How AI helps retailers with loyalty marketing and customer retention

Personalization, targeting, engagement – and all of it automated

13.12.2024

by Julia Pott

Artificial intelligence is revolutionizing customer loyalty in retail by creating personalized and interactive experiences. Through data-based analyses and automated processes, retailers can sustainably strengthen their customers' brand loyalty and make their loyalty marketing competitive.

Marketing experts agree that customer centricity and personalization are becoming increasingly important. AI-based loyalty programmes not only help to predict consumer trends and individualize communication. Through optimized timing, automation and scalability, they contribute to greater engagement, more customer satisfaction and stronger brand loyalty.

Personalized product recommendations for optimal customer centricity

AI analyzes the purchasing and surfing behavior of customers in order to identify consumer profiles. Personalized product recommendations are automatically created on this basis. Amazon is a prime example of this in e-commerce: one of its recipes for success is product recommendations that are tailored to customers' personal interests and purchase history. Previous purchases are usefully supplemented with suitable items: masterful cross-selling.

AI also creates impressive experiences in brick-and-mortar stores that consumers will remember. The beauty brand Sephora uses AI-based tools to analyse skin tones and make personalized product recommendations based on this. Customers feel that they are being met individually, such shopping experiences increase engagement and boost satisfaction and brand loyalty.

A graphical representation shows colored human silhouettes on a tablet, symbolic of customer data analysis; Copyright: Adobe Express

Targeted promotions and discounts strengthen brand loyalty

AI-supported promotions specifically target the interests of customers. A beauty retailer could send automated offers for organic skincare products to customers who regularly search for environmentally friendly cosmetics. Such targeted campaigns create a personal connection to the brand because they reflect the interests of the customers. Targeting strengthens the emotional connection to the brand and increases the likelihood of purchases. Finally, targeted promotions and discounts can also be used automatically to successfully up-sell and convert loyal customers into VIP or premium accounts.

In addition to personalization and automation, another major strength of AI-based loyalty programs lies in the optimal timing of marketing events. AI is characterized by the fact that it sends out rewards, special offers or purchase incentives based on user behavior at exactly the right time.

Attention, emotion, conversion! Promotional and marketing activities can have a major impact. To do so, they must be applied in a targeted manner and implemented with the best tools. You will find inspiration for this in our Retail Marketing dimension at EuroShop!

AI-supported customer support enhances loyalty management

An important part of loyalty marketing is customer support and customer communication. Chatbots based on AI offer personalized and fast support, which increases customer satisfaction. AI chatbots or digital assistants can not only answer common questions, but also respond to individual requests. Customers can place and track orders and provide feedback. The AI can access customer data, order history or reviews and personalize content accordingly. This support conveys the feeling of personal support and creates a stronger bond with the retailer or brand.

A young woman in a bright, modern shopping environment wears VR goggles and interacts with virtual elements; Copyright: Adobe Express

Mixed reality: virtual shopping with AR, VR or holograms

Artificial intelligence is driving mixed reality applications through advanced algorithms that enable the seamless integration of virtual and real elements to create interactive, immersive experiences. Many retailers are using these mixed reality technologies such as augmented reality (AR) or virtual reality (VR) to visualize product information and help customers make purchasing decisions.

Retailers such as IKEA, Lowe's and OTTO provide AR or VR applications that allow consumers to virtually place furniture in their own homes to test furnishing designs. Customers can use augmented reality or smart mirrors to try out items of clothing, accessories or cosmetics on themselves. The furniture retailer Cairo AG uses holograms of its sales staff to provide customers with personal advice, even when there are no employees available in the store. Such services increase confidence in the purchase and reduce the risk of bad purchases, which strengthens satisfaction and loyalty to the brand.

Mobile, omnichannel, personalized: Which features take retail loyalty programs to the next level?

Benefits of AI in loyalty marketing

Investing in AI-supported customer loyalty programs can bring numerous competitive advantages for retail companies.

Increased customer engagement: By using individual customer preferences and behavior to activate customers, AI makes loyalty programs more appealing and interactive.
Improved customer loyalty: AI-based personalized rewards and recommendations increase customer satisfaction and therefore brand loyalty.
Efficient marketing spend: AI uses predictive capabilities to predict what customers will buy and when, allowing companies to target their marketing budget more effectively.
Data-driven decision making: The ability of AI to analyze and evaluate large amounts of data from customer interactions provides valuable insights for strategic decisions.
Enhanced scalability: AI systems can harness huge amounts of data and complex patterns, and they can also execute actions automatically. In this way, AI simultaneously increases the quantity and quality of marketing activities.