Posted 19.12.2024
Personalisation is no longer an optional part of the online experience. In fact, 71% of customers now expect personalisation and will actively leave websites where it isn’t delivered. This makes personalisation a must for your business.
How you deliver this personalisation can differ, but customer segmentation should always sit at the root of your strategy. This is how you find customer preferences to tailor your marketing, user experience and even customer journey around.
With the introduction of artificial intelligence (AI) tools, you really have no excuse to miss out on this vital step either. AI tools make it a lot quicker, easier and more reliable to find effective customer segments for any business. Yet, not every business appreciates the potential AI-driven customer segmentation offers.
To help you realise just how helpful it can be, we’ve put together this primer. Covering everything from the basics of what customer segmentation is and the benefits it brings, right through to the ways AI tools can make it even more effective, we’ve all the tips and advice you need to get started with AI segmentation. But let’s start with the basics, and explore what customer segmentation even is.
Customer segmentation is the process of separating customers into groups based on their shared characteristics. It’s commonly used when planning marketing campaigns to improve their effectiveness.
The factors you use for the segmentation process will depend on your customer base and what you want to achieve. If you’re running a B2B campaign, you could use segments such as:
Whereas in B2C marketing, you could use demographic similarities such as:
The key to successful customer segmentation is to build it around your own customer base, rather than trying to squeeze your customers into groups that don’t relate to them. Customer segments should be based on your own data, not generic expectations. This will make them more accurate and help you achieve the highest results.
Customer segmentation lets you tailor marketing campaigns more clearly, increasing their effectiveness. They help ensure your messaging, products, and services speak directly to your audience, in turn helping you make your offering feel relevant to them. The more relevant your offering is, the more likely they are to purchase.
Here are some of the specific ways that customer segmentation can help boost your marketing strategy:
It can also help you find product development ideas, by identifying customer needs and pain points.
These benefits come from segmentation however it’s carried out, so what benefits does AI-driven customer segmentation offer in particular?
As we discussed earlier, customer segmentation only works when it’s tailored to your customer base. And this means you need to collect and analyse a lot of customer data to do it.
Traditional segmentation methods rely on analysing that data manually. While aspects of the process can be automated and made quicker, an intense level of human involvement is needed to find valuable insights to build your customer segments on.
Artificial intelligence can do a lot of this work for you. It can analyse vast amounts of data quickly and accurately, using a wide range of metrics. AI tools can take current and historical data from various sources and analyse it concurrently, using parameters that are as broad or narrow as you need.
As well as saving time and effort, AI-powered customer segmentation can even dig deeper into the data than standard human analysis can.
For example, AI can use natural language processing (NLP) to understand and interpret human language. This allows it to understand semantic relevance and meaning on a massive scale – one impossible for humans to replicate. This gives you even more options for identifying target groups and segments.
It even has the potential to help you predict future behaviour based on past actions through pattern recognition. It can help you spot which segments are most likely to purchase or churn at certain points so you can address any pain points.
Of course, knowing that AI can be incredibly useful in supporting customer segmentation is a different question to asking how this support should be put into practice.
There are many specific ways to use AI-driven customer segmentation to support your business, but here are some of the most effective.
As with many things, it’s important to know exactly what you want to achieve using customer segmentation before you start the process. Luckily, AI can even help with this.
First, you must set your goals. This could be attracting new customers, improving customer retention, or even increasing brand awareness – your goals are specific to you. However, every decision you make must be guided by the demands of these goals if you want to succeed.
You also need to decide how you will measure this success. The key to business success lies in being able to evaluate your strategies so you can streamline and improve them as you go. Customer segmentation is no exception.
AI can help with this stage too. By analysing such large amounts of customer data it can help you see what is driving decision-making and behaviours, so you can set goals and strategies that align with them.
It can also help you identify the best metrics to track to help you refine your strategy over time.
The more high-quality data your segmentation is based on, the more accurate it is. AI can collect data across a wide number of sources, including different channels, CRM systems and POS systems. It can also process and clean up raw customer data to pick out duplicates and errors to increase data accuracy and reliability.
While humans may pick out more creative insights, using AI in the first instance to collect and collate will mean that your team has clearer information to work with. AI enables them to spend their time where it’s needed while reducing the chance of human error creating false information.
The speed, scope and detail that AI enables mean that you can segment your customers using a broader range of factors. AI lets you go beyond basic demographic factors such as gender, age or location and use deeper insights such as behaviour or purchase history to base your marketing efforts on.
If you want to find commonalities in hard facts or numbers, AI will make the task achievable at scale – and accurate.
With AI, you can make sure that your customer segments are always up to date without having to redo them completely. Certain tools will update your segments as new customer data comes in, while others make it easier to put data together when it comes in.
AI is also useful for tracking changes over time. It can analyse how your customer’s needs, interests or engagement levels are shifting to make sure you are always serving them to the best you can.
AI can seamlessly integrate data from multiple channels to give you a clear overview of customer behaviour across all touchpoints. From email campaigns to social media ads to in-person experiences – AI can collate data that covers all customer interactions.
By bringing together and breaking down such a breadth of data, AI lets you build more effective marketing strategies.
As well as helping you pick what metrics to use to measure the performance of your marketing efforts, AI tools can increase how many insights you can harvest from the data. It can help you spot which segments provide the most valuable customers, which marketing strategies are proving most effective for that segment, and even how to increase that effectiveness.
It can increase your ROI by making sure you are pushing your budget into marketing campaigns that deliver, rather than continuing to follow strategies that aren’t performing.
AI tools are making customer segments easier and quicker to build, taking away perhaps the only disadvantage that segmentation has – the segmentation process. It ensures that this necessity is achievable for every business.
However, this isn’t the only way that AI can help you streamline your business. With our Product Catalogue Management Software you can also automate your business operations, drawing together your ERP, PIM, CRM and MRP systems to make sure you’re always working from the most up-to-date and reliable data. Talk to us today to find out more about the benefits Evolve Trader can bring to your business.
