The AI boom can’t beat customer loyalty

Forget the AI frenzy: small businesses now say customer relationships are more important for growth than new technologies, as research suggests repeat customers had the biggest impact on success last year.

Startups asked 546 small businesses about the factors that led to them “thriving” overall in 2023. The most popular response was strong customer relationships, as chosen by 54% of those surveyed. 

Having a talented and motivated workforce (40%) came in as the next most important factor, further solidifying the focus on human-centric strategies.

Product development and innovation, often associated with AI, was listed as the sixth most popular choice with 29% of votes. The results signal that, despite its growing popularity with tech giants, AI has yet to become a fundamental business tool.

Loyal customers top business wishlist for 2024

Tight customer relationships was the clear favourite amongst small business respondents, ranking as the number one factor that attributed to business success in 2024.

The results show that servicing customer needs beats out effective marketing and brand visibility as the most valuable business strategy, confirming that satisfied buyers have a bigger lifetime value than new sales leads and acquisitions in customer service.

Strong customer relationships also appear to give businesses a financial edge over competitors. Interestingly, regular customers were shown to have a more positive impact on business performance than cost-cutting measures (21%) or gaining funding (22%).

The results come despite a cost of living crisis threatening consumer confidence. They suggest that customers are still choosing to spend money with firms that are taking steps to improve their customer retention, such as introducing loyalty schemes and programs.

Human touch not yet replaceable

While investment in AI is still seen to be important, Startups’ research indicates companies understand new products need a foundation of strong customer relationships and a capable workforce to thrive.

Building trust and rapport with customers requires human empathy and emotional intelligence, two areas where AI still struggles. Indeed, research shows that an AI trust gap still persists in the UK.

The impact of AI on business communication is still yet to be fully understood. Until the tech is fully embraced by the wider public, business leaders shouldn’t be too quick to write off more traditional methods of B2C contact such as contact centres and telephone calls.

AI brings positive outlook to UK businesses

Despite the findings, Startups’ data also found that businesses that firms who are preparing to embrace AI this year feel better positioned for future growth.

According to the results, a mere 2% of those expecting a high level of AI disruption said they feel pessimistic about their growth prospects.

Meanwhile, 32% of those who anticipate no disruption display negative sentiment towards the future, suggesting that the business landscape could be about to shift rapidly as UK customers increasingly adjust to the rapid emergence of AI startups and software this year.