back icon Back Insights 04/30/2024

Streamlining Customer Experience: The Role of AI Chatbots in Loyalty Programs

It’s no secret that AI-powered chatbots have exploded in popularity recently. Retail chatbots currently engage with more than 600 million global shoppers annually — and that figure is slated to increase as nearly 90% of consumers report positive chatbot experiences. Automated chatbots now handle the majority of business-to-consumer (B2C) communications!

So, can AI-powered chatbots be deployed in loyalty programs, too? Yes, they can! And fortunately, you’ve come to the perfect place to learn how. In this helpful guide to personalizing loyalty program communications and prioritizing customer engagement with AI, we’ll explore how to streamline and scale customer experiences by integrating AI chatbots in loyalty programs.

The Rise of AI Chatbots in Loyalty Programs

The rise of AI chatbots in loyalty programs coincides with an existing trend — increased reliance on mobile devices. Of the 81% of Americans who use smartphones daily, more than half prefer retrieving their loyalty account information through a mobile app. So, it is no surprise that consumers turn to AI chatbot technology to interact with their mobile loyalty program perks. 

Advancements in AI and Machine Learning

Short for artificial intelligence, AI chatbot technology is a byproduct of machine learning (ML), an assortment of complex computer algorithms that allow chatbots to interpret and respond to queries like humans. Today’s chatbots have evolved to include natural language processing (NLP) abilities, which enable them to learn from continued interactions and deliver personalized responses. 

The more advanced AI has become, the more rapidly it’s been utilized around the globe. Approximately 88% of Americans and 92% of U.S.-based brands have adopted chatbots in recent years. In the travel vertical, more than 60% of travelers in the United States alone already use AI chatbots on mobile devices to plan or research trips, as per a 2023 global survey

Changing Customer Expectations

For consumers, the rise of AI chatbot technology has become synonymous with immediate, convenient brand interactions, whether on a smartphone, tablet, or laptop. For loyalty program providers, this convenience allows for direct interactions with members in their time of need, from answering questions and providing personalized assistance to simplifying reward redemptions. 

So, why is this convenience so essential? Now, more than ever before, consumers expect speed and simplicity. At a time when 99% of consumers report frustrations with customer service agents — primarily waiting on hold (63%) and not resolving issues quickly (37% — customer engagement with AI chatbots provides 24/7 availability and instant responses to inquiries effortlessly. 

A couple using AI-powered tools provided by their loyalty program while on vacation.

Benefits of Integrating AI Chatbots into Loyalty Programs

So, how do AI chatbots enhance loyalty programs? What are the key benefits of using AI chatbots in customer engagement? From powering growth to personalizing loyalty programs, explore these benefits of an AI-assisted loyalty program:

Scalability and Insightful Data Analysis

Business growth is good – unless your operations can’t keep pace with your growing customer base. Enter the role of AI chatbot technology! As your business scales — and you enroll new loyalty program members — AI chatbots help maintain operations and track useful customer insights, handling spikes in customer interactions while improving response quality.

Personalized Customer Experiences

Speaking of scaling, one of the primary benefits of AI chatbots in loyalty programs is personalization at scale. AI-powered chatbots leverage ML and NLP abilities to continuously “learn” about your customer base, sifting through previous interactions and purchase history to tailor individualized communications to each loyalty member. Personalizing loyalty programs allows each member to feel valued and appreciated, helping to drive higher rates of consumer engagement and enhancing customer loyalty.

Increased Engagement and Retention

The combined benefits of AI chatbots in loyalty programs work to better engage members for the long haul, ultimately helping to assist retention efforts over time. First, timely and tailored interactions with AI chatbots keep members satisfied and coming back for more. Next, enhanced customer engagement with AI — including on-demand assistance — makes members feel recognized and rewarded for their continued business, encouraging repeated interactions with the loyalty program. 

Implementation Challenges for AI Chatbots in Loyalty Programs

AI chatbot technology has developed incredible benefits; however, it also presents various integration challenges. So, what are the challenges in integrating AI chatbots into loyalty programs? Here are three to remain mindful of: 

  • Ensuring Customer Privacy and Data Security

Privacy is the primary barrier to widespread AI adoption. Because AI chatbots utilize customer information to personalize loyalty programs, businesses must ensure the security of personal data for AI to have a positive impact. If you’re unsure how to provide customer privacy when using AI chatbots, it’s wise to put together an incident response (IR) team and data breach response plan.

  • Maintaining Seamless Human-Chatbot Interactions

Properly integrated chatbots can manage 92% of customer issues “while forming meaningful connections that feel decidedly human-like.” However, that is not to say that human intervention is unnecessary. Certain situations, such as when members are angry about a billing cycle or upset at available rewards, still require a human touch. To provide exceptional customer service, loyalty programs must find a balance between when chatbot interactions are escalated to real human agents. 

  • Integration with Existing Systems

Beyond potential data security issues and challenges balancing humans and chatbots, integrations with existing systems can pose a significant problem for several companies, particularly those with long-standing tech stacks. Organizations with legacy systems, such as financial institutions, must provide chatbots with real-time access to several data sources to create timely, relevant, and accurate responses. Improper chatbot integration can lead to dips in operational efficiency in loyalty programs. 

Best Practices for Implementing AI Chatbots

All this talk about the benefits and challenges of AI chatbots in loyalty programs might have you wondering, what are the best practices for implementing AI chatbots in loyalty programs? Generally speaking, organizations must balance both AI chatbot technology capabilities and real-time member experiences for successful implementation. Here are three time-tested tips to do just that: 

  • Begin with a clear objective. Whether it’s customer service or personalized communications, focus on what you want your AI chatbot to achieve to design the best implementation framework.
  • Design for your audience. Remember that an AI chatbot will become the face of your brand for customers, so design it around their preferences and your brand’s distinct voice and tone. 
  • Create a simple escalation path to human support. Understanding that some scenarios still require a human touch gives customers an easy way to escalate their query to a human agent.

Effortlessly Implement AI in your Loyalty Program with arrivia 

From customer engagement to member experiences, AI chatbots in loyalty programs help ramp up how loyalty members interact with your brand, all while simplifying your operational efficiency. When it’s time to explore how to implement AI chatbots in your loyalty program, turn to the loyalty experts at arrivia. Our AI-powered assistant, VIA, is designed to turbocharge loyalty programs.

With VIA, loyalty program members can access TripTailor, arrivia’s personalized itinerary builder for upcoming travel plans, as well as SmartCal, an AI-powered smart calendar that crafts tailored getaway opportunities based on your members’ personal schedules. Explore arrivia services today to learn more about how we leverage the power of AI to design personalized travel reward perks.