How to Use AI to Improve Retention and Loyalty

The key to unlocking enduring loyalty doesn’t lie in flashy banners and discounts. It lies in creating personalized messages, recommending products, and assisting customers as quickly as possible to enhance their overall shopping experience. 

In other words, brands need to move beyond a one-size fits all approach and prioritize understanding each individual customer’s needs, aspirations and concerns to cultivate meaningful and productive relationships. 

While traditional methods have helped brands achieve this so far; they’re no longer sufficient to keep up with the increased demand for personalization. This is where artificial intelligence comes in. 

In this article, we’ll showcase how Shopify businesses can leverage its insights and capabilities to forge genuine connections with their customers, ultimately nurturing unshakeable loyalty and boosting bottom lines.

Predictive Analytics 

AI algorithms can analyze various data points like purchase history, support interactions, website behavior, and social media engagement to identify patterns and predict future actions of customers with remarkable accuracy. Here’s how this helps with improving customer retention and loyalty.

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AI-tools suggests a mix of products that are both familiar (based on past purchases) and new (based on inferred preferences) to enhance customer engagement.

They also analyze customer reviews, feedback, and queries to gain insights into customer preferences and pain points. This information can be used to refine recommendation strategies, ensuring they offer a diverse range of products that address customer needs and preferences. 

Furthermore, AI tools can also conduct A/B tests on different recommendation strategies to determine which mix of accuracy and diversity works best for different customer segments. This helps in continuously optimizing the recommendation engine for better performance in terms of customer retention.

Identifies Customers Likely to Churn

Examines patterns in purchase history, website activity, customer service interactions, and social media behavior to predict which customers are at risk of leaving. This allows businesses to proactively address potential issues before the customer decides to churn.

For example, customers identified as high-risk for churn can be targeted with special offers, loyalty programs, or personalized communication to re-engage them.

Case Study: Nike

Nike analyzes data from its apps to understand individual customer habits and predict purchase decisions. 

For instance, if a customer typically replaces their running shoes every six months but has not made a purchase in twelve months, Nike can proactively engage with personalized offers to encourage the customer to resume their regular purchasing cycle.

Conversational Commerce

Here’s how AI-driven conversational commerce enhances customer retention and loyalty:

Streamlines product discovery process

Conversational search streamlines the process of finding products, allowing customers to articulate their requirements naturally, akin to how they would communicate in a physical store. 

This intuitive interaction style proves to be less cumbersome than conventional keyword-based searches, ultimately enhancing the overall shopping experience and loyalty. 

Enhances post-purchase support

AI chatbots provide efficient post-purchase support; they allow customers to track orders, answer FAQs, and handle returns or exchanges. This level of support enhances the overall customer experience, increasing the likelihood of repeat purchases.

Case Study: L’oreal Luxe

The L’Oréal Luxe team developed a virtual fragrance advisor, known as the "Find the Perfect Fragrance" bot. 

It guides users through a series of questions to understand the qualities and characteristics of the person receiving the fragrance gift and recommends fragrances. 

These recommendations are presented as scrollable cards with links to purchase the fragrance directly from the brand's site.

By simplifying the process of finding the perfect fragrance gift and making it more enjoyable, the bot likely contributed to higher customer satisfaction and loyalty.

Customer Experience

AI enhances customer experiences in several ways, which in turn can significantly boost customer loyalty and retention:

Offers Dynamic Pricing

AI algorithms can analyze a vast array of factors such as demand, competitor pricing, market trends, and customer behavior to adjust prices in real-time. This approach ensures that prices are always competitive and fair, which can attract and retain price-sensitive customers.

For instance, during off-peak times or when demand is low, prices might be reduced to attract more customers, while peak times might see a price increase.

Improves Purchase Satisfaction 

One of the biggest challenges in online retail, especially in fashion, is the high rate of returns due to size issues.

Virtual try-on tools directly address this problem as they use AI and augmented reality (AR) to help customers visualize how apparel or footwear will look and fit on them.

This enhances the online shopping experience and leads to higher customer satisfaction and reduced returns which are crucial in building customer retention and loyalty. 

Case Study: Warby Parker

Warby Parker's Prescription Check app allows users to check their prescription through a series of tests, which can be done from the comfort of their home. The app’s convenience is particularly appealing to younger, tech-savvy consumers who prefer online interactions over visiting a doctor for minor check-ups.

Once users receive their updated prescription through the app, they are more likely to purchase new eyewear directly from Warby Parker, thus driving sales and enhancing customer retention.

Loyalty Programs

Here’s how AI-based loyalty programs enhance customer experiences and encourage repeat purchases.

Improves Personalization 

AI analyzes customer purchase history, preferences, and behavior to tailor rewards and offers. For example, if a customer frequently buys beauty products, the loyalty program can offer them exclusive discounts on new beauty launches or products similar to their past purchases. This level of personalization makes customers feel valued and understood, increasing their loyalty to the brand.

Gamifies Shopping Experiences

Incorporating game-like elements such as points, badges, and leaderboards, driven by AI, can make the loyalty program more engaging and fun. Customers enjoy the challenge and competition, which leads to increased participation and spending. 

AI can personalize these game elements based on customer preferences and behaviors, making the experience even more compelling.

Case Study: Sephora

Sephora's AI-based Beauty Insider loyalty program enhances customer experiences through personalized product recommendations and rewards, driving increased engagement and retention.

 By analyzing customer data, it offers targeted promotions, encouraging repeat purchases. Furthermore, the program's gamification elements, like points and tiers, create a more engaging shopping experience. 

This fostered a stronger emotional connection with the brand, leading to higher customer loyalty and sales. Additionally, the data gathered from customer interactions helps Sephora refine its offerings and marketing strategies, further enhancing the effectiveness of the program.

Improve Customer Loyalty and Retention with Raleon

AI's impact on e-commerce customer retention and loyalty is undeniable. From predicting churn, offering hyper-personalized recommendations, and streamlining post-purchase support, AI helps Shopify stores become more customer-centric. 

The case studies presented serve as testaments to its effectiveness, illustrating how brands like Nike, L'Oreal Luxe, and Sephora have leveraged AI to cultivate an environment where customers feel valued, understood, and rewarded.

As AI continues to evolve, its role in e-commerce will undoubtedly become even more profound, ushering in increased customer engagement and loyalty.

Raleon helps ride this wave, go beyond satisfying customers superficially, and creating personalized experiences that incentivize them to keep coming back. 

Our AI-powered Copilot tailors loyalty campaigns and customer profiles for immediate, customized engagement. Users can define unique earning methods and rewards, while Raleon's AI optimizes these campaigns based on brand data. 

Additionally, it offers insightful analytics to demonstrate loyalty program impact on revenue, enabling ongoing customer experience enhancement.

To discover how Raleon helps improve customer retention and conversions, try our Loyalty Experience Platform today.