How to integrate
AI into your
customer retention
strategies

As your company looks to digitally transform its operations, one potential trap is to focus all of your attention on sales and marketing. The attraction seems obvious—why not use the latest technology to attract new customers? The answer is you should—just don't forget about your current ones.

This is where customer retention strategies come in. By harnessing the power of artificial intelligence (AI) and machine learning, you can significantly improve the customer experience so that you can take the steps required to keep more customers happy for longer. This is important because it can be much more cost-effective to grow your business by focusing on increasing revenue from your existing customers.

Customer retention strategies are designed to reduce the number of lost customers, with a goal of keeping as many customers as you can for as long as possible before they churn.

Here's why your customer retention rate should be one of your most important key performance indicators:

• Get more bang for your buck: It can be up to five times more expensive to acquire a new customer than to retain an existing one.
• Small improvements lead to major bottom-line results: A 5% customer retention rate increase can increase revenue by as much as 25%.

You can improve your customer retention rate in many ways. For example, a generous loyalty program, marketing programs geared toward existing customers, an impactful brand, responsive customer support and a positive customer experience all have a role to play in keeping customers around longer.

Each customer activity across your organization—sales, marketing, billing and support—creates data that can be used to determine more effective customer retention strategies.

This is where AI comes in. AI can help create insights from all the data customers generate as they engage with your website, brick and mortar locations, customer support staff, mobile apps, social media accounts and more. It can identify shopping patterns through purchase history, along with customer intent from the words they use in chats and emails to your customer support.

In doing so, AI can leverage advanced analytics to uncover customers at risk of churn due to their lack of engagement with your marketing, a drop-off in product purchasing, disengagement with your subscription services or any number of other indicators.

AI can then help you identify cohorts of customers that tend to defect, helping you know exactly who you need to target using customer retention strategies. It can also help you classify and prioritize customer support by helping you identify customers who are likely to defect due to a service issue, giving you the opportunity to elevate their call to higher-trained staff.

To effectively use AI to improve your customer retention rate, you need two key pieces of information. The first is data: Your AI model will need historical data to best identify the differences between customers that churn and those that don't. It can then create a likelihood score that indicates if a customer will churn.

Next, you have to use those scores to identify which specific customers are likely to churn and why. This allows you to proactively reach out to customers with an action (perhaps one that the AI indicates) that will reduce churn. Better yet, automation can often execute the action itself, allowing you to reduce churn at scale.

Here are a few ways AI can be used to power your customer retention strategies:

• Personalized Discounts: Customers have never been more cost-conscious when shopping. While e-commerce retailers already automate price optimization in real time in response to competitor pricing, AI can help you create and surface discounts and offers on a customer-by-customer basis. By identifying a customer close to churn, you can dynamically offer more aggressive discounts for specific customers without impacting the pricing you offer the rest of your customer base.
• Personalized and Reactive customer service: AI can analyze the words customers use when they call your contact center for customer support or engage with your chatbot. This can help you understand what your customers want and if customers feel positive or negative about your product and the support they're getting, allowing you to identify any customers who are likely to churn. As one of your customer retention strategies, you can then quickly elevate their issue to a human (if using a chatbot or interactive voice response system) or a manager (if talking to a rep over the phone). This can soothe an angry customer, helping you keep their business and improve your customer retention rate.
• Personalized recommendations: Every purchase provides intelligence about what a customer wants, along with what they might need in the future. AI can help you create more sophisticated upsell and cross-sell campaigns by analyzing customer cohorts of others who have purchased a product to see what else they bought. This helps you think beyond obvious offers to provide non-intuitive suggestions that are more likely to generate additional sales. The more useful your recommendations, the more your customers will appreciate your service, reducing churn while increasing revenue growth.