Consumer theory in microeconomics is concerned with understanding – how the choices of goods are made. In practice, what is sought is to understand how people allocate their income to the acquisition of various goods and services, according to their preferences and respecting their budget constraints to maximize their satisfaction. This is exactly where Artificial Intelligence comes into play the role. How? Let’s begin!
What exactly is the theory?
Of fundamental importance for companies to decide how much to offer and at what price, the modeling of consumer choices was limited due to the complex calculations involved in the process. However, with the advent of Artificial Intelligence, that has changed. The demand curve may now be more assertive than ever imagined. Thus, creating a job value for the people who know how to implicate AI in business growth. So, if you are searching for this type of career growth, you can join Artificial Intelligence Online Training in India. Companies with huge customer lists such as online stores, telecommunication companies, Government sectors, private companies, and export-import companies pay extra attention to AI.
What are the facts to understand?
By taking into account variables other than just price, income and types of goods demanded, a company can know exactly how much of its production will be consumed, which public will consume, and the best – where are those who still do not know their products. In addition to taking into account the classic microeconomics variables, AI modeling observes data such as sex, geo-location and purchasing profile, which serve to form profiles of consumer groups, called people. With the database of the company itself, it is possible to understand the history of purchases of groups of consumers. Such data is combined with a larger base and, through the use of artificial intelligence, is transformed into information that enables the company to optimize sales and improve the profitability of the business. Either through more assertive campaigns or even correct inventory management.
The world of new possibilities
With the use of AI it is also possible to find a utility function – mathematical relation that associates levels of utility with individual market baskets – more complete and that expresses the preferences of the consumer that forms the persona that consumes certain products. In this way, instead of the company offering all products for all customers and potential, it starts to direct its offers to those who have the appropriate purchasing profile for that product. This increases assertiveness and reduces costs by making it possible to target those who are really interested in supply. With fewer features, you can increase the conversion rate.
It should be remembered that the marginal utility of the consumer is decreasing because as more of a particular commodity is consumed, additional quantities will have less utility. AI, after finding and multiplying the market potential by identifying the ideal people to buy certain products, should be focused on customer retention and profitability. From the moment the consumer begins to relate to the company, one can understand their behavior that will guide new offers. It is good for the company and for the final consumer.
The reality of AI in Business
According to technology giant Google, the world has gained two billion people connected between 2015 and 2018 – and will gain another one billion by 2021. Among those responsible for this growth are emerging markets. The main bet for changing this picture is artificial intelligence. So, if you understand the growth and the demand in the future, you will not think twice before taking Artificial Intelligence Online Training. Do you want an example of AI use in business (e-commerce business)? Amazon.