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Audience Segmentation with AI
An increasing number of businesses and marketing firms are turning to AI-powered tools to help speed up the process and increase the accuracy of segmentation efforts
As a business owner or marketer, you know that it's important to understand your audience. Every customer is unique, just as every person is unique, and can't fit into a one-sized marketing campaign. That's where audience segmentation comes in.
Audience segmentation is the process of dividing your customer base into groups based on various factors such as demographics, interests, or purchasing behavior. This process lets you tailor your marketing efforts to each group's specific needs and preferences. It’s a way to ultimately improve your bottom line through more conversions. However, audience segmentation can be time-consuming and challenging, especially as our access to available data grows.
That's why an increasing number of businesses and marketing firms are turning to AI-powered tools to help speed up the process and increase the accuracy of segmentation efforts. AI can analyze enormous amounts of data faster and more accurately than humans, allowing you to pick up on key customer patterns faster.
There are several existing tools for AI audience segmentation, such as Google Analytics or Salesforce Einstein.
While AI-powered audience segmentation has its pros, there are also potential drawbacks to using this technology. Relying too heavily on AI could lead to an oversimplification of your customer base or biases in the data if the AI algorithms are not properly calibrated.
Breaking Down Different Types of Segmentation
Audience or customer segmentation involves splitting existing and prospective customers into different groups based on factors such as age, geographic area, income, or how long it’s been since they purchased something. According to Forbes, segmentation helps you better meet individuals' needs and understand their behavior.
There are quite a few different types of audience segmentation you can use to split your customers, including the following:
- Behavioral Segmentation: This kind of segmentation relies on tracking things like which features web visitors interact with most, what they leave in abandoned carts, interactions with your business, and what they’ve purchased from you before.
- Demographic Segmentation: This version groups people based on basic information about them, such as their age, occupation, marital status, income, and educational level.
- Geographic Segmentation: Beyond the obvious segmentation of where consumer contacts live, geographic segmentation can include preferred language, the mode of transportation they use, and varying degrees of narrowing down location-based data.
- Needs-Based Segmentation: This is an interesting way to segment customers based on the features they consider must-haves in products, the aspects of your customer service they consider essential, and their specific delivery method needs.
- Psychographic Segmentation: Another way to segment clients is to consider their values, beliefs, and interests.
- Technographic Segmentation: This type of segmentation is easy to track with Google’s analytics tools, as it concerns what kind of browser and device your web visitors are using and how they arrived at your website, whether via a web search, a social media post, or even a word-of-mouth referral.
What’s the Difference Between Customer Segmentation and Market Segmentation?
While many businesses use the terms customer segmentation and market segmentation interchangeably, they do have some distinct differences. The most important difference to keep in mind is that customer, or audience, segmentation is about your business’s customers or audience while market segmentation focuses on the entire market for your products or services.
Customer segmentation involves dividing a company's customer base into groups that share similar characteristics, behaviors, or needs. This segmentation approach focuses on understanding individual customers and tailoring your company’s marketing efforts to meet their specific requirements.
Market segmentation involves dividing the larger market you serve into distinct groups of consumers who have similar needs, preferences, or characteristics. Unlike customer segmentation, which zooms in on individual customers, market segmentation zooms out to analyze the overall market landscape.
While customer segmentation focuses on individual customers within a company's existing customer base, market segmentation focuses on understanding and categorizing the larger market environment. Both strategies are crucial for businesses to tailor their marketing efforts effectively and optimize their overall marketing performance.
How does AI Help with Audience Segmentation?
Audience segmentation, a cornerstone of marketing strategy, is greatly enhanced by AI. Through advanced algorithms, AI parses through vast datasets to identify nuanced patterns and behaviors among audiences. This segmentation process enables marketers to tailor their approaches more effectively, maximizing engagement and conversion rates.
Possibly the biggest potential benefit of using AI to help with audience segmentation is how much faster AI can sort through data. AI tools can sort data faster than humans, and they can also provide real-time updates and help us make better marketing decisions. Many segmentation tasks can be automated, allowing busy teams to focus on other things. Advanced data science and machine learning allow AI to analyze customer groups with ease and accuracy.
The technology powering AI audience segmentation includes the following:
- Machine learning algorithms
Machine learning techniques are the core components of AI applications. They let computers evaluate large data sets, highlight patterns, correlations, trends, and perform tasks such as segmentation with accuracy.
- Deep learning
Deep learning models like machine learning algorithms use neural networks to detect detailed correlations in data.
- Natural-language processing
Natural-language processing enables sentiment analysis to determine what consumers are saying about goods or services. It is also useful for other tasks such as language translation, voice recognition, text categorization, and summarization.
- Chatbots and virtual assistants
Conversational AI systems such as chatbots respond to client requests and deliver information, increasing customer satisfaction and engagement. They gather significant data on client preferences, habits, and comments via these encounters, which is essential for developing more focused and successful customer groups.
Artificial intelligence is revolutionizing client segmentation across several marketing domains, including:
- Predictive analysis
AI technologies may predict client behaviors and interests, enabling segmentation based on present and future situations.
- Customer profiling
AI can automatically acquire information from many data sources and utilize it for segmentation.
Artificial intelligence can provide marketing material and campaigns that are targeted to certain client categories.
- Cross-channel integration
AI can aggregate data from several client contact points, allowing firms to have a comprehensive understanding of their customers.
Benefits Of Using AI for Audience Segmentation
AI is not infallible, but careful use can help operations in a variety of sectors, including marketing. It can help with:
- Saving Time: AI automates the segmentation process, significantly reducing the time required for manual analysis.
- Accuracy: AI-driven segmentation ensures precision by analyzing complex data points with minimal margin for error.
- Enhanced Personalization: By understanding audience preferences and behaviors, AI enables marketers to craft highly personalized campaigns.
- Anticipating Needs: AI’s predictive capabilities anticipate audience needs, allowing marketers to address them proactively.
- Maximize ROI: With targeted campaigns based on AI-driven segmentation, marketers can optimize return on investment and resource allocation.
Several platforms, including Google Analytics, Adobe Audience Manager, and Salesforce Marketing Cloud, offer AI-powered audience segmentation tools.
Other tools include the following:
Are There Any Drawbacks to AI Customer Segmentation?
While AI enhances segmentation accuracy and efficiency, potential drawbacks include initial setup costs, data privacy concerns, and over-reliance on algorithms, which may overlook subtle human insights. Balancing AI-driven insights with human intuition remains crucial for comprehensive audience understanding.