How AI Can Improve Customer Retention?

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How do you retain customers? As much as you wish there was a direct answer for it, there isn’t. 

If you think offering loyalty programs or rewards can increase customer retention, it won’t. Gone are the days of such old school techniques. 

Nowadays, more than the products, customers want to feel connected with the brand. But, how can businesses do this? Through Artificial Intelligence. 

A decade ago, people talked of AI as the future for driving business growth. And now, the future is here and it’s happening. 

AI has a significant impact on business processes. But, what is it? How will it help businesses with operations and customer retention? Let us walk you through the insights. 

Customer retention: An overview

Before understanding how AI helps with customer retention, it is important to know what it is. 

Customer retention is defined as the strategies used by a business to make the existing customers stay. This is done by understanding the analytics to know the customer churn rate. 

To drive profits, it is essential to undertake a data-driven strategy. As much as businesses tend to talk about it, they do not leverage the technologies the right way. 

Tips to increase customer retention by using data and technologies:

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Customer retention is not an easy task. Gaining a reliable customer can make you turn stones. So, once you get a customer on board, do not let them go. With all the data available, this task has become rather practical and easy. Here are some of the tips to help you set the right foot for customer retention

1. Create a data roadmap:

If you want to get successful results, you need to do two things. Firstly, put the data you have to right use. Next, implement the organizational changes using the data. Some of the factors to consider while implementing this are:

  • Automate the KPIs and make them scalable. 
  • Know the stakeholders. Alongside, find at least 3 major problems you are willing to solve as a business. 
  • Carry out task prioritization alongside assessing its technical feasibility. 
  • Ensure behavioural changes. 

All of these can work if the team is dedicated to carrying out a hands-on approach. 

2. Focus on potential leads:

Why waste your energy on leads who do not hold the potential of getting converted? Data provides you with the chance to understand the list of potential customers. You can apply algorithms to understand the characteristics of customers and their distinct features. 

3. Create proactive models by leveraging machine learning:

It is a labour-intensive task to manually sift through data and create an optimal model. You can opt for predictive analysis which allows you to understand the metrics of relationships. 

A good idea is to use machine learning which helps in retention optimization. With the use of maths and statistics, ML helps in building connections among the variables. Machine learning algorithms suggestively improve with time. They are iterative and can be revamped continually. 

4. Segmentation is the key for retention:

Understand how your audience engages with your brand. You can use data analytics to gain insights alongside adopting different strategies to increase retention. 

The various factors to consider include lifestyle, products, demographics, purchase value and frequency. This will help you know which customers bring in the most revenue. You can then divert your efforts accordingly. It is quintessential to understand your audience. As this can either break or make your business. 

Another way of doing this is by monitoring time sensitivity. The more insights you have into the demographics, the better actions you are able to make. 

Ways to increase customer retention through AI

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AI is quite a buzzword and it is quite a worthy investment for businesses. Artificial intelligence is a gateway opening a plethora of opportunities for your business. From omnichannel presence to better personalization, it allows you to enhance the overall experience of customers. 

If you use AI the right way, you have a good scope of winning loyal customers. With AI integrated tools, businesses can nurture their relationships with customers easily. 

Here are some of the ways through which you can increase customer retention with artificial intelligence:

a) Predictive analytics:

Predictive analytics image

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This involves garnering advanced analytics which will harness all the big data to help you predict future events. It involves the integration of different techniques including modelling, machine learning, statistics, etc. 

AI helps you get an idea of what the customers will most likely look for and make the products available to them. This strategy saves you from the potential threats that can affect the buying journey of customers. 

For instance, Sephora. They use this technique in their email marketing campaigns. They track the customer’s purchase history. Based on their dates, they send emails with the relevant product offers. Alongside, they also provide complimentary offers, increasing customer retention. 

b) Personalized recommendations to individuals:

Over the years, personalization has gained momentum. If you provide the customers with what they want, the chances of them buying it increases. This further decreases the chance of customers shifting to another competitor brand. 

It isn’t practically feasible to look at every customer’s preferences manually. AI helps in discovering customer’s choice, helping you back up by providing tailored content. 

Does this method sound familiar? Well, many big platforms are using it, like Amazon and Netflix. For instance, Netflix recommends you shows based on your history and liking. How is this done? Through AI. This further makes the customer stay on the platform for longer durations. 

c) Effective engagement with chatbots:


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The better experience customers have with a brand, the more loyal they will be towards it. 

Imagine a situation. A customer visits your site and has queries about the product. How will they get it resolved? Sure, calls and emails are a good option to connect. But, intelligent chatbots majorly eliminate the need for other methods. They help you get some brownie points for customer experience

Along with resolving customer issues, they can also update the customers. This can include informing them about new products and offers, events, and more. 

d) Customer loyalty programs based on AI:

Whenever you take an action, whether it be viewing a product or purchasing it, a deep algorithm records it. Once you analyze this information, a customer persona is segmented based on age, interests and others. 

You cannot follow the approach of one-size-fits-all. You can tailor loyalty programs and incentives based on customer personas. 

So, if the customer personas are different, you can make loyalty programs based on them. Another way of transformation of loyalty programs is through its digitization. 

e) Price optimization with self-learning algorithms:

Whenever customers make a purchase decision, the most important factor is price. You need to plan the pricing correctly to avoid losing customers. 

It is important to strike the right balance between business profitability and customer’s affordability. 

You can opt for AI-powered solutions which use self-learning algorithms. Following this, they provide suggestions for optimized prices. The past transactions are considered, competitors prices are analyzed and then a win/loss situation is finalized. 

These findings can further help in understanding the customer’s willingness to pay a certain amount for the product. It also helps you decide whether the product is overpriced or underpriced. In turn, this helps in the negotiation process with suppliers. 

f) Better product innovation:

This is yet another underutilized benefit that comes along with AI implementation. It is product innovation. It allows businesses to understand the customer’s expectations. You can use this knowledge for business benefits and product development processes. 

You can target the pain points of customers and address this by providing them with the solutions to it. It is an amazing way of getting an edge over competitors. 

Further, with AI, you can know the industry trends to stay on the top of the charts. It won’t just be about creating new products but also meeting customer’s expectations. 

Best AI software for customer retention:

All the above-mentioned benefits of AI have surely got you thinking of ways to implement it in your business. To make the process seamless, you can opt for software. But, which one to choose? PeppyBiz is here to cater to all your requirements. We leverage the best technologies in hand to drive results for your business growth. 

Further, we also instil AI in our software and applications to help you get what you need for customer retention. We make the complete buyer’s journey more human and expand your business exponentially. 

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PeppyBiz provides exceptional solutions for all kinds of businesses. We offer software solutions that are the best-in-class in the market. Schedule a free demo to learn more!


To summarize, if businesses really want to lead in the industry, they need to use AI. It successfully creates an intelligent and practical experience for the consumers. By using the data in hand, it allows building brand credibility and customer loyalty. So, if you really want your customers to stay, go ahead and make AI a part of the process. After all, technological innovation is here to stay. 

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