back icon Back Insights 02/13/2024

AI-Powered Loyalty Programs: Revolutionizing Customer Engagement

Loyalty programs have served as reliable customer engagement strategies for generationsliterally. What began as meager copper tokens redeemable for store merchandise in 1793 evolved into cardboard checks in 1872 and paper trading stamps in 1896 before American Airlines launched the first currency-based customer loyalty program in 1981. The rest, of course, is history. 

To date, more than 90% of businesses offer loyalty programs, amassing more than 3.3 billion active participants. Now, AI-driven loyalty programs have emerged to transform the customer engagement landscape. Powered by real-time insights, AI loyalty programs predict customer behaviors and tailor loyalty rewards to bring an unrivaled level of personalization to the forefront.

Discover what AI loyalty programs can offer your customers, complete with predictions from arrivia Chief Technology Officer Firasat Hussain. 

What Are AI Loyalty Programs and How Do They Work?

Short for artificial intelligence, AI is a computer function replicating human cognitive abilities. At their core, AI loyalty programs utilize machine learning algorithms and predictive analytics to understand customer preferences and behaviors. This AI integration allows programs to offer highly personalized rewards and experiences, making each customer interaction unique and relevant.

So, how do AI loyalty programs work? In layman’s terms, AI systems first analyze customer data, such as purchase history, user preferences, and engagement patterns, to predict future behaviors and anticipate customer needs. Next, the programs deploy a type of machine learning called generative AI (gen AI) to create personalized experiences, including messaging and rewards.

The essential components of an AI-powered loyalty program include a robust data collection and predictive analytics framework, a personalized recommendation engine, and automated customer communication tools. AI loyalty programs are also defined by their real-time functionality, which works to enhance customer satisfaction and encourage continuous customer engagement.  

The Impact of AI on Customer Engagement

Personalization and customer engagement go hand-in-hand, with the majority of marketers identifying increased engagement as personalization’s top benefit. As a result of AI programs analyzing customer behavior and identifying hidden patterns, businesses can deliver highly personalized recommendations, rewards, and communications that resonate with each individual.

“We are able to easily capture intent instead of just search parameters,” explains arrivia CTO Firasat Hussain. “Say someone wants to cruise to Alaska for an anniversary. The search doesn’t catch the intent of an anniversary trip it would only know the person is looking for cruises to Alaska for a certain date. AI will pick up on the anniversary intent and let us serve better content to the user.”

Geared with predictive analytics, AI loyalty programs can proactively engage customers with relevant offers and experiences in real-time, increasing the effectiveness of program rewards and communications. AI-driven automation in loyalty programs streamlines workflow, from customer segmentation to reward allocation, ensuring customer interactions are timely and relevant.

Arrivia is very focused on using AI in our contact center,” adds Firasat. “Right now, it takes multiple calls to learn the customer’s wants and goals. We want to curate more content to cater to their needs and help member interaction. We are exploring the idea of having an AI-driven virtual assistant or chatbot that members can chat with to learn about itineraries, travel details, and more.”

Benefits of AI in Loyalty Programs

So, how can AI improve customer loyalty? The answer lies in personalization. Personalized experiences foster a deeper connection with customers, enhancing satisfaction and loyalty and leading to increased retention. With AI-powered insights, businesses can make more informed decisions on customer engagement tactics, marketing strategies, and product offerings.

In other words, AI aligns loyalty programs with customer needs. On the operations side, AI loyalty programs also effortlessly scale, handling growing amounts of data and adapting to shifting trends and business needs. Businesses won’t need to worry about the potential challenges of legacy systems — AI grows with loyalty programs, ensuring longevity and relevance for years to come.

“Our partners and clients want platforms that are highly configurable,” explains Firasat. “They want to change the look and feel of the program, change out headers, and other configurable elements on the website. The arrivia white label travel rewards platform allows us to create customized forms or extend the platform for the customer’s needs. We pride ourselves on the ability to do this.”

Challenges and Considerations in Implementing AI Loyalty Programs

An AI-powered loyalty rewards program is rich in customer data, including customer behavior and preference data unavailable elsewhere. As one would expect, ensuring the confidentiality and security of customer data is paramount. When looking to implement an AI loyalty program, businesses must adhere to data protection regulations and employ robust security measures.

Beyond fraud detection and encryption, AI technology must integrate seamlessly with an existing customer loyalty program and business systems for maximum efficiency and impact. However, businesses must still balance AI-powered automation and a human element in customer service to maintain authenticity in customer interactions.

The customer support team is working in front of computers.

Best Practices for AI-Powered Loyalty Programs

AI loyalty programs are slated to impact the customer loyalty landscape and influence customer engagement strategies on a significant scale. More than 9 in 10 businesses now use AI-driven personalization to enhance their business processes and connect with customers on a deeper scale. Best practices when implementing AI-powered loyalty rewards include:

  • Focus on customer-centric strategies. AI should be used to advance the customer experience, not just for the sake of technology. Predictive analytics and machine learning should always focus on delivering value to loyalty program members.
  • Invest in continuous learning and improvement. Regularly update and train AI models with new data and customer feedback to ensure the program remains relevant and effective.
  • Commit to transparent communication. Since only 51% of customers trust brands to keep their data secure, it’s vital to remain transparent about how AI is used, especially regarding data collection and usage, to build credibility in the loyalty program.

Leveraging arrivia in the Age of AI Loyalty Programs

Now is the time to take customer engagement to the next level — and arrivia is here to help. In a landscape where AI loyalty programs are reshaping customer engagement initiatives, arrivia’s travel rewards platform is a complementary asset. By integrating your AI-driven strategies with arrivia’s extensive rewards offerings, you can power an unparalleled loyalty experience

Leveraging arrivia as a loyalty program partner allows for a harmonious blend of technology and human touch, where personalized AI insights meet the vast, experiential rewards only arrivia offers. To ensure your AI loyalty program is innovative and engaging, reach out to arrivia for a demo and explore how our travel rewards can enrich your cutting-edge loyalty program.