts. But for all other shoppers, or for shoppers who don’t want to give up their email address, Industry West launched an AI chatbot in February called Nibble.
How the Nibble AI chatbot works at Industry West
On product detail pages that are eligible for promotions, which Leslie says is about 70%-80% of its SKUs, Industry West shows a “Negotiate Price — Instant Chatbot” button underneath the Add-To-Cart button.
If shoppers click on it, they can start to negotiate with the bot, named Nibble. Industry West authorized the bot to agree to a certain level of discount that varies by product, Leslie says without revealing the discount. As part of its negotiation tactics, Nibble is trained to offer “proof points” of the value of Industry West’s products, such as its quality materials and its warranty program, Leslie says. If shoppers suggest $20 for a $500 product or even $250 for a $500 product, Nibble can be cheeky with its response. For example, it might say, “Low offers like that won’t make me generous.”
If Nibble and a shopper come to an agreement, the bot generates a unique discount code for that shopper that expires within 48 hours. When the shopper adds the item to her cart, that discount code shows up.
If the shopper and Nibble agree on a price, the AI chatbot will create a unique discount code.
Results of using the AI chatbot
Overall, Leslie is happy with the shopper engagement with the AI chatbot. The best news is that the average aggregated discount that shoppers agree to is lower than the 20% pop-up discount. It’s also lower than the maximum discount that Industry West authorized Nibble to offer. Leslie would not reveal how low Industry West programmed Nibble to go, but for some products, it is a higher discount rate than 20%.
Thousands of shoppers have interacted with the chatbot each month. 28% of shoppers who start a negotiation reach an agreement with the bot, Leslie says. Of that 28%, 11% go on to make a purchase. Put another way: 3% of shoppers who engage with the bot go on to make a purchase.
Industry West’s AI chatbot chats with shoppers in real time to reach a negotiated discount.
Leslie suspects more shoppers will use the bot the more Industry West turns it on. For example, during Memorial Day weekend, Industry West ran a sale with a banner ad on its site. That discount was the highest the retailer was going to offer. So, to avoid confusing shoppers about any potential hidden promotions, it turned off the Nibble bot.
The goal with Nibble is to save on some of its product margins. While the early results are encouraging, Leslie hopes to take it further. Eventually, he wants to lower that first-time customer pop-up discount to 10% and maybe have Nibble offer the maximum discount between 15%-20%. Then, if shoppers and Nibble come to an average agreement of 18%, the chatbot could help save the merchant even more margin, while shoppers are happy because they agreed to the discount.
Benefits of the AI chatbot
The benefit of having an AI chatbot is that it can react to scenarios in real time. For example, one shopper told Nibble that she had four bar stools she bought a few years ago, is happy with them and wants a fifth one. But she asked if she could have it at a lower price. The bot, not programmed on this specific scenario, responded with, “Of course, we’re happy to hear you have our product.” The discount was within its allowed range and it generated the code for the shopper. This scenario is exactly how Industry West would want one of its consumer service representatives to handle this scenario, and Leslie was pleased the bot handled this scenario in this way.
Rosie Bailey, CEO and co-founder of Nibble, says the Nibble chatbot is a hybrid of generative and more traditional artificial intelligence.
“We use our own models to create Nibble’s chat and also use generative AI in specific places,” Bailey says. “As a result, Nibble is more secure — and cleverer — than generative AI alone.”
Working with savvy shoppers
Some shoppers are smart and may know that Industry West offers a 20% discount to new shoppers. Those shoppers may try to get a higher discount out of Nibble. That’s fine by Leslie, who wants the chatbot to drive as many sales as possible.
“This person, what they wanted was 20.6%. If that 0.6% was all I needed to gain the sale, that’s amazing. I’m all for that,” Leslie says.
Similarly, Industry West wants the AI chatbot to consider margin rate in the future, which could help drive even more sales. Currently, the AI bot only factors in discount rate. For example, Industry West may be OK with giving a shopper a 35% discount on a certain product if it doesn’t exceed the margin rate it needs to maintain profitability.
Holiday season implications
Industry West has a live chat feature on its website where shoppers can engage with its human customer support team for any questions and issues.
By having this feature for the holiday season, some shoppers may use it to get a discount instead of contacting customer service.
“It will take some pressure off of chat,” Leslie says.
Typically, Industry West will start its Thanksgiving weekend Cyber sales around Nov. 15. But this year with Nibble, it could use different marketing language where shoppers could gain early access to its best discounts via negotiation. For example, Industry West could authorize the chatbot to give the low Cyber discount, but shoppers have to be able to negotiate to it.
“By using Nibble, we can show an early access sale without slapping a banner on our website come November first,” Leslie says.
Bailey says avoiding endless discounting is the main goal of many of its clients.
“Most clients are fed up with the ‘race to the bottom’ and feel discounting is a trap,” she says. “Nibble helps you escape this trap by still offering great value deals one-to-one to valued customers without being stuck in an endless discounting cycle.”
Nibble takes 2% of sales attributed to them, Bailey says. The bot is available as a Shopify app, which only took a day to integrate, Leslie says. Nibble has about 300 clients that are mostly online retailers in discretionary spending categories, Bailey says.
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