Loyalty AI – The Power of Relevance in Personalization

TLDR: Sucharita Kodali, VP Analyst at Forrester, recommends three key use cases for AI in loyalty programs: personalized content, chatbots, and optimized A/B testing. Brands should follow a framework that balances relevance with privacy, invests in the right technology, and avoids potential pitfalls of AI adoption.

AI is the buzzword in marketing, promising to transform customer connections, especially in loyalty programs. But like any powerful tool, it demands a nuanced approach. As Sucharita Kodali, VP Analyst at Forrester, warned during our webinar, “The Power of Relevance: AI-Driven Personalization,” caution is key.

We’ve all experienced personalization gone wrong: irrelevant ads, generic birthday emails, frustrating chatbots. Today’s consumers want relevant personalization. It’s not enough to collect data; you have to act on it respectfully and deliver value.

Relevance: The Holy Grail

Relevance unlocks AI’s potential. Half of US adults join loyalty programs for relevant messages, but over a third are turned off by current personalized interactions. What does this tell us? Brands need to understand what levers to pull for which customers, and when.

Annex Cloud’s Head of Strategy, Alex Tavera, shared how getting ads in Spanish made sense for his wife but not him when she shares the family Apple ID because she uses Spanish for her work and he doesn’t. His anecdote showcases the importance of knowing the customer is just as important as knowing how to deliver a personalized message.

Loyalty AI in Action: A Double-Edged Sword

AI offers exciting opportunities for enhancing loyalty programs. From personalized videos and chatbots to dynamic segmentation and predictive forecasting, the possibilities are vast. However, brands must tread carefully. Here are some cautionary tales to keep in mind:

1. The Chatbot Gone Rogue: Sucharita shared stories of chatbots going off-script, providing nonsensical or even offensive responses. Without proper training and oversight, AI-powered chatbots can quickly damage brand reputation.
2. The App Experience Fail: Sucharita described a frustrating scenario where a loyal customer downloads a brand’s app, only to be forced to log in repeatedly when accessing content from social media links. “It’s like I have held up my hand and told you I want your information. Why are you making it so hard for me to access your information?” she questioned, highlighting the importance of friction-free experiences.
3. The “Creepy” Birthday Wish: While Erin emphasized acknowledging a customer’s birthday, the execution matters. A generic “Happy Birthday!” message feels impersonal and insincere. But swing too far in the other direction and it can even backfire, raising privacy concerns and making customers feel like their data is being used without their consent. Find the right balance that works for your customers!
4. Avoid the “Locked Loop”: Early segmentation can pigeonhole customers into specific behaviors, limiting their opportunities for growth and engagement. As a marketer, it’s critical to allow room for customers to evolve naturally.
5. Invest Wisely: AI solutions can be expensive, especially those involving Large Language Model (LLM) enhancements. Weigh the costs against the potential benefits before investing in new technologies.

The “So What” for Brands

AI has the potential to revolutionize loyalty programs, but it’s not a silver bullet. To succeed, brands must prioritize relevance, balance personalization with privacy, and invest in the right tools and strategies.

Here are three actionable takeaways:

• Maximize your data: Break down data silos to create a unified view of your customer.
• Focus on value: Deliver tangible benefits to customers in exchange for their data.
• Be transparent: Communicate clearly about how you’re using AI to personalize their experiences.

By embracing these principles, brands can harness the power of AI to create loyalty programs that are not only effective but also ethical and customer-centric. Contact Annex Cloud to learn how to move forward faster and start building stronger relationships with your customers today.