Improving Customer Segmentation With AI

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

This personalization means marketing messages will be more relevant to the individual reading them. With greater relevance, response rates are likely to be significantly better than 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. The level of segmentation you can achieve is limited to how well you understand your customers and the resources 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 several 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 are)
  • 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. 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.)
  • It 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 a 760% increase in revenue from segmented campaigns.

Automatic Optimization of Marketing Campaigns for Different Segments

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

An increased amount of data enables you to create particular segments (a segment may be as small as one person) and send laser-targeted marketing messages to each part. But as the amount of data you collect and the number of groups you speak to grows, the 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 variables, with several different options. 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 following user in real-time. This way, your marketing assets will automatically optimize themselves to suit your segments, no matter how many you’re targeting or complex.