AI-DRIVEN PERSONALIZATION AND ITS IMPACT ON CUSTOMER LOYALTY IN DIGITAL PLATFORMS: THE MODERATING ROLE OF PRIVACY CONCERNS

Abstract

The rapid advancement of digital technologies has transformed the way organizations interact with consumers, with increasing emphasis on delivering personalized experiences through artificial intelligence. While such approaches offer significant benefits in enhancing user engagement and loyalty, they also raise concerns regarding data privacy and ethical use of information. This study aims to examine the impact of AI-driven personalization on customer loyalty in digital platforms, with a particular focus on the moderating role of privacy concerns. A quantitative, cross-sectional research design was employed, with data collected from users of digital platforms through a structured questionnaire. The data were analyzed using SPSS and SmartPLS 4, applying Partial Least Squares Structural Equation Modeling to test the proposed relationships. The findings reveal that AI-driven personalization has a significant positive effect on customer loyalty, confirming its role in enhancing user engagement and relational outcomes. However, the results also indicate that privacy concerns negatively moderate this relationship, suggesting that higher levels of concern weaken the effectiveness of personalization strategies. These findings highlight the importance of balancing technological innovation with ethical data practices to ensure sustainable customer relationships. The study contributes to existing literature by providing a nuanced understanding of the conditional effects of personalization and offers practical insights for organizations seeking to optimize digital strategies while maintaining consumer trust.