Can Artificial Intelligence Drive Customer Loyalty?
Artificial Intelligence (AI) has amazing potential to drive customer loyalty.
Customer loyalty is a huge priority for most businesses. It’s one of the key facets of customer retention, as it reduces customer churn.
Reducing churn is desirable since it typically costs four times more to gain a new customer than to keep hold of an existing customer. You also have a 70% probability of making a sale to an existing customer, versus 20% to a new customer. (InvespCRO)
Combine all the loyalty effects together, and it’s estimated that customer disloyalty can stunt growth by 25%- 50%.
Driving customer loyalty is, therefore, an easy decision—but how can AI help?
The Current State Of AI
AI is the simulation of human intelligence by machines, and it’s used in products such as personal assistants (Apple’s Siri or Google Home), chatbots, and self-driving cars.
Current technologies that are categorized as AI include natural language processing, machine vision, and machine learning.
These technologies typically use complex algorithms and distributed computing power to analyze large datasets. These datasets are much larger than what any human could tackle and have been collected by the many digital products and services we use today.
This analysis by AI can start a sequence of responses that means you can predict likely future actions likely to be taken by a person. For business, being able to correctly anticipate customer needs has many implications for personalizing and tailoring a product or service on a large scale.
The Forrester 2017 Customer Service Trends report suggests that companies can use AI to “anticipate needs by context, preferences, and prior queries and will deliver proactive alerts, relevant offers, or content. They will additionally become smarter over time via embedded artificial intelligence.”
The Drivers Of Customer Loyalty
So, what does this look like in terms of loyalty?
Customers no longer feel as much loyalty to a well-known brand or the household name, but to the company that delivers the best experience. We can measure this quality experience in terms of delivery or service speed, product availability, personalization options, and customization.
The customer experience is the sum of the interactions a customer has with your brand, whereas customer loyalty is the likelihood they will stay with your brand in the long-term.
These factors influence customer loyalty:
– Product quality
– Easy, effortless experience
– Feeling valued and listened to
– A personal interaction
But these factors are challenging to implement. In particular, these favorable situations are more difficult to engineer for companies as they have to operate at a larger scale than any previous time in history. It’s just not possible to assign an individual agent to interact with every customer.
Also, while technology has brought us a long way in terms of efficiency, it can also cause problems and make customers feel alienated. Systems that don’t work as they should are frustrating and make customers feel like companies don’t care about them.
Digital experiences also differ from the in-person experience. Friendly and helpful staff are more important in a physical store, whereas speed and product availability are crucial for ecommerce retailers.
AI can offer the best of both worlds when operating at a large scale with limited resources.
How AI Encourages Loyalty
According to Gartner, customer service interactions are four times more likely to lead to disloyalty rather than loyalty. This means customers are more likely to have a bad interaction than a good one with your brand.
AI can increase the chances of customers have a good interaction in the following ways.
AI can drive customer loyalty by improving the self-service experience.
Self-service is not about setting up a static system and forcing customers to do all the work. It’s about empowering customers to help themselves. And using AI means you can better predict customer needs and fulfill them with no more human input.
Engineering an effortless customer experience by improving your self-service offering makes agents more effective. For example, artificial intelligence can also suggest relevant knowledge base articles to customers who are experiencing problems.
If customer support agents deal less with the smaller queries, they can save their time and attention for the more complex ones.
Handling Large Volumes Of Customers
Customers want to be treated like humans, but that’s difficult when they are one of the thousands or millions in your customer base.
I have learned to imagine an invisible sign around each person’s neck that says, ‘Make me feel important!’
—Mary Kay Ash, Founder, Mary Kay Cosmetics
We can listen to customers better when we can appreciate the scope of the data.
A machine sometimes has the ability to give a more personalized service than humans when it has access to large amounts of data. We can use this data to make predictions. AI is based on data that has been collected about people—but instead of one customer in particular, it’s from many thousands or millions of customers.
The sheer volume of data available was historically difficult to analyze—at least until AI developed to a point where it could take over some of the analysis. This pattern-seeking behavior means that AI can predict what a person is likely to do next.
For example, if a subscriber of your software has not been active in the last two weeks, this suggests they may be likely to churn. AI can trigger re-engagement emails to be sent to them, or alert an agent, who can intervene before it’s too late.
Beyond customer service, AI will drive business analysis for loyalty programs. For example, marketing teams can use AI to understand consumer behavior and personalize promotions.
Companies Already Using AI
Despite the obvious benefits of AI, only about 20% of businesses are using it according to McKinsey’s last survey.
Customer-centric digital natives like Amazon are setting the benchmark for the customer experience with AI. The ecommerce giant uses AI in its warehouses to automate much of the order fulfillment process, with robots transporting products around the warehouse floor faster than any human.
The company fulfills orders the same day they were ordered with Amazon Prime, and this incredible logistical feat is the result of AI.
Amazon captured 39% of the US retail ecommerce market in 2017 (Statista).
Online streaming service Netflix drives customer loyalty through predicting with 75% accuracy the types of shows its customers want to watch. Netflix also personalizes the application home screen based on a user’s past viewing and selections.
It even uses personalized artwork for each show based on what data shows will get the best response from that individual user.
Netflix revenue in 2017 was 11.69 billion U.S. dollars, compared to 150 million in 2002. The incredible growth of these two companies is even more impressive when you consider that neither existed 20 years ago.
The Challenges Of AI
The difficulty with adopting new technologies is that they sometimes don’t work as we’d hope. Chatbots that come across like robots will do more to put off your customers than if you hadn’t used them at all.
While AI can improve customer loyalty, when used badly it can also drive customers away.
“35 percent of customers will not use a brand that provides one poor customer experience” – Business Reporter
If you’re allowing AI to interact directly with your customers, there’s a risk that any of these interactions will go poorly. For example, Google got in trouble after its Google Allo messaging app’s “Smart Reply” feature was caught sending out offensive responses.
The moral of the story is to test your AI strategy as thoroughly as possible before trying it out in the wild.
So Can AI Drive Customer Loyalty?
AI can drive customer loyalty if it’s used correctly, just like every other tool.
AI means you can drive customer loyalty by:
– Listening to your users when they are dissatisfied
– Making your customer’s life easier by expecting needs
– Iterating and improving on your service through data collection
– Improving your customer self-service strategy
– Handling large volumes of data
The key is not to pretend that your AI technologies are in fact humans because your customers will be able to tell.
Use it to streamline and optimize the core services you provide, while keeping your customers at the center of it all.