Customer Segmentation No Longer a Choice, But a Necessity for your Business

  • Posted by AISmartz
  • /
  • August 19, 2019

Customer segmentation is the way an organization demarcates and collates its consumer base data in various segments based on their common characteristics.

For example, if a pizza chain were to segment its customers, they’ll be interested in finding out the lifestyle, employment status, age, familial status among other factors to better understand the kind of people who buy their products.

Benefits of Segmentation

On the same lines, there are four notable basis that organizations use for customer segmentation:

  • Demography based segmentation involves grouping people based on their age, marital and familial status, income groups, gender, occupation, and education status.
  • Geography based segmentation groups people based on their location. Depending on the scale of the organization, geographical customer segmentation may group people based on their city/town, state, country, continent, or specific regions.
  • Psychographics based segmentation involves clustering people based on their social status, personal preferences, and lifestyle choices.
  • Behavioral data-based segmentation is clustering of customers based on their spending or consumption habits, preferred add-ons/benefits, and services/products used.

Why Customer Segmentation?

Because it’s no longer a choice, it’s a necessity.

For those hopping on the latest marketing trends train just now, here are some more reasons:

  • Streamlined Marketing
  • According to Mckinsey, email marketing is 40% more effective than advertising on Facebook or Twitter.

    Now, imagine that each of your customer receives an email that appeals to them and provides them offers that they want. This is made possible through customer segmentation.

  • Better Consumer Retention
  • Having customized services for the end-user, organizations ensure that users get what they actually want. Such fine-tuning significantly reduces chances of customers to look for alternate service/product providers.

  • Expansion Opportunities
  • Customer segmentation data, specifically geography-based customer segmentation data, provides invaluable insights into which places have an inherent demand for your products and services.

  • Optimized Pricing Strategy
  • Customer segmentation based on behavioral data tells you which features of your products/services are a hit among your users and which you could make do without. This information may also prove instrumental in realizing a potential consumer base for the services/products an organization offers.

AI for Customer Segmentation

The benefits of customer segmentation are not a new discovery, however, using AI for customer segmentation can prove revitalizing for organizations today. 

Machine Learning based AI systems customize much better to customer trends, adapt to changes in said trends, and update the course of action to best suit the consumer trends. For example, AI systems can customize the messages they send to EACH of your customers as a part of an automated email marketing process. With this level of personalization, your email marketing campaign has much higher chances of success while maintaining a significantly better customer relationship. 

Further, an AI system operates at zero to minimum human intervention, reducing the cost of operation and chances of human bias affecting the segmentation. The number of segments an AI system will create is virtually limitless, it discovers hidden patterns and trends which can prove pivotal for a business. 

In conclusion…

Customer segmentation is an integral part of a successful marketing strategy and using AI for customer segmentation will provide your organization the edge it needs to stand apart. If you’re looking for an implementation partner to execute customer segmentation at your company, reach out to us today!