Artificial Intelligence
How to Improve Customer Segmentation with AI

How to Improve Customer Segmentation with AI

February 20, 2019
4 min read

Accurate segmentation is one of the cornerstones of an effective marketing campaign. Segmenting or dividing your audience into groups means that you can target messages to customers with similar characteristics and needs.

This personalization means that marketing messages will be more relevant to the individual reading them. With greater relevance, response rates are likely to be significantly better than they would be for a single non-personalized campaign.

There are various market segmentation strategies that businesses can use. However, traditionally these tend to result in large, generic groups, rather than smaller more highly targeted groups.

For example, you might segment your customers based on their age, geographic location, or whether or not they’ve bought from you before. The level of segmentation you can achieve is limited to how well you understand your customers and the resources you have available to create different marketing campaigns for these segments.

Quick Takeaways:

  • AI lifts the limitations of traditional market segmentation by analyzing customer data to create more targeted segments.
  • It goes one step further by automatically adjusting campaigns to be more personalized for each segment.
  • AI also tweaks marketing campaigns for each segment by changing the variables involved.

The Advantages of Automatic AI-Driven Segmentation

Using artificial intelligence to segment your customers offers a number of advantages over traditional manual segmentation.

  • Removal of human bias (such as the assumption that video game players are young males – AI algorithms look at the data without any pre-assumptions to build a picture of who your customers reallyare)
  • Finds hidden patterns in data that a human marketer may be unable to spot
  • Automatic updating of segments in a rapidly changing market
  • Unlimited number and size of segments
  • Enables a higher level of personalization (Just look at the highly targeted t-shirt advertising you may have seen on Facebook for an example of this. Facebook collects so much data on its users that a segment targeting “mothers who listen to Iron Maiden and were born in August” is made possible.)
  • Needs little maintenance or human intervention
  • Highly scalable

Segmented marketing can improve your productivity and the effectiveness and ROI of your marketing campaigns overall. A report by email marketing software company Campaign Monitor found that there was a 760% increase in revenue from segmented campaigns.

Automatic Optimization of Marketing Campaigns for Different Segments

While AI can certainly help you to understand your audience better, dividing your customer base into smaller and smaller segments also comes with its own issues.

An increased amount of data enables you to create highly specific segments (a segment may be as small as one person) and send laser targeted marketing messages to each segment. But as the amount of data you collect and the number of groups you’re speaking to grows, the whole task becomes more complex.

Machine learning removes this complexity by automatically adjusting the marketing campaign to an individual segment and editing variables including:

  • Headlines
  • Email subject lines
  • Images
  • Copy
  • Colors
  • CTAs
  • Time of delivery

Each marketing asset may have several of these variables, with a number of different options for each. While the initial set of options is usually chosen by a human marketer (for example, selecting a few possible images or writing a set list of headlines), from this point on the process is hands-off and automatic.

Machine learning algorithms can then try out different combinations of these variable choices for each individual. The effectiveness of each variation can be measured based on customer behavior, and the landing page, email, or ad can be edited to suit the next user in real-time. In this way, your marketing assets will automatically optimize themselves to suit your individual segments, no matter how many you’re targeting or how complex they are.

Getting Started with Customer Segmentation

You’re probably already doing some form of manual segmentation in your marketing strategy. But if you’re intrigued by the potential of AI-powered segmentation and you don’t know where to start – don’t worry. More and more marketing software solutions are enhancing their offering with AI. You now have a lot of choices when it comes to finding a platform that suits your business.

For large businesses with a wide customer base that collect a lot of data, the market leaders have you covered. Salesforce Pardot and Adobe Marketo both offer their own suites of intelligence-driven tools.

It’s also possible to introduce AI segmentation into your marketing campaigns on a smaller scale. For example, you may want to experiment with AI in email marketing campaigns first and see what sort of segmentation it offers compared to your existing software.

Content marketing is another area where you can try out the power of AI in a more manageable way. Content marketing strategy platforms like NewsCred, and Turtl enable you to segment your audience so you can deliver the right content on the right channel at the right time, optimized for the greatest impact and ROI.

Even before you’ve chosen a platform to work with, you want to start thinking about exactly how you should segment your customer base. Some options include:

  • By traffic source (referral from other websites, from email campaigns, social media, paid ads, etc.)
  • New or returning customer or visitor
  • Past purchase behavior
  • Search behavior
  • Time spent on website or engagement with email campaigns
  • Viewed content
  • Viewing platform (mobile vs. desktop)
  • Location
  • Demographics
  • Average order value
  • Likes and preferences

There’s no one best way to segment your audience – it depends on the needs of your customers and the type of business you run. You may have to experiment with some different types of segmentation before you find the methods that work well for your business.

You also may not have access to the data you need to segment in all these different ways. If that is the case, you need to start thinking about how you can start collecting this data. For example, Facebook offers enhanced intelligence on their users, which includes interest and preferences based on pages they follow, posts they like, and even other websites they’ve visited.

By encouraging users to sign up as a member of your site or to your mailing list via their Facebook account, you’ll be given access to this valuable information.

This is just one example of how you can gain an enhanced understanding of your customers that will allow you to be more accurate in your segmentation and harness the power of AI-driven marketing platforms.

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Michael Brenner

Michael Brenner is an international keynote speaker, author of "Mean People Suck" and "The Content Formula", and Founder of Marketing Insider Group. Recognized as a Top Content Marketing expert and Digital Marketing Leader, Michael leverages his experience from roles in sales and marketing for global brands like SAP and Nielsen, as well as his leadership in leading teams and driving growth for thriving startups. Today, Michael delivers empowering keynotes on marketing and leadership, and facilitates actionable workshops on content marketing strategy. Connect with Michael today.

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