Click to read the article published in Money Wise in the April 2025 edition.

Can AI Revolutionise Customer Experience and Increase Loyalty & Growth? It all depends on You

Why does it depend on you? 

Every time a new technology or channel is available, businesses immediately grab it with both hands with gusto. Historically, this includes call centres, IVRs, online services, chatbots, ATM’s, etc.  The key question is – to achieve what end? Typically, businesses use these channels to reduce costs and improve efficiencies. Not a bad objective in the short term. However, a short-term perspective around short-term cost cutting gains can have a huge negative impact on the customer experience, customer relationship and customer lifetime value (CLV).

Technology Adoption By Banking In Australia

A case to illustrate the point is banking as a category. Decades ago, banking was a personal experience. Customers walked into their local branches, greeted familiar faces and handled their transactions with people they trusted, just like they did at the post office. There was a sense of community and banking relationships were built on trust and familiarity.

Then came the call centre.

Banks saw it as a cost-saving revolution. Fewer branches meant lower operational costs, and with call centres, transactions could be handled more efficiently over the phone. But there was one major oversight. Customer relationships weren’t just about efficiency. While call centres measured success by call duration and resolution speed, they missed a crucial element: human connection. Unlike branch staff who could cross-sell and build relationships, call centre agents were instructed to focus purely on transactional efficiency.

Next came phone banking, which allowed customers to complete transactions remotely. This was followed by internet banking, a breakthrough that made banking even more convenient. Banks embraced digital channels to reduce costs, assuming that customers cared only about efficiency. But in the process, they stripped away the very thing that made customers loyal – Human Relationships.

Over time, banks realised the consequences of their mistake. When customers needed a home loan, a term deposit or any high-value financial product, they no longer had a strong bond with their bank. The human relationship was replaced with a transactional relationship. So, instead of remaining loyal with one bank for high-ticket items such as Home Loans, Term Deposits and Investment accounts, they shopped around for the best deal. This cost-cutting mindset had turned customers into mere transactions, and in doing so, banks had inadvertently weakened their most valuable asset: Trust. This came full circle when banks started increasing the number of branches and even introducing concierges to greet you at the entrance to make the branch experience even better.

This shift highlights a broader challenge not just for banks, but for every business today.

 

Is Adopting The Next Shiny Thing Bad?

It is natural that businesses are drawn to the next shiny thing in technology and operational efficiency. No wonder they often fall for the trap of prioritising short-term gains like cost savings, rather than long-term impact, which is CX and its resultant customer loyalty, word-of-mouth and overall Customer Lifetime Value.

In our studies we have found that the transfer of emotions from staff to customers is often the driver of loyalty, referrals and, therefore, growth.

The Power of AI in Customer Experience

Artificial Intelligence (AI) has transformed customer experience by providing businesses with instant responses, hyper-personalisation and seamless transactions. Yet, while AI-driven solutions like chatbots and predictive analytics have made interactions faster and more efficient, the crucial element of human connection is often lost. Striking the right balance between automation and emotional engagement is the true challenge businesses must overcome. But how?

AI-driven systems can analyse vast amounts of customer data in real time, allowing businesses to predict needs before customers even voice them. From personalised recommendations on e-commerce platforms to intelligent voice assistants resolving queries, AI enhances efficiency and convenience. With machine learning algorithms continuously evolving, companies can offer smoother, more intuitive experiences that boost customer satisfaction. But are businesses using AI to enhance customer relationships or merely as a cost-cutting tool?

AI-driven automation can, and does, reduce overheads. But if it removes the human touch, companies risk alienating their customers. Brands that focus on Customer Lifetime Value (CLV) rather than just efficiency will use AI not just to automate, but to create richer, more meaningful engagements.

The Cost of Ignoring Customer Lifetime Value

If I have to give you a simple equation for Customer Lifetime Value, it would be:

Customer Lifetime Value = (Retention + Propensity to buy additional products + Likelihood to refer you to others) – Less Cost to serve.

Let us look at each aspect.

  • Customer Retention is a direct driver of Lifetime Value.
    • For instance, if a company retains 95% of its customers, their average lifetime value extends beyond 10 years. But if retention drops to 80%, lifetime value shrinks to just five years. As you can imagine, this is a massive difference. Businesses often focus on acquiring new customers while failing to plug the leaks in their existing customer base. This leaking bucket effect means that while new sales flow in, customers are exiting just as quickly due to a poor experience. Prioritising cost-cutting over CX leads to an endless cycle of churn, ultimately eroding profitability.
  • Propensity to buy additional products/services
    • Most businesses have more than one product on offer. According to Engaged Strategy’s studies, engaged customers are 50% more likely to take up additional products.
  • Referral Economics
    • Based on Engaged Strategy’s research, engaged customers are 2X more likely to recommend you to others. Referrals as a primary source of sale makes up for 30% to 50% of overall sales with some of our clients.
  • Less Cost To Serve
    • It goes without saying that irate customers complain more often, and many times these complaints are escalated, chewing up a lot of internal resource.

Businesses must make economic based decisions but based on a full Customer Lifetime Value assessment not just short-term cost cutting. 

Relational vs. Transactional CX: Where AI Fits In

AI is revolutionising customer experience, but is it truly enhancing CX or just making transactions more efficient?

There is no doubt that AI excels at transactional customer experience by providing instant solutions, reducing wait times and automating responses. However, when it comes to relational CX where brands need to build trust, show empathy and build deep customer connections, AI still struggles to deliver on this.

Emotional intelligence remains a uniquely human trait. Businesses that fail to recognise this often risk turning their customer interactions into cold, mechanical exchanges. The key is to use AI as an enabler rather than a replacement for meaningful human engagement.

Injecting Emotion into AI-driven CX

While a seamless transactional and relational connect must be built into your business’ CX and operational practices, I personally experienced how AI can add an emotional touch in unexpected ways.

For instance, on New Year’s Eve, Spotify surprised me by simulating a call from the artist of my most-listened-to song where the artist’s video popped up as a call and a thank you message directly from the artist was played for me. It was a small gesture, but it made me feel valued as a customer. Similarly, when I called Disney’s customer service, instead of the usual dull IVR, their AI asked me, “Who is your favourite Disney character?” Instantly, I was engaged, smiling as I answered with every question the AI asked me. These experiences proved that AI, when used thoughtfully, can enhance customer interactions by making them more personalised and emotionally resonant.

While this is well-executed in the entertainment industry, how does one use technology to deliver such personalised and emotional experiences in B2B?

Hence, it is also critical to be cognizant that customers don’t just remember transactions; they remember how brands make them feel. And AI’s biggest challenge is delivering Emotion that Matters. While AI can analyse sentiments in text or voice, it lacks genuine empathy. This is why brands need to:

  • humanise AI interactions by using it for operational assistance rather than replacing human interaction;
  • ensuring seamless transitions between AI and human agents; and,
  • leveraging it to enhance emotional intelligence, not just to automate responses.
  • Hence, if you are in a business that values customer lifetime, then here are three core ways to integrate AI into the customer experience your business offers:
  • Leverage AI as an Employee Enabler: AI, for instance, can be used to retrieve customer data instantly, improving efficiency while allowing human representatives to focus on empathy-driven interactions.
  • Proactive Customer Support: AI can anticipate common issues and provide businesses with predictive solutions, ensuring clients feel supported before they even reach out.
  • Hyper-personalised B2B Communications: AI can tailor product recommendations and service offerings based on a client’s past interactions, making every touchpoint more relevant.

AI + Human Synergy = The Future of CX

AI can better customer experience only when used correctly. The most successful brands won’t replace the human touch with AI but will merge AI’s efficiency with human warmth. The future lies in:

  • AI-powered hyper-personalisation where customer needs are predicted even before customers ask.
  • Emotionally intelligent AI that augments human interactions rather than replacing them.
  • A hybrid model where AI handles routine tasks, freeing humans to build deeper relationships.

AI can either make Customer Experience cold and mechanical, or seamless and engaging. It all depends on the intent behind its use. So, is your business just cutting costs or are you enhancing customer value for the long run?

NPS®, Net Promoter® and Net Promoter Score® are registered trademarks of NICE Satmetrix Systems, Inc., Bain & Company and Fred Reichheld.