In the digital age, the foundations of customer loyalty are as relevant as ever. Success still relies on a company’s ability to build a positive emotional connection between its customers and its brand. That connection, based on trust, drives repeat business and often leads to new business when loyal customers act as brand advocates.
What has changed in the digital era are the means companies use to build and maintain loyalty. According to 63% of the executives we surveyed for this study, emerging technologies such as artificial intelligence (AI), machine learning (ML) and advanced analytics are now instrumental in such efforts.
But brands should be careful. In customer interactions, technology can be a double-edged sword. Used correctly, it can lead to positive customer experiences that translate into greater retention, reduced churn and, ultimately, a loyal customer base. However, get the technology—or the balance between machine and human interactions—wrong, and the opposite outcome is likely.1 Our research suggests that not all companies are currently getting this right.
To understand how companies are using emerging technologies to improve customer loyalty, we surveyed 500 marketing, customer service and technology executives from different parts of the world and across multiple industries. Their observations, and those of other executives whom we interviewed for this report, reveal a keen appreciation of the opportunities such technologies offer to bolster loyalty as well as the challenges companies face in using them to good effect.
Our key findings
Mastering emerging technologies is pivotal to winning customer loyalty
Close to half of the companies in the survey appear to be using technology effectively in their loyalty-building efforts. For those that in recent years have recorded improvement in key customer metrics—such as churn, retention and lifetime value—technology factors have been a vital ingredient in their success. The key factor, respondents say, is an ability to act on insights generated by the analysis of customer behavior. Also important in this context has been investment in emerging technology to improve customer experiences.
Many brands struggle to use new technologies to build loyalty effectively
A large minority (39%) of respondents say their companies have failed to capitalize fully on the advanced technologies they’ve deployed in recent years in their customerfacing operations. The problems stem chiefly from employees struggling to adapt to new tools and methods; difficulties integrating the new technologies with existing ones; and the failure to create sufficiently intuitive processes for customers.
AI, chatbots and AR are future investment priorities
According to respondents, chatbots and AI (often used in tandem) have been the most impactful of the newer technologies used in building customer loyalty. These will remain investment priorities in coming years, while companies in sectors such as financial services, retail and media will also prioritize spending on augmented reality (AR) in their efforts to enrich the customer experience.
Technology can help build empathy
Another large minority (37%) of respondents’ companies (and a higher proportion of consumer goods producers and financial services firms) struggle to use technology to strengthen customers’ emotional attachment to the brand. Executives believe better empathy training of agents is vital, but many also cite a need for better visualization of analytics insights about customer preferences. Technology that captures customer preferences effectively—and at first time of asking—will also be important.
of respondents’ companies do not yet know how to use technology to strengthen customers’ emotional attachment to the brand.
1 For a discussion of how consumers perceive the role of “machines” in their interactions with brands, see The human connection: Using technology to create a better customer experience, Verizon, 2021.
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