#533: Real-World Application of AI in Marketing and CX with Kathryn Murphy, Twilio

As businesses increasingly integrate AI into their marketing and customer experience strategies, understanding the real-world applications and implications becomes essential. 

Joining us today to share insights on these topics is Kathryn Murphy, SVP Product Communications at Twilio, who recently released their State of Customer Engagement Report with a lot of information reinforcing the need for businesses to have a strong foundation of data to drive ROI from their AI investments.


Twilio’s 2024 State of Customer Engagement report: https://bit.ly/3UEKxqs

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Greg Kihlström:
Joining us today to share insights on these topics is Kathryn Murphy, SVP of Product Communications at Twilio, who recently released their state of customer engagement report with a lot of information reinforcing the need for businesses to have a strong foundation of data to drive ROI from their AI investments. Catherine, welcome to the show. Why don’t we get started, though, with you giving a little background on yourself and telling us a little bit about your role at Twilio.

Kathryn Murphy: Yeah, so I work in the product teams. In fact, I’ve spent the last almost three years at Twilio working on our data and apps side of the house, our customer data platform. And just recently, I’ve moved over to the communication side of our business where we have channels, all the different channels, email, messaging, and Flex. And so it’s been pretty fun and it’s exciting in my new role to kind of figure out how to better pull all these things together. especially in this era of data communications and AI.

Greg Kihlström: That’s great. Yeah, definitely. And we’re gonna touch on pretty much all of that. So this is a great, great segue to, let’s get started by touching on the ROI from AI and marketing and CX. And so as AI technology is maturing, certainly there’s been a lot of talk about it, but I think adoption is still, a lot of orgs are still maturing in their adoption of it. as this happens, identifying areas where it can deliver tangible returns is crucial for businesses as they kind of get past that initial stage of experimentation and trying things out. So, according to the Twilio report that I mentioned at the top of the show, brands using AI to personalize are seeing higher customer satisfaction scores, about 45%, better data driven decision making about 41% of respondents and improved market segmentation and targeting a little over 40%. Can you share where brands are currently seeing the most significant return on investment from AI initiatives and how should they look at that in their marketing and CX?

Kathryn Murphy: Yeah, so first of all, I’ll come to the brands in just a second, but one of the things I think we’re really trying to focus on as a product team is to do is build AI capabilities that do produce results. In this era, it’s like really alluring to try to build something super shiny or out AI people. And we really try to anchor ourselves in results. And so in that vein, we see customers using Twilio Predictions like crazy and getting amazing results. One of our customers Trade Me is a, The classifieds company out of New Zealand, they’re big adopters and they had incredible results in terms of their campaign performance. We have other brands like Vox using predictions to just save time and optimize campaign performance and unlock revenue opportunities as well. They are an example of how they’re using predictions. they use it to predict the likelihood of a customer signing up to attend one of their events. And it sounds so obvious, like I think marketers have been trying to do this for like, this is not a new goal, but just having AI, more fine tuning on the audiences and the people we target and when we target them just really equals dollars at the end of that.

Greg Kihlström: Yeah. Yeah. And I love that you touched on the, you know, there’s, there are plenty of shiny things that can be done with AI and you know, I’ve, I’ve certainly, I think we’ve probably all played with at least some of them, but. You know, I just started writing another LinkedIn newsletter, just highlighting the stuff, you know, AI is not a goal or a strategy, it’s a means to an end, and that end needs to somehow translate into ROI. So, you know, love that you’re talking about this and focused on that. To that end, you know, what are some of the key factors that contribute to achieving positive ROI when companies are investing in AI? How does a company like Twilio support companies in those efforts?

Kathryn Murphy: Yeah, I think one is they have time. We’ll spend a little more time on this. They have to have good data. They have to have like data. that is powering AI. I feel like everyone says this, there’s a LinkedIn post every day about this. We’ll dig into it a little bit more, but if people think, oh, what I need to do is find some AI tools, that is never going to be enough. They have to also say, what is the state of my data so that I can leverage AI tools? I think, yesterday I just happened to spend the whole day with customers. And so many of the customers are like, yeah, we’re trying AI things on our own, but we’re also really relying on our vendors to have AI capabilities because of the data challenge. Like we can’t go do all the consent. the transparency, we make sure that we only have third or first party data that we’re using and no third party data. Like there’s actually a lot to having your data in order, in order to apply AI on top of it. And so vendors, I think are also have this, we can bring a lot to our customers and we have the obligation to do help them with that data work as well.

Greg Kihlström: Yeah. And then to your point and to dive in a little deeper on just the critical nature of data, there’s also the nature of transparency and how AI is using customer data, right? And certainly a critical component of it. So let’s talk a little bit about that. And going back to the report from Trulia that I mentioned, there appears to be a significant gap between brand perceptions and customer views on AI transparency. So 91% of brands say they are transparent with customers about how AI uses their data and a little less than half about 48% of customers agree with that those 91% of brands. So could you elaborate a little bit on this issue?

Kathryn Murphy: Yeah, isn’t that it’s like, it’s actually terrifying to see. But it’s also sometimes when I saw that gap in our own report too, I thought, well, yeah, but how many of us actually read the terms and conditions of anything? Or how many of us really understand when we click the button on the website that we agree to cookies? What does that mean? I think there’s a big gap between brands saying, Oh yeah, no, we have policies. We have things that we show customers and customers understanding. And I think AI has like raised the stakes there. One of the things that we did back several months ago is we put together an AI nutrition facts. And truth be told, when we first started coming up with this nutrition facts, which is like what it sounds, looks, like a nutrition label, and it has some of the key elements around AI data usage, transparency of the model being used, what kinds of things that we are checking for, what level of data is being used in this AI capability. We put these together. First, I was worried they were too gimmicky. Like people would be like, you know, like, this is just, You know, we need to take this seriously, but our customers have loved these nutrition facts and we’ve had a lot of reach out from other vendors and even regulators about this because it is, I’m not here to say that it is like the solve, but I think it’s more representative of the type of transparency that needs to happen around AI. It’s simple. It’s clear, it’s using a framework we already understand. It’s not 7,000 lines buried in some terms and conditions or in something that I clicked on on the website. It’s like, so I think that’s when we see this gap, I think that’s at least one of the ways that we as vendors have to do better. We actually have to care about customers understanding it and making it simple for them.

Greg Kihlström: Yeah. Yeah. And I think, you know, this is, I’ve drawn a lot of correlations between, you know, the consumer data privacy stuff in general, you know, how GDPR came around and, you know, but there, there are some differences here, I think, with, with AI. So, you know, the similarities in that, you know, Europe is kind of leading the charge in AI regulation as well. Right, right. But I think the difference also is, you know, with consumer data privacy, consumers were getting hounded or still are, but like they’re getting hounded on the phone and text and email and stuff by brands that they just don’t want to interact with. I think the AI stuff is a little It’s a little harder for consumers to maybe understand unless they know it. You and I know this stuff because we deal with it every day and we can kind of see at least most of or some of what’s going on at the very least from the brands that we use. But I think maybe the average consumer, it kind of gets lumped in with consumer data privacy and AI certainly has some some unique aspects. So I mean, to all that to say, like, I love the idea of the nutrition facts, because there’s not only there’s, is there transparency in that, but there’s also education, which you you touched on as well, because I do think we need to educate consumers about this.

Kathryn Murphy: Yeah. And I think, you know, I think the other thing that’s, I feel like I’ve been on this journey for a while, still am on it, which is as a, as a vendor, Trust is a feature. It’s not like, oh, I got to check boxes so I can move on to the good stuff. It’s increasingly, and our report would definitely indicate this, it’s increasingly becoming a decision factor in whether or not a customer will do business with you. And AI transparency is just part of that.

Greg Kihlström: Yeah. And it’s also just like consumer data privacy. It’s only a matter of time before consumers really are savvy enough. And the average consumer, let’s say, is savvy enough to know and be looking for those nutrition facts in whatever form they might be um be provided in so no i think that’s that’s that’s really interesting and and you know along those lines i think something also top of mind for consumers is security and you know how not only privacy but just data security in general. And so another thing from the report, 40% of businesses report that finding a balance between security and customer experience is one of their most pressing challenges this year. So from your perspective, maybe some obvious reasons, but why is it important for brands to close this AI transparency gap as well as this security gap?

Kathryn Murphy: Yeah, I mean, we, it’s hard. Like I really empathize with brands out there because we’re quite demanding as consumers. Like we want, we want this very personalized, or as we say in our report, individualized experience. But we want to make sure that it’s not, but we can’t, but the brand can’t cross the creepy line. Because if they do, then we’re like, you know, like we’re going to probably break up with them forever. So this, like, it’s like kind of interesting to me, in my view, personalization goes way beyond just how you talk to a customer, but it’s actually knowing what matters to them, including things around security, which might simply be the form of like channel preferences or times that you should talk to me or ways that you should talk to me. Because as a consumer, that helps me feel like you care and you are taking care of my preferences or, you know, when I opt out that you really do honor the opt out. All of those things I think are hand in hand and that It’s too short-sighted if we think of personalization just about your preferences. I’m going to send you, you like shoes, so I’m going to market you shoes, and you like certain colors. It’s also very much about data, security, data, preferences, channel preferences too.

Greg Kihlström: Yeah, I mean, it’s about what we value, right? I mean, at the end of the day, you know, it’s like, I value my email inbox, because it’s already crowded enough. And so sometimes I actually prefer to get an SMS, you know, because for, for whatever reason, or, you know, I value transparency or security or, or, or, you know, I value getting the right thing at the right time, not just because I bought shoes, I am always I buy shoes every day. That’s, you know, that’s certainly not me. But yeah, definitely. I think, you know, it’s, to simply know a customer’s name or to know something that they bought, that’s more, you know, I, I look at like, you know, some of the basic personalization, it’s really just substitution of like, instead of saying, Hello, first name, it’s saying Hello, Greg, you know, it’s, it’s that simple, but to really to really what you’re saying, you know, to really understand them and, and kind of empathize with them is, is really taking it that step further.

Kathryn Murphy: Yeah, we, we saw this a lot on the segment side in the last couple of years as our customers would, you know, really pressed us to centralize and store and deal with consent. And so like going beyond just assembling a unified customer profile with all those preferences, they were like, we, in order to keep this customer. we need you to help us enforce consent. When the customer does opt out or they do say, you know, only in this timeframe, make sure that we don’t accidentally send data to a downstream system that might then like break that trust with the customer. And so It’s not even theoretical. I think we’re really seeing at least great brands lean in all the systems elements to of making sure that you treat that customer with, you know, like you honor their preferences and their rights as well as personalization across the entire ecosystem inside of the business.

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Greg Kihlström: Let’s get back to, you know, we talked a bit about some of the data challenges and opportunities. So let’s get back to talking about that as well, because I think there’s plenty to talk about here. So, you know, as you mentioned, and I’m sure a lot know, you know, it’s the classic garbage in, garbage out, right? So, you know, we need great data to, you know, an AI sort of makes that even more so. The report I mentioned earlier from Twilio found that only 16% of brands believe that they have the data required to understand their customers’ needs, and only 19% say they have a comprehensive profile of their customers. So what’s going on here? What’s holding back companies and brands from having the customer data that they need and to be able to really fully capitalize on all this AI stuff that we’re talking about.

Kathryn Murphy: Yeah, I think there is a bit of a nuance in the have the data you need and do have it in a place where you can use it. And You know, like I think it’s very common for brands to have like one set of the customer data in their marketing systems, another set in their commerce, another set in their contact center. And so the idea of, you know, unified profiles, yes, it is getting more signal and more data elements, but it’s also like just connecting your own systems. And we’re really trying to help with this, because we hear this all the time from our customers. And we just recently took parts of our segment products and made it easier with a new capability called unified profiles, like it sounds, like let’s give you the one profile. And we brought that together with some of our contact center capabilities, agent copilot. which has AI capabilities for summarization. But we brought these together for our customers. And literally with clicks, they can connect data they have in the contact center with real-time signals they might need from the website or a mobile app, and then use AI to help the agent understand how to engage with the customer. Sounds obvious. Sounds like everybody should have this, you know, but again, like I think so many of our real world customers are like, well, we are still in very siloed systems across these different functions in the business.

Greg Kihlström: Yeah. And I can definitely say from, from my experience with the, they don’t have, you know, a lot of, a lot of brands simply just do not have that. And the, you know, to me, like one of the obvious use cases there for something like that is, you know, I, I just call and complain about something, I have an issue, and then I get a marketing message, like within an hour, trying to sell me more stuff when I haven’t even gotten my problem solved. Or I just, you know, give me give me 24 hours to cool down at the very least, from just having a challenge and you know, talk to talk about not empathizing and understanding what customers, you know, really value. It’s, you know, they want to be understood. And, you know, at some point on a long enough continuum, a brand is there’s going to be less than perfect customer experience. But I think customers are forgiving when they feel understood. And you know, things are things are connected in a way to do that. So I mean, definitely, I think that’s, like you said, it, it sounds obvious, but it’s so it, it’s not prevalent at all, you know, I think it’s so lacking in in the enterprise at this point. So I think that’s a great, that’s a great ad.

Kathryn Murphy: Yeah. And we and the as consumers, there are handfuls of brands, like the very big brands that do a good job at this, uh, you do have that connected experience. So I think that consumers are just going to get more and more demanding because they’re saying like, why can’t I have the same experience, you know, that I have with like an Amazon or with Delta airlines or with some of these like big very sophisticated organizations. And so, Brands have to start caring about connecting these pieces. And then we as vendors need to, I think we care about it more too and help them with tooling and system integration support to make these things come to life.

Greg Kihlström: Yeah, well, and so, you know, connecting the data is one thing, even having a plan of what to do with it. So, you know, again, to give those customer service agents data that’s helpful. But, you know, how does a brand think about managing that data to make sure that it is, you know, not only up to date, but that, you know, as new opportunities arise, there’s a plan in place to continually improve that and optimize that so that the enterprise really can take most advantage of it.

Kathryn Murphy: Yeah. And so like, this is where I like say things like, well, data management, data governance, like data strategies have never been more important for companies. And yet those always sound like, uh, kind of like, no, I don’t, you know, who wants to go work with the data governance department?

Kathryn Murphy: No one, but like that is so I’m not suggesting it’s like a big heavy thing and like companies need whole departments just in charge of this. It’s more like. It is part and parcel with AI strategy with personalization strategy. Like if you’re not just inching the ball forward on. Where is your data? Is it connected? Is it consented? Am I being transparent? Like you’re going to not really be able to progress on the other things they do. they are linked, they do all go together. And I think that’s, you know, my guess, my personal plea to brands, but, you know, as a vendor to like, this is the thing we’re trying to really help with and lean in on with you is that they do go together.

Greg Kihlström: Yeah, yeah. Well, and I mean, to your point, it’s like, you know, I know that I’m loyal to, you know, you might have mentioned one or two of the brands that I’m loyal to already, but it’s like, I’m loyal to them for the reasons that you mentioned is like, I know, again, stuff happens from time to time. And, you know, in any relationship, there’s going to be a bump. Certainly with a relationship with a brand, there’s going to be a bump or two along the road, but it’s like, you know, it’s what, what do they do about it? And how quickly can they respond even to a misstep? And I think that’s really what it, what it comes down to is, you know, customers, I think consumers get a bad rap in some of these things by, you know, by brands thinking that they’re going to quit at the first moment’s notice. But I think on the on the positive side, when they’re even if there’s a quick fix or a quick solve, or at least, you know, realization that a misstep was made. I’m I know, I’m certainly forgiving of those kinds of things. And, you know, I want to be loyal to a brand that understands me and stuff. And so, you know, able to able to do that, they just need to one hand needs to know what the other hand is doing. And I think that’s what we’re talking about here.

Greg Kihlström: One last question before we wrap up here. Looking out to the future, what are you excited about as far as trends or advancements? What are you anticipating in this realm of AI, CX, customer data in the next few years?

Kathryn Murphy: Yeah, I think we, well, I’m so excited about it. really talk today about how much AI can help. the workforce, which I think is another big aspect. We talked about like the results of AI, doing better predictions and those kinds of things. But there is so much happening in our world to make technology easier to implement, more accessible. And just to like hit a couple of examples and make my statement a little more concrete. It’s like, you know, some of these challenges of connecting all these systems, they’re technical. They require coding or you know, tooling, and we could make those things accessible to businesses that don’t have developers on staff by using AI. AI is great at writing code. You know, likewise, like, we have tools that maybe are like, for sophisticated marketers to build the right audience to target. AI can do a great job, generative AI in particular, in just letting people write down what’s the business outcome they want. And then we figure it out for them. So I’m just, I’m really excited about that kind of capability coming to brands because I think it will be this great democratization. Now it won’t be just the big brands that I mentioned that deliver those experiences. It really will be possible for brands with small teams because of AI. They can stitch these data together and create customer experiences that are really unique and personalized.