Increasing customer value with data & AI - how retail companies succeed

Gone are the days of mass media in which general advertising to all potential consumers successfully appealed to a large number of customers. Due to the sensory overload of digital media, consumers are increasingly ignoring content. This phenomenon, in which website visitors consciously or unconsciously tune out advertising banners, is known as ‘banner blindness’. 
Your advertising measures lose their impact - and your direct line to your customers dwindles. The result? High marketing costs with less success - and falling conversion rates. To retain your customers in the long term and grow profitably, you need a different strategy: increase customer value with AI.

Why increasing customer value is important now 

Every customer acquired is more valuable than ever. Increasing customer value helps companies offset rising acquisition costs, retain customers for the long term and grow more profitably:

• Rising customer acquisition costs: according to Forbes, HubSpot and other sources, the cost of acquiring new customers has risen by up to 50% in the last five years. Retailers need to focus more on existing customers to remain profitable.
• Declining customer loyalty: According to the SAP Customer Loyalty Index (CLI) 2024, depending on age, only 56% (Gen Z) to 66% (Gen X) describe themselves as loyal to certain brands, retailers and stores. One reason for this is growing cost awareness - especially among younger people. They also want offers tailored to their own interests in order to remain loyal.

To meet these challenges, companies need to create content that appeals to customers and incentivizes them to buy. The solution? Relevance through AI-supported, customized offers. Only those who truly understand their customers will retain them successfully.

Why relevance is the key to increasing customer value

Retailers who do not provide the right offer at the right time quickly lose relevance - and therefore also customers. The result: fewer repeat purchases, lower basket values and higher marketing costs.

To regain customers' attention, companies need to provide relevant content. This is only possible if companies know their customers. 

Similar to how SEO strategies rely on long-tail keywords to reach targeted audiences, retailers need to use their data to drive highly accurate customer segmentation and targeting. Long-tail keywords are more specific and often less competitive, but they achieve a higher conversion rate because they address the exact needs of customers. Just as long-tail keywords increase visibility with the right customers, relevant content ensures that companies address exactly those customers who are interested.

This is where data-driven artificial intelligence (AI) comes into play. It can be used to address people in a personalized way. Hyper-personalization uses behavioural data and interactions to create micro-segments. If transaction data can be linked with product data and/or product hierarchy, suitable vouchers can be automatically created and displayed by evaluating purchasing behavior.   

This strategy strengthens customer loyalty, improves the customer experience and promotes brand loyalty as well as the willingness to buy more, which in turn increases marketing effectiveness. A study by McKinsey has shown that companies that excel at personalization generate 40 percent more revenue from these activities than the average company (Next in Personalization 2021 Report).

Increasing customer value with AI - what is possible with data analysis

AI-supported product recommendations and offers

With the help of machine learning, retailers can generate individual product recommendations based on purchase history, behavior and preferences. Platforms such as Amazon show the impact of personalized recommendations on sales: 35% of Amazon's revenue is generated by AI-supported, tailored recommendations (digital.pwc.at).

Smart customer segmentation

AI enables customers to be segmented more precisely - not only according to demographic characteristics, but also according to behavior, interests and purchase probabilities. This significantly increases the effectiveness of marketing campaigns.

Next-generation loyalty programs

Modern loyalty programs use AI to analyse purchasing behavior and preferences in real time. As a result, customers receive individually tailored rewards - such as discounts on their preferred products, exclusive offers at suitable times or special promotions based on their purchasing behavior. According to the EHI study AI and customer loyalty in retail, which was published in 2024, attractive offers are one of the most important levers for increasing customer loyalty and the proportion of loyalty program users.

Hurdles on the way to a data-driven customer approach

A lack of concrete use cases, a lack of expertise, technological hurdles, concerns about data protection and a lack of resources are common reasons why retail companies hesitate to work with data & AI (Statista 2023).

Concrete use cases

In addition to the possibilities already mentioned above, AI can also be used in customer approach and loyalty, for example for dynamic offer management, hyper-personalized email campaigns, personalized ad design or dynamic content in web stores.

Data quality & integration

Many retailers struggle with fragmented data sources: POS systems, e-commerce platforms, CRM software, ... Historically grown IT infrastructures make centralized data management even more difficult. Without a uniform and central data strategy, the potential for AI-supported personalization and customer loyalty remains untapped.

Lack of resources & know-how 

AI requires specialized knowledge. Management must learn how to develop a successful AI strategy, those directly involved need in-depth training for practical application and technical teams must acquire specialist knowledge for implementation and maintenance. Companies that do not invest in data science skills will find it difficult to exploit the full potential of AI.

The good news is that retailers don't have to start from scratch. There are already tried-and-tested solutions with which they can take the first steps in AI-supported customer communication - without high entry barriers.

How retail companies can get started quickly with AI-supported customer loyalty

With our customer loyalty platform, you can take the first steps in AI-supported customer loyalty quickly and easily. We analyze the interests and behavior of your customers and determine the environments in which they currently live. On this basis, we create personas that you can use to design your campaigns in a more targeted way. Subsequently, the content can be automatically adapted to different target groups and played out using AI. This means less effort and greater benefits as well as effective customer retention and acquisition.

Why the use of data & AI is worthwhile for retail companies

Competitive advantage through a head start

According to a study on artificial intelligence in retail conducted by the German Retail Association and Safaric Consulting in 2023, over 20 percent of retail companies surveyed use AI either in certain areas or company-wide. While some companies are still hesitating, others are already relying on AI - and securing competitive advantages that are difficult to catch up on. Do you want to wait until your competitors are ahead of you? Or do you want to take the decisive step now and take the lead? Be quick: According to the EHI whitepaper AI and customer loyalty in retail from November 2024, more than half of the decision-makers surveyed in German-speaking retail stated that their company is planning to use AI to increase customer loyalty in the future.

Data-driven companies grow better

Data-driven companies achieve significant competitive advantages: According to a McKinsey study, data-based personalization increases sales by 5 to 15 % and improves marketing ROI by 10 to 30 %. Companies that consistently rely on AI-supported personalization can also reduce their customer acquisition costs by up to 50 % (McKinsey & Company, State of Marketing 2024).

Conclusion

The future of retail is data-driven. Companies that increase their customer value with AI will retain their customers better and lead the market.

Are you ready to increase your customer value with AI? Your digital loyalty program in mobile-pocket is all you need. Make an appointment now.