How PetSmart is using AI in its revamped loyalty program

With its new rewards system in place, PetSmart saw a 22% increase in offer activation in 2024, the company told Modern Retail. What’s more, members who activated offers spent “significantly more,” Bradley Breuer, vp of loyalty and CRM for PetSmart, told Modern Retail. This is important for PetSmart’s business, as the retailer traces more than 90% of transactions back to a Treat Rewards account.

PetSmart revamped Treat Rewards last year to “simplify the program and reward the most loyal customers,” Breuer explained. While the old program was “one size fits all,” the new program has three different tiers (“member,” “bestie” and “VIPP,” or “very important pet parent”), depending on how much members spend in a year. Members earn points for purchases and services and can cash them in for extra discounts. Members also get perks like free products from PetSmart’s partners like Shutterfly. The program has 75 million members today, up from 67 million before the relaunch.

Breuer explained that while PetSmart has always tried to personalize deals, it’s doing so to a greater extent now with AI. The retailer uses “AI Decisioning,” a machine-learning model from Hightouch, to tailor specific messages to specific customers at specific times. For instance, the AI analyzes what PetSmart customers have bought in the past, like dog food, and then sends them deals on related products. The tool also analyzes what people aren’t buying. For example, if someone comes in and gets their dog groomed at a PetSmart, but doesn’t buy anything else, the AI model looks for ways to convince the customer to come back to PetSmart for other needs.

“A lot of times a customer will give us a signal that they have a dog, and then we look and we’re like, ‘Why aren’t they buying dog food from us? Why are they always clicking on dog in the email navigation but never buying dog food from us?'” Breuer said. “[AI] can help us serve up offers that make that dog purchase relevant to that customer and also deliver them a bunch of value along the way.”

AI has become a larger buzzword in retail, with companies using the technology for everything from answering customers’ questions to scanning produce. But Lin Dai, CEO of loyalty technology company Superlogic, told Modern Retail that AI is also “reshaping how brands approach loyalty.” “[They can] move beyond the outdated one-size-fits-all coupon strategy to truly understand what customers want and need,” he explained. Still, Dai said, “AI is only as good as the data behind it, and without the right insights, brands may risk coming off as intrusive rather than intuitive.”

PetSmart is still emphasizing the human aspect of its rewards program, even as it uses AI, Breuer said. For instance, two weeks ago was PetSmart Charities’ National Adoption Week, and anyone who adopted a pet at a PetSmart became a “VIPP,” thereby unlocking access to the highest tier of deals. “Adopting a pet is a really meaningful and emotional experience that you will remember forever, and we want to add onto that,” Breuer said.

Dai believes this is a good example of “emotional loyalty.” “Rewarding adopters isn’t just a nice touch — it’s a strategic move that turns pet parents into lifelong PetSmart loyalists,” he said. “Points and discounts can get a customer in the door, but purpose and connection keep them coming back.”

PetSmart also has 50,000 store associates, whom Pet Smart has found to be “the biggest lever” in growing its Treat Rewards membership, Breuer said. Associates walk the floor and help people activate offers based on what’s in their cart or what they’re thinking of purchasing.

Customers especially activated offers in the last few weeks, when PetSmart celebrated its first Treats Rewards Members Month since relaunching the program. Until April 6, PetSmart shoppers were able to access extra deals, such as “spend $50, get 5,000 points” and “get 2,500 points if you purchase both services and merchandise.” PetSmart’s Treats Rewards members activated more than 1 million offers during Member’s Month.

Compared to other sectors of retail, the pet market has been doing relatively well, analysts said. “Overall, the pet retail market is in better shape than many other sectors of discretionary retail,” Seth Basham, managing director of equity research at Wedbush Securities, told Modern Retail. He added that net pet adoptions are flat for dogs but slightly up for cats and that pet food inflation is muted.

Still, pet parents aren’t immune to economic challenges. Customers are still feeling the pinch, and many are pulling back on discretionary purchases within the pet category, Basham said. In a crowded environment with everyone from Chewy to Amazon, “offering value [via] price, loyalty program benefits and convenience is critical,” Basham explained.