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Artificial Intelligence (AI) has become a topic of conversation for marketers this year. With its ability to enhance personalization, tailor rewards, and make product recommendations, the technology has wide implications for customer loyalty. Even so, many marketers are struggling to wrap their heads around AI — how to define it, what it means for their brand, and the best way to implement platforms that leverage AI.
Loyalty360 CEO Mark Johnson recently spoke with Andy O’Dell, Co-Founder and Chief Strategy Officer at Clutch, about the current role of AI in customer loyalty, potential uses of AI going forward, and how brands can implement the technology to reimagine the customer experience.
What is the state of AI right now in our industry?
O’Dell: AI is an emerging trend. There’s a lot of curiosity around it, tempered with concerns or lack of understanding about what AI can do and what it should do.
I see an even split in focus between using AI on the operational side to make the enterprise more efficient — and on the experiential side to have a positive effect on the customer. There’s a robust conversation about how companies can use AI to improve the customer experience and optimize whatever level of interaction a customer might have with a brand.
Do you see reticence or skepticism toward using AI?
O’Dell: AI is in the gawky toddler phase of rolling out to business. Workers in some sectors might feel they’re facing an existential risk to their careers because AI can be effective at straightforward tasks like copywriting. However, such tasks still need human intervention. I don’t see AI as a replacement or an opportunity to reduce headcount. What AI does is allow employees to cover more ground, be more effective, and ultimately create greater personalization for their customers.
How can companies rack up some early wins with AI? Where should they start applying the technology to get results quickly?
O’Dell: The introduction of AI has placed us in a tech environment that’s moving faster than any other time in the last 20 years. A lot of the conversation now is on how to use AI to replace things. Brands should take a positive approach and develop a vision. Businesses should be thinking: Where could this take us in 10 years?
Let’s fast forward a decade or so. AI might have access to my calendar and every item in my closet and refrigerator, making determinations based on all the details it sees in my personal life. It might know I have a wedding coming up, so it may prompt the brands I like to dropship items in my taste and size. I would pick out two or three things and send the rest back. I’d have this seamless retail experience that’s cognizant of who I am, what I’m doing, what’s coming up, and where I’m at in my life. It might know how much money I have allocated this year to clothing versus other discretionary categories. As consumers, I think we’re going to turn over the keys behaviorally to this AI world because it will make our lives freer and more productive — less encumbered by everyday activities.
Once you understand where you’re headed as a brand, then you can take a step back and consider what to knock out first. Maybe you want to work on operational inefficiencies. Perhaps you want to maximize transactional spend first because you need to increase revenue to make investments in AI that you can’t otherwise afford. The AI conversation can be tactical — while serving the long-term vision you’ve established.
A promising feature of AI is its ability to perform predictive modeling. How does AI do this, and can you give an example of the benefits to a brand?
O’Dell: A big part of AI is its ability to forecast. AI is essentially a collection of interconnected sub-models — think of them as building blocks — through which data flow. These blocks predict different things and build on one another to arrive at the ultimate prediction the AI model is trying to make.
Let’s say you want to plan inventory. You can set up the AI model to predict how many items you need to optimize inventory at each location or how much excess inventory you need to get the unit economics you’re looking for.
If you have naysayers in your organization, how can you make them more accepting of AI?
O’Dell: First, you must recognize that skepticism around AI is justified at this early stage. Everyone knows the best intentions don’t always produce the best outcomes, and there’s been little federal guidance on the appropriate use of AI. Then you must make the distinction between generative AI —using AI to produce something — and using AI for business purposes like creating operational efficiencies. The concern for most people is misuse of generative AI, like using a person’s likeness or speech without their permission or creating “deep fakes” intended to deceive. It’s important for your colleagues to understand that we’re not talking about that kind of AI. The technology itself is value-neutral. It does what you want it to do.
Can you give an example of how AI can improve a customer loyalty program?
O’Dell: AI is good at detecting nuances, so you can make highly personalized offers. You may have two customers who look the same on paper demographically, but they’re clearly not the same person and don’t behave identically as consumers. AI can see how these two consumers are different and determine which offers to send them and when. That leads to better conversion rates, which every brand wants. They want to deliver more effective communication and thereby reduce the frequency and cost of outreach.
Reducing the frequency is also a benefit to consumers. I think everyone is getting tired of excessive messaging. Let’s say a customer shops with a brand every 90 days, and the brand sends the customer an email every day. That’s not the right level of communication for most people. There must be more sensitivity to the customer’s interests, which is where AI comes in. It can optimize the expense of customer communications while also enhancing the customer experience. That’s a recipe for better conversion rates.
It’s not always about personalization, though. AI can touch all areas of the business. Your most immediate opportunity with your loyalty program might be something totally different, like lowering your cost basis so you can extend better discounts to members.
Quick-fire Questions:
What is your favorite word?
Love.
What is your least favorite word?
Loser.
What excites you?
Sports.
What do you find tiresome?
Gossip.
What profession other than your own would you like to attempt?
Professional sports coach.
What profession would you avoid?
Lawyer.
Who inspired you to become the person you are today?
No single person — I’m just a culmination of a lot of positive and negative experiences.
What do you typically think about at the end of the day?
How did I do?
How do you want to be remembered by your friends and family?
As someone who tried hard and loved people.
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