5 Ways AI Can Improve Retention Rates in the Retail Industry

Is Your Customer Loyalty Lagging? 5 Ways AI Can Improve Retention Rates in the Retail Industry

Customers become loyal to a brand and decide to choose it over any of its industry competitors when they are happy with the experience they’ve had and begin to form an ongoing positive relationship. Customer loyalty is the driving force behind repeat purchases and high customer retention rates. 

As the competition in the retail industry becomes even fiercer, leveraging emerging technologies—especially artificial intelligence (AI)—can be a great way to build a positive brand experience for your customers and prevent their loyalty from lagging. 

The future of AI looks bright with the use of the technology in the retail market alone skyrocketing to an estimated $7.1billion in 2023. But why and how should retailers use AI to improve their retention rates?

This article dives into why retailers should use AI to improve their retention rates, the five best practices for doing so, and how to measure the effectiveness of using AI for increased retention.

Why Should I Use AI To Improve My Retention Rates?

Traditional methods for improving customer loyalty and retention rates are now more challenging for retailers because they rely on manual data collection and analysis. This traditional method can be time-consuming, increases the likelihood of human error, and may not gather real-time changes in customer behavior. 

AI applications can analyze mass amounts of data quickly and accurately, identify trends and patterns, and make business predictions, all of which enable retailers to gain valuable insights into real-time customer behaviors. This form of competitive intelligence allows retailers to stay ahead of market shifts and update their customer retention strategies accordingly. Retailers are then able to update and improve their customer retention strategies accordingly.

In addition, AI automates mundane and repetitive tasks which gives businesses more time to focus on developing personalized customer retention strategies that are more effective.

Five Ways AI Can Improve Retention Rates In The Retail Industry

With 62% of customers saying they are open to the use of AI to improve their experiences, why would you not embrace this impressive technology to improve customer shopping experiences and, in turn, your retention rates?

Personalization 

76% of consumers say they're more likely to purchase from brands that personalize their experience. 

AI can analyze customer data such as purchase history, browsing behavior, and social media interactions. This data provides businesses with a profile for each customer—highlighting their unique needs, interests, and preferences—which can be used to create a personalized online shopping or browsing experience.

For example, AI algorithms can recommend products that match a specific customer's interests or tailor promotions based on a customer’s location. This level of personalization ensures that the customer’s experience is relevant and engaging, which is the driving force behind repeat purchases and boosting retention.

(Image Source: LinkedIn)

In addition, AI in digital marketing can divide your customers into segments based on demographics, behavior, or purchase history and then craft targeted marketing messages to increase the relevance and effectiveness of your social media or email marketing campaigns.

Personalization strengthens relationships, fosters customer loyalty, enhances customer satisfaction, and increases the likelihood of repeat purchases, all of which ultimately drive retention. In fact, brands that excel in personalization are 71% more likely to see improved customer loyalty rates.

Customer Predictions

AI can predict customer churn—the probability of losing a customer for any reason—by processing customer data such as purchase history, account activity, and social media engagement. 

Once AI data has informed your business that an account has become inactive or is likely to churn, you can take proactive measures to stop customers shopping elsewhere, such as offering personalized incentives, addressing their concerns, or improving product offerings. This proactive approach can significantly improve customer retention and reinforce loyal relationships.

For example, if a repeat customer stops purchasing as often as usual, AI can create personalized discounts to re-engage them before they consider switching to your competitors. 

As well as reduced retention rates, customer churn can have a significant impact on sales, revenue, and a retailer's overall brand reputation and image.

The data from your POS system can be used to analyze the buying patterns of your customers, and then use that information to send out custom offers. 

Customer Service

90% of customers say an immediate response is essential when they have a customer service question, but having a team of representatives working 24/7 is not always feasible.

(Image Source: HubSpot)

Well, the answer is an AI-powered chatbot that helps your business offer 24/7 customer service, as well as help with marketing and sales queries, without compromising on quality or accuracy.

Implement chatbots on your website, mobile app, or social media pages to handle routine inquiries, resolve issues, answer frequently asked questions, and provide general support.

Partnering with an AI chatbot development company can ensure that your chatbot is customized to your brand’s needs, offering advanced features like natural language processing and personalized responses to enhance customer engagement and satisfaction.

Using a chatbot frees up your customer service assistants' time to focus on complex queries such as complaints. They get to ditch the routine questions and give customers focused and personalized attention, enhancing their experience and improving loyalty. 

To ensure your AI chatbot provides customers with accurate information, choose a training-free model that leverages the content from your knowledge base to create responses. 

Multilingual Support

70% of end users say they feel more loyal to companies that provide support in their native language. So, customers should be able to interact with your brand in their preferred language if you want to improve loyalty and retention.

However, this can be difficult for your business if you have a global customer base and can't afford or acquire a team of multilingual customer service assistants.

Luckily, AI-powered translation tools can translate your customer service support to help you communicate with customers across the globe in a language that suits them. In addition, these AI tools can translate your website and its content to engage more international customers.

Omnichannel Experiences

73% of customers use multiple channels during their purchase journey, so it has become essential for your business to offer a seamless omnichannel experience. 

Whether a customer interacts with your brand through your website, mobile app, social media, or in-store, the experience should be consistent to improve customer loyalty.

AI can help synchronize data across channels, ensuring that customers receive a cohesive and integrated browsing and sales experience at every touchpoint.

In addition, AI can enhance your omnichannel marketing campaign by analyzing data about customers and products, predicting channels customers are more likely to convert on, and automating repetitive tasks.

How To Measure The Impact Of AI On Customer Retention

Now that you know how to leverage AI to boost customer retention, it's essential to also know how well the technology is working for your business. Other than tracking your customer retention rate, consider monitoring these metrics so you don’t waste your time or investment:

• Customer Satisfaction Score (CSAT). Ask customers for feedback on how satisfied they are with your business at a relevant part of the customer journey, such as on a purchase confirmation page. AI surveys can help gather this feedback in real time, allowing you to act on customer insights more efficiently.
• Net Promoter Score (NPS). Ask customers how likely they are to recommend your products or services to others on a scale from 0 to 10 after they've received their purchase.
• Average Handling Time (AHT). Consider how long it takes to handle and resolve customer queries now that you’re using AI-powered chatbots.

Is Your Customer Loyalty Still Lagging?

Improving your lagging customer loyalty is essential in today's competitive retail landscape because research shows that retaining existing customers is more cost-effective than obtaining new ones. In addition, loyal customers will likely spend more over time and recommend your brand to others. 

By leveraging AI to improve your retail operations in the five areas explored in this article, you can improve customer retention and stop loyalty from lagging. Ensure you monitor your metrics after implementing AI, so you know the technology is working for your business.