One of the most effective ways to increase revenue is by building customer loyalty. That's because the longer your customer remains your customer, the greater their lifetime value will be, making customer retention a prime opportunity for your next artificial intelligence (AI) initiative.
What is customer loyalty?
Loyalty defines the strength of your customer relationships. High-loyalty customers can have a higher average spend and can have more repeat purchases than low-loyalty customers. For example, research has shown loyalty program customers spend 6% more than non-loyalty customers. Not only that, but loyal customers are often your biggest fans; these are the customers that tag your brand on social media, use your hashtags, and tell their friends about your products.
In some cases, a loyal customer can be more valuable than a new customer who makes a single purchase, which means the more loyal customers you have—and the more loyal they are—the better. While customer acquisition is important, improving loyalty can have a significant impact on your bottom line results, which can justify making it a key marketing initiative.
While they are related, customer loyalty is different than customer retention:
- Customer loyalty strategies and key performance indicators (KPIs) are focused on maximizing how engaged your customers are with your business.
- Customer retention strategies and KPIs are focused on keeping your customers from churning.
By building customer loyalty, you'll often see a positive impact on your churn rate, which mitigates lost revenue. However, customer loyalty also has the ability to drive business growth through larger cart sizes, more cross-sell opportunities, and increased word-of-mouth, making it an important focus in its own right.
Building customer loyalty with AI
Artificial intelligence can help you uncover the customer insights required to turn your customers into fans. By using data to improve how you personalize service, you can deliver the exceptional customer service required to differentiate your brand in the eyes of consumers.
AI is able to leverage data generated by customers interacting with your business to unlock new insights into how they think and what they value from the products and services you provide. By analyzing customers’ shopping, searching, and browsing history on your site, wish lists, sales, marketing engagement metrics, customer support chat logs, and more, AI can build a sophisticated model that can identify who your best customers are.
Using this information, you can then do three things:
- First, you can specifically target your most loyal customers with personalized offers designed to encourage them to make additional purchases.
- Second, you can identify existing customers who have the potential to become loyal customers, so you can deliver targeted marketing campaigns to increase their loyalty.
- Finally, you can identify the interests and behaviors that tend to lead to loyalty, and then focus on acquiring new customers with those same interests and behaviors.
In addition to increasing your customer understanding, AI can deliver personalized recommendations that help you improve customer experiences. By making every micro-moment of the customer experience personalized to each customer, you can deliver the right offer or interaction at the right moment across the customer journey and delight your customers.
Examples of AI-powered customer loyalty use cases
Here are some of the ways organizations can use AI to help with building customer loyalty:
- Data-based loyalty programs: By knowing what customers are purchasing, when, and why, AI can help you create tailored programs that reward their specific purchases with incentives designed to increase transaction value and visitation frequency.
- Customer chatbots: Chatbots are a fantastic tool for not only providing customer support when something goes wrong but for improving every facet of the customer experience. For example, when a customer is shopping on your website, an AI-powered chatbot could help them find products based on features, sizes and availability instead of having to search and browse. Not only does this improve the customer experience, but it can save customers from having to call to ask the same questions, freeing up your customer service reps to handle other inquiries.
- AI virtual agents: While chatbots are good for answering basic queries, virtual agents powered by conversational AI are able to engage in long, complex, and multi-topic conversations with customers. This allows virtual agents to better understand user intent, helping the customer get exactly what they want.
- Customized recommendations: AI can analyze the purchase history of your customer base to make sophisticated predictions about what cross-sell or upsell recommendations to make to each customer. This ensures that customers don't just receive a generic recommendation, such as batteries for a toy, but instead get an offer that is more likely to resonate and trigger a purchase. This not only grows your revenue but makes the customer feel like your company is meeting their needs.
- Predictive marketing analytics: By using AI to better understand who your customers are, you can create highly targeted campaigns that allow you to gain more customers like the ones that tend to be most loyal to your business.
Leveraging AI to create personalized customer experiences lets you create the seamless, fast and personalized connections required when building customer loyalty at scale.
Learn how Verizon can help you create exceptional customer experiences with artificial intelligence.
The author of this content is a paid contributor for Verizon.