Dive Brief:
- One in five loyalty programs will only offer fully personalized, member‑specific perks instead of a universal list of benefits by 2030, according to a Gartner prediction from last month.
- AI will enable this mass personalization by helping brands dig through behavioral data, product data, and other information to create appropriate offers, according to Brad Jashinsky, director analyst at Gartner.
- “The existing loyalty framework is not providing the best experience for the customer, and it's also not providing the most profitable program for the brands,” Jashinsky told CX Dive. “I think the huge benefit of AI technology is going to be further customizing those benefits, instead of limiting them to however many tiers there might be.”
Dive Insight:
Done right, personalized loyalty programs can save money for companies while creating compelling offers for customers — but brands have plenty of work ahead to strike the correct balance.
CX and marketing teams need to break down data silos, adjust operational practices and iterate on loyalty experiments to make the most of AI-powered personalization, according to Jashinsky.
Brands with the expertise and resources to explore AI-powered loyalty should start building their framework now, according to Jashinsky. Major companies that don’t start exploring the potential of mass personalization now risk being left behind by their peers. Some businesses are already starting to experiment.
“Instead of having specific benefits and specific tiers and ‘you save 5%,’ all of that's going to go into the background,” Jashinsky told CX Dive.
The Home Depot is one example of a company on the forefront of personalized loyalty, according to Jashinsky. The retailer’s Pro Xtra loyalty program, which is aimed at professional contractors, doesn’t promise blanket discounts. Instead, it creates discounts and promotions based on purchase behavior.
Pro Xtra still has the hallmarks of a traditional loyalty program, including discrete tiers and universal benefits like project planning tools, which makes it “a really nice combination of both” the traditional and future approaches to loyalty, Jashinsky said.
Once shopper-specific benefits become more common, businesses will need to figure out how to personalize them in a customer-friendly way, Jashinsky said.
For instance, a company can lower the free shipping threshold for a customer near a distribution center, but that perk may seem unfair to a customer who lives further away and has a higher threshold.
While Gartner believes AI-powered personalization is coming, not every organization should rush ahead deployments. Small- to medium-sized companies likely want a strong foundation for their strategy before the technology is worth the investment.
“We're cautioning our clients about ensuring that they're getting the fundamentals right before jumping into AI,” Jashinsky said. “We're really trying to help them figure out the why.”
