Taking an emotional approach to greater customer retention. - guest blog by Jonas Berggren

As we navigate the ever-shifting landscape of customer experience, it's impossible not to be captivated by the two prevailing narratives that have dominated this year. One has been the relentless growth in the popularity of artificial intelligence (AI) tools. The massive adoption of ChatGPT earlier this year proved that AI is everyone's curiosity. From everyday chats to solving big problems, AI is everywhere.

The other big story has been the economy. Economists had their crystal balls out, predicting a roaring comeback after the Covid hit. But the reality? Most developed countries have yet to see the enormous bounce many economists were predicting as we left behind the Covid pandemic. In fact, most economic commentators still appear to be quite uncertain about when growth will return. Equity markets are struggling in Europe, but at least there are some positive growth indicators.

In an uncertain economic environment, it makes sense for executives to focus on customer retention. Smart leaders know retention is necessary, but it is still interesting to see just how much a small shift in retention can affect a business's overall performance. A 5% increase in retention can lead to a 25-95% boost in profits.

Obviously, any comparison of the cost of retention compared to acquisition depends on the type of product and industry. Still, business journals like Forbes and the Harvard Business Review tend to agree on a ratio of 5-7 times - it costs far more to acquire new clients than to retain those you already have.

Typically, when companies talk about retention, they focus on 'know your customer' initiatives. This connects the two big themes of the year. AI can play an essential role in creating great customer insight. By analyzing customer behavior and preferences, you can identify opportunities when the customer may want to buy something and when they might stop purchasing from your brand - important for subscription businesses.

However, what we sometimes miss is the emotional link that truly makes a brand special. Think of it as the secret ingredient: customer loyalty. When people genuinely love your brand, they don't just make purchases – they become champions and enthusiastic supporters. And this loyalty isn't just about smart marketing; it's rooted in a strong emotional bond.

"Customers today seek more than products; they seek experiences that mirror their values and aspirations. Crafting such experiences builds bonds that withstand market fluctuations."- Simon Sinek, Leadership Expert.

Why is getting new customers more expensive? It's because of a simple human feeling - loyalty. When you're fond of a brand, you stay loyal. That consistent relationship cuts down on marketing costs and boosts regular earnings. It's the kind of steady companionship that doesn't fade like last season's trend.

The journey, however, continues beyond analyzing numbers and algorithms. It's about creating an ecosystem where customers willingly immerse themselves. Look at Red Bull, whose ownership of football teams around the globe doesn't just sell energy drinks. Fans in Salzburg, Leipzig, New York, and even São Paulo in Brazil follow their local Red Bull team. The company doesn't need to create any direct advertising around its main products - energy drinks. The fans wear the shirts and build an emotional connection to the brand.

Smart brands will create retention strategies that draw fans in - they pull the fans into an ecosystem that they enjoy rather than pushing information at the customer. Constant offers can feel like spam rather than anything useful.

If you've been following me for a while, you're probably well aware of my passion for hiking. Most of my hiking gear comes from Outnorth AB. An interesting thing happened when I purchased a new pair of hiking boots. Instead of bombarding me with promotional offers, they sent an email with backpack-packing tips and advice to enhance my trip experience. There was no attempt to upsell or cross-sell. No link-clicking pressure to make me buy more.

It was genuinely helpful. Outnorth extended their hand, welcoming me into their world, fostering a connection beyond just transactions.

We can indeed use AI to identify what customers are really interested in, but a retention strategy does not always need to focus on the sale. It can be entirely focused on pulling that customer back into the brand's orbit. If they enjoy staying close to the brand, then they will buy something.

As I said earlier, make it easier to be a fan of the brand rather than just a customer. Make that connection. Add some value to the customer and their lifestyle. This is why many recently launched banks focus on supporting customers in their financial goals rather than just offering an account and credit card.

AI can be a powerful tool for improving customer loyalty. AI can be used to personalize the customer experience, anticipate customer needs, and resolve customer issues quickly and efficiently.

Here are some examples of how AI can be used to improve customer loyalty:

• Personalization: AI can be used to personalize the customer experience by understanding customer preferences and behavior. AI-powered algorithms dive deep into customer data, creating hyper-personalized experiences that hit the right note.
• Predictive analytics: AI can be used to predict customer behavior, such as which customers are likely to churn. This information can be used to target customers with personalized content to prevent customer churn or enable you to proactively address their needs and foster an enduring bond.
• Automated customer service: AI can be used to automate customer service tasks, such as answering FAQs and resolving simple issues. This can free up human customer service agents to focus on more complex and challenging cases, which can lead to a better customer experience.
• Emotionally Intelligent Interactions: AI isn't just about numbers; it's about emotions, too. Imagine having chatbots that understand the sentiment and respond accordingly. It's like having a customer support team fluent in empathy.
• Automated voice and text translations: AI can be used to automate real-time voice and text translations, which can help businesses communicate with customers in their native language, no matter what language the agent is speaking.
• AI agent assistant: AI agent assistants can help customer service agents automate their work and focus on customer needs. For example, an AI assistant can help agents find information in the knowledge base, route calls to the correct department, and resolve issues quickly and efficiently.