Artificial Intelligence-Driven Personalization and Consumer Engagement: Examining the Future of Customer Experience in the Digital Economy

Abstract

Artificial intelligence (AI)-driven personalization has become a transformative innovation in the digital economy, enabling organizations to deliver tailored products, services, and interactions that enhance customer experience and consumer engagement. As AI technologies, including machine learning, predictive analytics, recommendation systems, and chatbots, become increasingly integrated into digital platforms, understanding their influence on consumer behavior is essential for achieving sustainable competitive advantage. This study examined the effects of artificial intelligence-driven personalization on customer experience, customer satisfaction, and consumer engagement in the digital economy. Specifically, it determined the effect of AI-driven personalization on customer experience, examined the influence of customer experience on customer satisfaction, and assessed the combined effects of AI-driven personalization, customer experience, and customer satisfaction on consumer engagement. A mixed methods research design using the convergent parallel approach was adopted. Quantitative data were collected through a structured questionnaire administered to 400 respondents selected through stratified random sampling, while qualitative data were obtained through semi-structured interviews with 20 purposively selected participants. Quantitative data were analyzed using descriptive statistics, Pearson correlation, multiple regression, and Partial Least Squares Structural Equation Modeling (PLS-SEM), whereas qualitative data were analyzed using thematic analysis. The findings revealed that artificial intelligence-driven personalization has a significant positive effect on customer experience, customer experience significantly enhances customer satisfaction, and artificial intelligence-driven personalization, customer experience, and customer satisfaction jointly exert significant positive effects on consumer engagement, with AI-driven personalization emerging as the strongest predictor. Qualitative findings further confirmed that personalized recommendations, predictive services, and intelligent digital interactions improve customer experience, increase satisfaction, and foster sustained consumer engagement. The study concludes that AI-driven personalization is a strategic capability for enhancing customer experience and strengthening long-term consumer engagement in the global digital economy. It recommends that organizations invest in AI-driven personalization technologies, adopt customer-centric digital strategies, integrate AI into customer relationship management systems, and promote ethical AI governance, robust digital infrastructure, and effective consumer data protection to achieve sustainable competitiveness.