What does customer loyalty look like in the age of AI?

Transcript

Robert Zirk: Brand loyalty isn't what it used to be.

Research from TechSee, a technology partner of TELUS International that provides visual customer experience solutions, shows that more than one in three U.S.-based customers aren't brand loyal and would leave for a competitor if the right opportunity presented itself. And the SAP Emarsys 2023 Customer Loyalty Index found a 14% drop in the number of U.S.-based consumers who considered themselves loyal to one or more brands.

Those numbers might seem alarming at first glance, but they don't mean that loyalty is going away altogether. Today's customers are looking for personalization, speed and convenience, and as technologies like AI continue to be leveraged to enhance the customer experience, this represents an opportunity for brands willing to put in the work to swim against the tide.

So today on Questions for now, we'll ask: What does customer loyalty look like in the age of AI?

Welcome to Questions for now, a podcast from TELUS International where we ask today's big questions in digital customer experience. I'm Robert Zirk.

Robert Zirk: Before we get to our big question, we need to start by clarifying that when we're referencing loyalty, we don't mean "loyalty programs" like frequent flyer miles or a freebie after a certain number of purchases. That's a distinction one of our expert guests was keen to emphasize.

Shep Hyken is a keynote speaker, author, host of the Amazing Business Radio podcast and customer experience expert with more than four decades of experience in the field. He views loyalty programs more like incentivized marketing programs. They can be a great tactic to deploy as part of your overall marketing strategy, but shouldn't be confused with the overall concept of customer loyalty.

Shep Hyken: What it really drives, and I love this, is repeat business. Now, my question to the people that do these types of programs is simply this: if we took away the perks and the points, are we strong enough in the experience to make customers still want to do business with us? That's true loyalty.

Robert Zirk: In his book, I'll Be Back: How to Get Customers to Come Back Again and Again, Shep dives deep into the concepts of customer loyalty and retention, and clarifies the difference between repeat customers and loyal customers.

Shep Hyken: Sometimes we think customers are loyal to us because they keep doing business with us, but sometimes it's just easier to do business with us than switch to a different vendor. Sometimes it's, you feel like, "Eh, these sticky solutions make me want to stay. Even though I'm experiencing frustration, I still stay."

So one of the things we want to find out is why does a customer keep coming back? Is it because, if we're just, say, a retail location, is it because I'm closer than my competitor? What happens if a competitor moves one mile closer to my customer or even just a quarter of a mile? Does that mean I'm going to lose the customer because that customer was more interested in convenience? Then they were my store, I just happened to be the more convenient store at the time.

What about price? We advertise low prices. Does that mean the customer is going to go wherever the lowest price is? If that's the case, they're loyal to the price, not the business. Maybe it's somebody inside our business. This happens, especially in the B2B world, where an inside sales rep decides to move to another company and in the process may end up taking customers with them because it turns out that the customers love the rep and it just happens to be where they were working.

So all of these factors need to be considered to understand: why does a customer keep coming back? And are they truly loyal or are they coming back for other reasons?

Robert Zirk: Shep challenges leaders to think about customer loyalty as something that's built one interaction at a time.

Shep Hyken: I did a keynote speech for an organization and we talked about loyalty and I said, "Here's the way I want you to think about it. Think about: 'What am I doing right now as I interact with this customer?'"

At this moment, as the customer interacts with us in any way that they do, to ensure that the next time they do what it is that we sell, they're going to come back and want it from us because of the experience we're giving them right now.

If it's people to people, are we doing all the things that are expected? Are we showing empathy, concern? Are we supportive? Is it an easy experience? Was it easy to reach a person? Was it easy to get an answer? Are the self service options intuitive? Is AI being used to deflect human-to-human interaction, or is it used to support and augment the interaction?

All of these things go toward creating an experience that makes the customer want to come back.

Robert Zirk: In a TELUS International survey, 62% of US-based consumers said if they had to choose between the two, they would prefer a more personalized customer experience over one that takes less time. Furthermore, 55% of respondents said that nothing excuses a bad customer experience.

And while it's important to consider the questions Shep raised from a business perspective, it's also valuable to take a step back and look at how your customers think about loyalty.

To do that, I spoke with Colin Shaw, who's dedicated the last 22 years to helping leaders and brands improve their customer experience. He's the author of seven books, co-host of The Intuitive Customer podcast and among the top 150 business influencers on LinkedIn.

To demonstrate his thesis on loyalty, Colin has a question for you:

Colin Shaw: Who in your life are you loyal to?

Robert Zirk: Consider anything and anyone in your life. Take a second... Okay. Did any of your answers include your partner, family or friends?

Colin Shaw: Absolutely. And that's what everybody answers. Everybody answers family and friends and your family and friends can do things to you that you don't like and that bug you and annoy you, but you still love them and you're loyal to them.

Robert Zirk: So now, Colin has a follow-up question.

Colin Shaw: If I was to turn around and say, "I've got this really great family. They're a lot cheaper to run than your existing family. Would you fancy swapping?"

Robert Zirk: Which... you'd almost certainly say "Absolutely not."

Colin Shaw: And that's the point I'm trying to make is that loyalty, true loyalty, is an emotional attachment. You have an emotional attachment to your family and your friends and they can do things that you don't like. But it's not based upon price. It's not based upon the running costs of the family. All too often, businesses look at loyalty as a transactional thing when it's not.

Robert Zirk: In other words, it's important to remember that loyalty isn't built only on rational decisions, but also emotional connections that are formed through memories.

Colin Shaw: Loyalty means that I have dealt with this company in the past and I am now going to go back to this company. So, by definition, there is a memory. If there was no memory, you wouldn't be loyal. because you wouldn't know that you'd been there and therefore it would be the first time and it's like the first time every time you went to that company.

But you are making a decision based upon the last interaction or the first interaction that you're having with that company. So the really interesting question starts to become how our memory is formed.

Robert Zirk: Colin cited research from psychologists Barbara Fredrickson and Daniel Kahneman, who found that people tend to remember and assess life experiences based on two points of that experience. The first is the emotion they felt at the peak or the point of greatest intensity, regardless of whether it's good or bad. The second is the emotion they felt at the end of the experience. This concept is known as the Peak-end rule.

Colin Shaw: One of the phrases that Kahneman uses, which I love, and this is probably one of the biggest things I've learned over the last 10 years, is we don't choose between experiences, we choose between the memory of an experience. Okay, so it's a subtle difference.

So if I was to say to you, "Okay, I'm coming into town, tell me a restaurant I can go to." You would then say, "Oh yeah, go to so and so." And you're basing that upon a memory. So again, memories become really important. and therefore, the peak-end rule becomes really important.

Now, let me now apply that thinking to customer experience. What that says to me is: where is the peak emotion that your customer is feeling in your current experience? And what again is the end emotion that your customer is feeling currently today? And is that what you want them to feel? Because again, most organizations won't be able to answer that question.

And what you should be able to do is you should be able to design an experience that evokes the emotions that you're trying to evoke. I can't just say to you "Hey, right now, be happy. So let's just create happiness." Happiness is through an evolution of feeling some of those other emotions like trust and cared for and valued.

So when you think about someone who feels that, if I feel cared for, then typically things like: they respected me, they spent time with me, they went out of their way to do things for me, okay?

Now, just simply put that into the business context. If you want your customers to feel cared for, you need to spend time with them. You need to respect them. You need to go out your way for those customers. And if you do that, they will feel cared for. And if they feel cared for, that increases value and that goes towards making a customer feel much more loyalty because loyalty is an emotional attachment.

Robert Zirk: And Shep noted that CX leaders don't need to overthink the process. Loyalty can be built on small improvements that create a better and more consistent experience.

Shep Hyken: If you can create an experience that consistently and predictably is the tiniest bit better than average, or a hundred percent of the time meets the customer's expectations, they won't want to take a chance of doing business anywhere else.

Why? You know what? "They're always, whenever I call, they're always so knowledgeable. They're always so helpful. Even if there's a problem, I know I can always count on them." So you've got this word "always" followed by something you want the customer to be saying about you. And "always" means it is consistent and predictable.

It's like Amazon. How much true interaction do we have with Amazon? It's totally self service. So we're interacting with a computer. Yet, they create this incredible amount of comfort and convenience and confidence because the moment I place the order, boom, I get an email. Your order's placed. Next, your order's been shipped. Here's tracking information. Next, here's a picture of the box outside of your porch. They give us this great communication in addition to this digital experience that just makes it so comfortable and confident that things are happening the way they're supposed to.

So this is what companies need to be thinking about. They don't need to be Amazon. They don't need to be big brand, small brand, it makes no difference. What they need to do is understand what their customers want and expect and deliver on those expectations because nobody can argue with "They always meet my expectation." Why would I want to do business anywhere else?

Robert Zirk: Shep shared a personal story involving Costco that highlights exactly how brands can set themselves apart from competitors by setting expectations and consistently meeting them, which he illustrated with a statistic from his 2023 Achieving Customer Amazement study.

Shep Hyken: Half of American consumers, actually 51 percent compared to last year, it was 48%. Half of American consumers felt customer service was more important than price. Specifically Costco. I can speak from experience. I love my Costco membership. And we bought carpet from Costco and had our whole home carpeted with one of their vendors.

And we got the price and I said this seems a little bit higher than what I thought it was going to be. And I looked at competitors and sure enough, it was a tiny bit higher, not much higher. I thought I was going to get this incredible discount by doing business with Costco. Here's what the vendor said to me.

"On this particular item, we'll be happy to price match. That's not an issue, but we're not going to be lower. We can't afford to be lower, but I'll tell you why you'll want to do business with us: the Costco guarantee. Put that carpet in. A month later, if you don't like the color, you don't like the shade, something's bothering you, we will rip the whole thing out and replace it." Wow. Okay. That's the Costco guarantee.

Robert Zirk: I asked Colin, as AI plays an increasingly important role in CX, how is customer loyalty changing?

Colin Shaw: The reality is, the human being, the customer, is not changing. The way that you deal with that customer through AI is the thing that's changing. So it's a bit like when people talk about social media. All that social media is doing is providing the platform for already social animals, us human beings, to be able to communicate through that means.

What you're looking to do is you're looking to turn around and say, "We want our customers to feel this at the end of that experience. So how are we going to design it?"

And lots of organizations don't have that amount of data on customer emotions to be able to design their experience. And the other issue then becomes do the CX professionals even understand the result that AI will be able to provide?

Robert Zirk: Colin compared this to the depiction of AI in Douglas Adams' s book, The Hitchhiker's Guide to the Galaxy.

Colin Shaw: One of the things that it talked about was that there was this planet and they had a big AI machine and the population wanted to know what the answer to life, the universe and everything was.

And this computer called Deep Thought went away for seven and a half million years to process what's the answer to life, the universe and everything.

And it came back with the answer. And the answer is 42. And clearly, that's ridiculous. It's not ridiculous. What it was really saying is, you don't really even understand the question. And that's my fear, with people with AI implementations now, it's going to come back with answers that CX professionals don't understand the answer to, yeah? So it's either not going to come back with the right answer because it hasn't been trained well enough because it hasn't got the emotional data, or it will have that data and it's going to come back with the answer, the equivalent of 42. And people are going to go "I don't understand what I'm meant to do with that."

Robert Zirk: One of the strengths of AI is pattern recognition, and Colin shared an example of how this might be applied to behavioral patterns that don't factor in the emotional aspect of decisions.

Colin Shaw: Disney know when they ask their customers what they want to eat at a theme park, Disney know that people say they'd like to have an option of a salad. Disney also know that people don't eat salads at theme parks, they eat hot dogs and hamburgers. So what customers tell you and what customers do can be very different.

So the issue becomes that, in my view, there's going to be a big issue or a lack of understanding about customer behavior at that behavioral science level to be able to interpret what the customers are actually doing.

And let me give you two examples of that. So there was a telecoms company in the States that asked, through its AI, we want to identify customers that are leaving us. AI went away and came back with a list of "Here's all the customers that are going to leave us." Then they asked it, why are they going to leave? It couldn't answer that, because it hadn't been trained on how to understand that.

Robert Zirk: According to a Zendesk study, only three out of 10 CX leaders are using AI or machine learning to predict customer interactions. So there are opportunities to get ahead of the competition. And Colin demonstrated examples of how AI can provide proactive experiences based on behavioral data.

Colin Shaw: Just think of Google when you type into Google something to search for. I've got a Jeep, and I was trying to search for, in England I would call it a towing hook, in the States it's called a hitch. Okay, but when I type "towing Jeep", Google starts to put words in there of what it thinks that I'm looking for. And that's based around one really important word, which is intent. So what is my intent? What am I really searching for? Because I may not be expressing myself very well. But it's trying to help me go, "Look, typically this is what people are looking for." So it's understanding human behavior at that level.

And then from a CX professional perspective, it's being able to understand what is happening and to get into a more positive perspective, how can we use behavioral science to design our experience? How can we predict how our customers are feeling?

Robert Zirk: Research from McKinsey indicates 71% of consumers count on brands to deliver personalized customer experiences. And when that doesn't happen, 76% report feeling frustrated, placing the brand they're interacting with at risk of losing future business to a competitor.

Predictive AI can play an important role in delivering a more personalized experience, and Shep shared an anecdote from a demonstration he saw that showed how predictive AI could support agents in a contact center environment.

Shep Hyken: Not only did it feed the agent information because the agent knows how to properly ask the question, they were typing in what the customer was asking and getting a good answer back, where sometimes customers don't do so well typing in their answers into a chatbot, and getting clarity to the bot so that they completely understand. Again, this agent now can reflect that information the way they need to interpret it and give it back to the customer.

But here's what else that AI was doing. By the way, and I'm going to paraphrase, this customer is the same as 3,000 other customers that have called in and asked the same question, have bought the same products, have the exact same buying patterns. So whether this customer knows it or not, this is the next question they are going to ask. So why don't you answer it for them so they don't have to call back?

By the way, this customer doesn't realize they are going to be buying another product from us. They just don't know it yet. Why don't you share with them what it is so they don't have to call back and take the time filling out an order form?

So it is able to predict with uncanny accuracy, what customer behavior is going to be, what customer future purchases are going to look like. And the data that we're getting is going to allow for these types of one on one interactions to feel completely hyper personalized. And I love that. Personalization is going to be more powerful and better than ever. And we need to do it the right way so the customer isn't creeped out.

Robert Zirk: Colin has noticed some organizations implement AI in silos within different teams. And he cautioned that, to best serve customers, AI needs to be holistically deployed across the organization. He shared an anecdote of the early internet, where different departments of the same company would often have their own web pages that were distinct from one another rather than one unified cohesive web presence.

Colin Shaw: I think there is a danger that things are going to be implemented in a siloed perspective. And therefore it needs that more holistic view answering those questions, what's the experience that we're trying to deliver to our customers and what emotions are we trying to evoke?

Robert Zirk: And then, CX leaders will need to decide the right tactic for the right point in the customer journey.

Colin Shaw: So let's go to our example where the delivery is late and we can get AI to send out some messages, etc. That may be fine, but there may be a group of high value customers that a phone call is going to be best, yeah? So where is that? And with what group of customers is that?

We need to determine that and that then goes back to the beginning part of our conversation about loyalty and emotional attachment and understanding which emotions are driving value and where do we, therefore, deploy that? My worry is that, as with everything, it gets driven by cost and people start to deploy AI too much into areas that should be still being dealt with by people, and therefore destroy value, so defining the areas where the experience drives most value and determining how to approach those.

Robert Zirk: And there isn't a one size fits all answer. Colin reinforced the importance of understanding context and how it connects to customer preferences.

Colin Shaw: There are a number of things where I am happy to use chat or whatever else to overcome a problem and I don't want to speak to a human. But there are also different times when I definitely do want to speak to a human. And that again goes back to understanding customers. It's like that Disney example. What customers say and what customers do may be different. So, I may turn around and say, "Yeah, actually, I'm fine just dealing on chat." Yeah, that may apply 75 percent of the time, but actually this 25 percent of the time, it's really important that I speak to a human being. And actually, I am a high value customer and therefore you should be doing that, because if you do, that will keep me loyal because I feel that you are responding to me, and that you understand me, and if you keep shoving me down this loop of just dealing with chat and having these messages come up that I can't interpret, then you're gonna lose me.

Robert Zirk: Shep cautions that AI can become a "loyalty killer" if it isn't properly deployed. Instead, he emphasizes that the optimal role for AI should be to enhance human interactions.

Shep Hyken: So if AI is going to make a recommendation, then it should be one that the company is comfortable making. Okay. However, AI is also smart enough to realize, "Wow, this is something that I need to pass on to a human being." And it should automatically flip. And if it's in a chat bot, it should automatically flip to a live chat with a live person. And that way we can get empathy and sympathy and talk about alternatives, something that might not be quite as cut and dry as what that AI is typically going to do.

Robert Zirk: Shep shared how automated interactions, with an option to receive support from human team members when necessary, can create seamless and frustration-free experiences for customers.

Shep Hyken: The other day I was on a panel and I didn't want to correct the person, who was a very, high level executive, when they said, "Amazon customer service? You can't even get a person on the phone."

That's not true! You absolutely can. But what Amazon does is brilliant. And, by the way, this is not expensive to do anymore. It can be done even with very small companies. It's a minor investment. If I've got a problem on Amazon, I'm going to get to customer support and it's going to start asking me questions. And there will be a point where it says, "If you need to talk to somebody, click here." But I can keep going if I don't want to. And by the way, I'm oversimplifying this, but essentially, I keep going down the path until I do need to talk to somebody. They do not give me a phone number. What they do is ask me for my phone number.

And I put it in there and I hit enter, or submit, or whatever the word is, and with almost, I'd say it's almost instantaneous, my phone is ringing. I'm not waiting 30 minutes. I'm not waiting 30 seconds. The phone is ringing and it says, "Please hold for the next available Amazon rep." And it's usually within seconds that I get somebody who now is going to ask me questions based on what I've already been filling out. I don't have to start over again. It is an omnichannel experience, but it's allowing me to move to a human-to-human experience from the digital. And this is where companies make the mistake: they deflect, not recognizing that once in a while, somebody's going to say, "Hey, I need to talk to somebody."

Robert Zirk: And AI can be used to streamline processes that would normally be tedious for customers.

Shep Hyken: If you've gone to a doctor's office and they tell you, "Hey, before you get here, we want you to go online and fill out all the forms." It frustrates me that I have to put my name, my address, and social security, insurance card information more than one time. I shouldn't have to do it. This is such a simple process, right? Ask me once and then later on ask me to repeat it again with a check mark rather than having to type the whole thing out. Or just auto populate it for me.

There is such a simple example of how you can increase the experience to still be compliant, get the information to the provider however they need it and yet make it easy on the customer. And I think that's what all of this is headed toward is how can we make this as easy and frictionless for the customer as possible?

Robert Zirk: As you ponder that question in relation to AI, it's important not to lose sight of the human element in your customer experience. After all, your customers are human, so your experiences need to be designed in a way that reflects how they interact with technology.

Shep highlighted how AI can make customer support more accessible, which he details in his book, The Convenience Revolution.

Shep Hyken: If I call you at 10 o'clock at night, I bought a cool thing at the store and I'm building it, and I call customer support because it can't seem to figure out how this works, and I get the message "we're only available from 7am till 6pm, Monday through Friday." We can now, with chatbots and ChatGPT and generative AI and all the tools that we've been talking about, we can create almost 24/7 support.

And if we can't answer the question using these technologies, at that point, we might say, "We've tried. Here's what we need to do. We're going to take your information and somebody is going to call you tomorrow morning between these hours and these hours, unless it's more convenient, put in the time that you want..." and you're able to punch that in, "...and we'll get somebody to get back to you." Again, it might not be the most convenient solution at that point, but at least they're giving you options.

Robert Zirk: We've spoken about how memories are formed and the roles those memories play in shaping customer sentiment. Today, with the advent of AI, Colin envisions that organizations won't just map the customer journey — they'll map the customer memory as well.

Colin Shaw: So think about AI being used to map the interactions that they've had with you for the last five years And I'm now assuming you've got an all encompassing AI across all the channels and it can understand all those touch points.

But think about, knowing that this customer three years ago had a problem with their delivery and this is what they did, and therefore being able to predict that we've just had the same issue, so that customer is likely to act in the same type of way.

So effectively, you're mapping that customer's memory. And what we know from the Kahneman work, again, is that the memories that are the most vivid to us are the memories that have got the most intense emotions. If I was talking to you about some either happy event or some tragic event in your life, you can remember exactly where you are, what you were doing, how you feel. And that is because those are intense emotions, and those intense emotions burn more of a deeper memory into you.

Now again, let's apply that in the customer circumstance. If a customer has really got upset with you about something, imagine now that those memories are evoking some really intense emotions. Then, again, AI will be able to go, "This was an intense emotion, therefore that's going to be a larger memory," et cetera.

How many times currently do you contact a company, and you have to repeat to them 27 times about all the problems that you've had because they haven't passed on the details and, you know, the person who is dealing with you is really happy and they're the third person that you've spoken to about this, and they start off the conversation in a really bright mood, not taking into account the fact that you're really frustrated that you've been on the phone for the last two hours trying to deal with this.

Robert Zirk: And Shep shared an example of how automation and AI were deployed proactively to create a positive experience out of an issue that otherwise would have been negative across the board.

Shep Hyken: I'll share with you something. I had a wonderful lost luggage experience. How's that to the set?! (laughter)

Robert Zirk: That is a sentence I don't think I've ever heard before. (laughter)

Shep Hyken: I know, I know. And this is what happened. American Airlines lost my luggage. I land in San Francisco and I'm on the beginning of a very long two plus week trip, so I did have to check my bag. I walk off the plane and I received a text message from American Airlines. It's automated, but it says, "We sincerely apologize" - and I'm paraphrasing - "but your luggage is not going to be delivered" when I got off the plane. "However, it is going to be delivered on a later flight. Please, put in your address and it will be to you by six o'clock tonight," or whatever time it was.

I thought, "Wow." Two things, three things are happening here. Number one, they're informing me of a problem proactively, very powerful. Number two, I now don't have to go down to the luggage area, wait to see if it's going to come off the carousel before I walk into the office next to baggage claim. All I need to do is give them the address where I'm going. And as soon as I did, I got a confirmation back. And then, about the time, I wasn't expecting, it actually came early. I received a message.

"Your luggage is out for delivery. It should be there within," whatever the timeframe was. And I thought, "Wow, now that is an automated way of handling a real moment of misery."

Even in my experience that I had with American Airlines, there was a phone number for me to call if there was a problem with the way the system was working.

And while nobody's ever going to be happy with it, how can they be unhappy with the effort that American Airlines made to create a system that was going to hopefully get me what I needed, right? There's a great case study of automation and AI doing its thing.

Robert Zirk: To wrap up, Colin highlights the opportunity AI can provide as a tool to shape positive, loyalty-building customer experiences.

Colin Shaw: It's got to start off at the beginning by thinking it through and making sure you're gathering all the right data across the silos to be able to predict and then provide a proactive experience, I think that's the key.

Robert Zirk: And Shep reiterated that customer loyalty is a process, not a goal.

Shep Hyken: This is all about philosophy and culture. Recognize that loyalty isn't about a lifetime. It's about the next time, every time. So whatever we're doing, be it automated responses or AI-generated support or human-to-human — ensure that you're thinking about the next time every time, because ultimately, if you do it right, it will turn into a lifetime.

Robert Zirk: Thank you so much to Shep Hyken and Colin Shaw for joining me and sharing their insights today. And thank you for listening to Questions for now, a TELUS International podcast.

If you're looking for an experienced partner with end-to-end data capabilities that can work with your brand to build customer loyalty in the age of AI, TELUS International is here to help. Visit telusinternational.com to learn more.

And for more expert insights that answer today's big questions in digital customer experience, be sure to follow Questions for now on your podcast, player of choice to get the latest episodes as soon as they're released.

I'm Robert Zirk, and until next time, that's all... for now.