It is hard to think of a time when it has been so important or so difficult for brands to retain their most valuable customers. That’s a key takeaway from our latest report – ‘Where AI and Marketing Collide: 2024 CX Predictions.
Important, the report indicates, because the era of growth at all costs is largely over. Difficult, because building customer loyalty has become a lot harder to secure these days.
The uncertainty of prevailing economic conditions is putting the squeeze on many marketing budgets and trying to build customer reach into any and all markets is just too expensive. (McKinsey’s CMO survey reveals, for example, that the average cost per click in 2022 was 20% higher than in 2021).
So instead, brands are increasingly turning to ‘Healthy Acquisition and Retention’ – narrowing their focus to attracting and nurturing high lifetime value (LTV) customer segments.
But shifts in the customer landscape make this easier said than done.
First, those same economic uncertainties are putting pressure on customers’ personal budgets, too. Our report – which draws insights from 2,000 consumers – reveals 61% are likely to switch to an alternative brand if it’s cheaper. And today’s consumers are well informed about the multiple options for finding such alternatives.
Of those who do stay brand loyal, 65% want to be rewarded for their loyalty. They’re also increasingly aware of the value of their data to brands, and are willing to trade on it. As the 2022 Global Data Privacy report from the GDMA put it: “The global consumer is becoming more aware of the intrinsic value of their data and is developing a more entrepreneurial attitude towards data sharing; as a value exchange where both sides can gain benefits.”
In short, loyalty (along with customer data) comes at an increasingly high price for brands. However, against this tricky backdrop, our report also indicates that AI might just balance the scales a little, providing organizations with the means to not only retain their high LTV customers – but attract new ones. Let’s take a look.
Retaining high LTV customers
The ‘Healthy Acquisition and Retention’ section of our latest CX trends report provides powerful insights into key drivers of customer loyalty:
- 72% of consumers are willing to stay loyal to a brand if they offer discounts and rewards
- 73% are willing to stay loyal to a brand if they deliver a great customer experience
The statistics are unambiguous. Brands wishing to retain their customers need to reward them for their loyalty, and they need to provide great CX. So let’s take a quick look at how AI is empowering businesses in these two important areas.
Great CX
By collecting, connecting, and analyzing vast quantities of demographic and behavioral touch point data, AI enables brands to create personalized – sometimes individualized – customer experiences at scale. In creating this coherent data ecosystem, such personalization can be delivered consistently across every channel – online, on social, or in store. Customers feel understood, listened to, and appreciated.
Organizations can deploy machine learning algorithms to analyze customer responses to engagement activity. Very quickly they can refine which channel, at what time, in what tone, at what frequency, and in what volume customers prefer to communicate (and what’s most likely to drive sales).
Understanding purchase preferences and buyer behaviors enables virtual assistants or chatbots to provide personalized product recommendations. Advances in natural language processing (NLP) within AI’s large language models (LLMs) are enabling systems to provide customer support on increasingly complex requests. The CX applications are multiplying daily.
And because AI continually refines its understanding through feedback loops, recommendations, and interactions stay relevant over time – even if customer preferences change. The result is a seamless and individualized customer journey.
Customer loyalty rewards
AI can enhance the impact of loyalty programs by using dynamic customer segmentation. Customers are grouped into different categories based on their responses to loyalty incentives and offers. These segments can be continually updated as customer engagement patterns change, ensuring personalized interactions that always reflect the most current buyer behavior. By allocating customers to micro-segments in this way, businesses can optimize their loyalty strategy to maximize engagement.
Similarly, predictive analytics enable brands to identify which rewards or offers are most likely to have a positive impact on customers based on analysis of their recent engagements. At the same time, this analysis provides an early warning system if customers are showing signs of disengagement. Armed with these insights, the AI can autonomously determine the next best actions, tailoring available promotions and rewards to optimize individual customer engagement. This also allows businesses to allocate their marketing budget strategically, weighting it towards engagement of specific segments (like high LTV customers).
Currently, according to our report, only 50% of organizations provide any sort of rewards for customer loyalty. What’s more, only 12% are currently using AI for their loyalty and retention activities. Both of these facts feel like ready-made opportunities to grab some competitive advantage.
Gaining high LTV customers
AI’s capacity to process, analyze, and derive predictive insights from huge swathes of data makes it the ideal instrument for growing high-value audiences.
Having first determined what constitutes ‘high value’ (lifetime spend, profitability, longevity of relationship, level of engagement, etc.) brands can set AI-powered analytics to work. Sifting through first-party demographic and behavioral data, third-party data extensions, purchase histories, and engagement statistics – in fact, all the relevant data from across the organization’s tech stack – the AI can build out the high LTV segment.
Next up, advanced AI modeling can determine the key common traits, interests, and behaviors that distinguish members of this segment. Then it’s simply a case of running an algorithm to identify lookalike customers who closely match these patterns found in the high LTV group. The AI-generated lookalike models can be constantly refined as the system is enhanced with more customer data.
Brands can then focus marketing activity on engaging these AI-identified lookalike audiences across their preferred channels. With continual optimization, they can convert lookalikes into loyal buyers who end up generating high lifetime value.
Making it happen
Healthy acquisition and retention of high LTV customers may be tough right now, but AI-tech provides a positive path to making it happen. When it comes to identifying, super-serving, and expanding this most valuable segment, well-implemented, well-integrated AI solutions can help delight even the most tech-savvy, price-conscious customer.
Just so long as they are well implemented and well integrated – and the single most important driver of success here is data management. For all the extraordinary possibilities AI can bring within reach, it has the same requirements and characteristics as the earliest database or CRM system: garbage in, garbage out. An AI system must be fed a diet of high-quality, well-marshaled business data to be effective.
Don’t miss out on our latest CX report ‘Where AI and Marketing Collide: 2024 CX Predictions’ where these data requirements and the wider context of ‘Healthy Acquisition and Retention’ are explored in greater depth (along with real-world examples of top brands using AI to transform their CX offering).
