AI Segmentation with contAIn
As an SMB, effective resource allocation is probably on your list of top priorities. Marketing is often an area that receives significant spend–but it’s crucial that you don’t overspend on efforts that yield little ROI. One effective way to optimize marketing spend is to use AI to better understand and segment your customers. In this post, we’ll explore why using AI to segment your customers is critical and we’ll show you how to get started.
What is Customer Segmentation?
As its name implies, customer segmentation is the process of splitting your customers into groups based on similar characteristics such as demographics, behavior, or preferences. By dividing seemingly disparate customers into cohorts, you may better understand customer needs, tailor marketing communication and promotions and ultimately increase customer satisfaction and loyalty. Segmentation also allows you to identify high-value customers and thus allocate more marketing efforts and resources to them, where necessary.
Why is Customer Segmentation Essential for SMBs?
Customer segmentation enables SMBs to focus on the customers who will most likely generate revenue for the business. Gone are the days of blindly scattering advertising seeds. If you sell luxury chairs, you can identify customers who have purchased high-end furniture in the past and target them with promotions for similar items. In contrast, customers who solely purchase discount furniture might not be interested in receiving such offers. These examples are for illustrative purposes, but segments can be as simple or as multidimensional as it makes sense.
Customer segmentation can also help you to:
Personalize your marketing messages
Customers today expect personalized experiences from the brands they interact with. By segmenting your customers, you can create tailored marketing messages that resonate with each group.
Identify profitable customer segments
By analyzing your customer data, you can identify the customer segments that generate the most revenue for your business. You can then allocate your resources accordingly to maximize ROI.
Improve customer retention
Customer segmentation can help you identify the factors that contribute to customer loyalty. By understanding what keeps your customers coming back, you can create targeted marketing messages and offers that help retain them.
How AI Can Help with Customer Segmentation
Customer segmentation requires analyzing vast amounts of customer data, including purchase history, website activity, and social media engagement. This task can be challenging and time-consuming, especially for SMBs with limited resources. This is where AI can help.
AI-powered segmentation tools use machine learning algorithms to analyze your customer data automatically. These algorithms can identify patterns and similarities within your customer data that humans may not have noticed. By using AI, you can segment your customers faster and more accurately, which can save you time and money–and stress.
How to Get Started with AI-Powered Customer Segmentation
Now that you understand the benefits of customer segmentation, let's explore how you can get started with AI-powered applications.
Gather Customer Data
Before you can use AI to segment your customers, you first need to gather relevant customer data. This data should include demographics, purchase history, website activity, and social media engagement. There are a number of ways to collect this data with third-party software for web analytics, social media monitoring, and customer relationship management (CRM).
Choose an AI-Powered Segmentation Tool
Now that you have your customer data, it’s time to pick an AI-powered segmentation tool. There are many of these tools available, so choosing the right one can be challenging. When selecting a tool, consider factors such as cost, ease of use, and the capabilities. Please note that customer dimensions aren’t static–over time you may decide to augment customer data either organically or via more complex methods. Later on we’ll introduce the RFM app, which, allows for flexibility as you build deeper intuition about your consumer base.
Define Your Segments
Once you have your segmentation tool in place, it’s time to define your segments. Though ultimately business and industry dependent, you may want to segment your customers based on demographics, behavior, interests, or any combination of these factors. More advanced AI tools will usually be able to suggest meaningful segments based on provided inputs.
Use AI to Segment Your Customers
Now that your customer segments are defined–it’s now time for AI to segment customers automatically. The AI-powered segmentation tool you selected should have features that allow you to create rules and conditions for each segment. For example, you can create a segment of customers who have purchased luxury purses in the past six months, or a segment of customers who have abandoned their shopping carts in the last 24 hours.
Target Your Marketing Efforts
Now that you have your customer segments, you can create targeted marketing messages and offers for each group. By tailoring your marketing messages to each segment, you can increase the likelihood of conversion and, later, retention. Common examples include sending personalized offers to customers who have abandoned their shopping carts or offering promotions to high-value customers who haven’t made a purchase in a while and are at risk of churning.
Monitor and Refine
Developing an effective marketing strategy is an iterative process, so it's critical to monitor and refine your customer segmentation efforts regularly. Use analytics tools to measure the efficiency of your marketing campaigns, track customer behavior, and refine your segments accordingly. By doing so, you can ensure that your marketing efforts continue to generate the desired results.
Our Solution: The RFM App
The RFM (Recency, Frequency, Monetary) app is our AI solution for customer segmentation. The model segments customers and makes it possible for businesses to target marketing accordingly. Through inputs like order dates, composition, size and product reviews, the model assigns customers to cohorts based on future predicted purchase performance. The RFM app is enterprise-grade and designed to handle even the messiest datasets–all data is securely pre-processed prior to training the model.
By now, we hope you’re convinced that using AI-powered customer segmentation is an effective way for SMBs to optimize their marketing budgets and efficiency. Machine learning algorithms enable you to analyze customer data faster, more accurately and with meaningful outcomes.With the right tools and strategies in place, SMBs can use AI-powered customer segmentation to boost their ROI and drive business growth. For an RFM demo, contact us here!
- Timan Goshit