4 ways AI can contribute to customer retention strategies


The argument of which is more important between customer acquisition and retention has been a hot topic in ecommerce before. What used to be a fierce debate, however, has died down in recent years. It has been shown that the cost of acquiring a new customer is five to seven times higher than the cost of retaining customers. It also often takes one to five years for new customers to start contributing to the profit. Given these stats against the backdrop of prevailing economic conditions, it's not surprising that companies are now completely locked into investing in customer retention strategies. Artificial intelligence is expected to provide exciting solutions for ecommerce brands striving to retain more customers.


The importance of customer retention is at the highest level it has ever been. Recent and anticipated economic trends are key drivers for the shift in emphasis to retaining new customers rather than acquiring them. At the top of the list is the persistent global inflation which started in 2021. The COVID-19 pandemic caused an increase in inflation rates and the political turmoil between Russia and Ukraine exacerbated the situation by causing disruptions in the supply chain. This contributed to an increase in the price of online goods, a trend that Bloomberg says will continue for years to come.

Another contributing factor to the increased emphasis on customer retention strategies is the growing fear of an impending recession. Economists and financial experts predict that by the end of 2023 a economic recession will strike. The double-edged sword of inflation and recession is already changing customer spending patterns. Various types of research have shown that customers are now willing to spend less, especially on expensive branded items. Continued inflation and the expected recession are also taking their toll on business. With the prevailing economic constraints, brands must adjust their budgets and focus on more cost-effective strategies, including customer retention.

Implementing customer retention strategies has many benefits for businesses. It is cost effective and reduces marketing and advertising costs. Customer retention also promotes revenue growth, as old customers tend to spend more and make repeat business. According to Sixads, loyal customers spend 67% more than new customers. In addition, the focus on customer retention opens up more opportunities for word of mouth, as loyal customers often share their experiences with friends and family, potentially attracting new customers to your brand. Because of these and many other benefits, ecommerce brands have invested more in building customer loyalty.


The main idea behind customer retention strategies is to improve the customer experience. Positive experiences are the driving force behind customer satisfaction and loyalty. Therefore, companies must always be in control of the experiences customers gain from interacting with them. Achieving this level of control with traditional systems can prove cumbersome. However, with artificial intelligence, this seemingly difficult task can be accomplished seamlessly. Here are four interesting ways AI your brand can help retain more customers:


One of the most well-known capabilities of AI is predictive analytics. It's a feature that helps companies understand future customer behavior by extracting patterns and trends from historical data. This can be applied in many creative ways to strengthen customer retention strategies. For example, predictive analytics can be used to anticipate customer needs. By analyzing customer data such as purchase history and behavioral data with AI, companies can discover more about the needs and preferences of most customers. This enables the brand to deliver personalized experiences that customers love, including personalized product and content recommendations and targeted promotions.

In addition, predictive analytics ensure more effective customer segmentation. AI can group customers into segments that help brands properly steer their customer retention strategies. For example, customers can be segmented by predicted future lifetime value. In response, brands can prioritize customers with the highest potential lifetime value to ensure they are a part of the business longer. Consequently, companies can make customers loyal and ensure that relationships become long-term.


Customer service plays a huge role in the customer experience. Customers want fast and reliable answers to their questions, and according to HubSpot, 33% says waiting on hold is the most frustrating part of customer service. AI-powered chatbots are excellent ways to remove such frustrations for your customers. Chatbots are available 24/7, which means human unavailability is no barrier to providing customer support. AI-powered chatbots can also be trained to provide personalized and accurate answers, minimizing the need for human intervention. As a result, companies can improve the quality of their customer support so that customers never have to complain about bad experiences.


Churn management is a critical aspect of customer retention strategies. AI can contribute to this in a number of ways, starting with identifying churn indicators. By analyzing customer data, AI can identify patterns and trends that are highly predictive of customer churn. This includes a sudden drop in a customer's engagement metrics or a change in purchasing behavior. By detecting these early signals, AI ensures companies can take action before they actually lose these customers.

AI can go a step further by helping companies formulate targeted retention strategies to ensure customers are at high risk of egress. This may include creating personalized offers and discounts to encourage them to buy their favorite products and services. In addition, AI can automate the delivery of these customer retention strategies to enable faster action. For example, once a customer stops paying for a subscription service, AI can activate personalized emails and push notifications to re-engage such a customer. Through methods like these, AI encourages companies to predict and prevent customer churn and improve retention rates.


Voice of the Customer (VoC) is a practice of collecting customer feedback to understand their perception of your brand and its offerings. AI can take VoC analysis to the next level and uncover insights that are rich and actionable. For example, AI-powered sentiment analysis can reveal a customer's emotional response to products, services and marketing campaigns. AI can also identify pain points by analyzing customer interactions and planning strategic interventions to solve the shortcomings in their services.

Using VoC analysis can even help brands innovate more. For example, if customers are constantly expressing frustration with your brand's mobile app, an innovative response will be to redesign or update the app to higher standards. The same principle can be applied to customer journey optimization. VoC can also help gain a competitive advantage. By monitoring what your target audience and customers are saying about your competition, your brand develops tactics to mimic their positives and take advantage of their weaknesses. All these uses of VoC help to keep customers happy, which will have a positive effect on the retention rate.

In conclusion, while acquisition efforts continue on the one hand, there should be more emphasis on customer retention. AI can make an important contribution to customer retention strategies, especially in 2023 when economic indices force customers and businesses to spend less. Through predictive analytics, chatbots, churn prediction and prevention, customer voice analysis, AI differentiate you from others in the race to keep customers loyal.

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