How Companies Are Using AI to Improve Market Segmentation

In today’s fast-changing world, companies need to understand their customers better than ever. One of the most important ways they do this is through market segmentation, which means dividing customers into smaller groups based on things like age, location, income, or behavior (Armstrong & Kotler, 2009). A recent article from The Wall Street Journal explains how companies are now using artificial intelligence (AI) to make this process even better (Deloitte, 2024).

Modern Customer Segmentation: More Dynamic, Personalized (Deloitte, 2024)


What’s New About Market Segmentation?


In the past, businesses used basic information like age or where people live to figure out what products to sell them. But now, thanks to AI and machine learning, companies can study huge amounts of data quickly. This helps them find patterns and predict what customers will want next, instead of just looking at what they’ve bought before.


For example, stores can now use AI to see which customers are likely to buy certain products soon. They can then send special offers or ads to those customers. This type of smart marketing helps companies connect better with people and makes customers feel like the company understands them.


Why Does This Matter?


This new way of segmentation is important because:


• It’s more accurate. AI can group people based on their real interests and habits, not just basic information.


• It’s faster. Companies can adjust their marketing right away when they see customers’ needs changing.


• It saves money. Businesses can focus their time and money on the groups of customers who are most likely to buy from them.


In one study, researchers found that many companies waste money by trying to sell to the wrong people. Using better segmentation helps companies avoid this mistake and make smarter choices (Hollenbeck & Taylor, 2021).


What Does This Mean for the Future?


AI is changing the way businesses talk to their customers. Instead of sending the same message to everyone, companies can now send messages that fit each person’s interests. This helps businesses grow and keeps customers happy.


References


Armstrong, G., & Kotler, P. (2009). Marketing: An introduction (9th ed.). Prentice Hall.


Deloitte. (2024). Modern customer segmentation: More dynamic, personalized. The Wall Street Journal. https://deloitte.wsj.com/cmo/modern-customer-segmentation-more-dynamic-personalized-a3eba574


Hollenbeck, B., & Taylor, W. (2021). How to make your loyalty program pay off. Harvard Business Review. https://hbr.org/topic/subject/market-segmentation




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