{"id":3056,"date":"2023-01-05T11:10:00","date_gmt":"2023-01-05T05:40:00","guid":{"rendered":"https:\/\/www.vue.ai\/blog\/?p=3056"},"modified":"2024-06-10T11:40:05","modified_gmt":"2024-06-10T06:10:05","slug":"customer-segmentation-is-not-real-personalization","status":"publish","type":"post","link":"https:\/\/www.vue.ai\/blog\/ai-in-retail\/customer-segmentation-is-not-real-personalization\/","title":{"rendered":"Customer Segmentation Is Not Personalization"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69f4a16d2dc52\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69f4a16d2dc52\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.vue.ai\/blog\/ai-in-retail\/customer-segmentation-is-not-real-personalization\/#evolution-of-segmentation\" title=\"Evolution of Segmentation\">Evolution of Segmentation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.vue.ai\/blog\/ai-in-retail\/customer-segmentation-is-not-real-personalization\/#why-cohort-based-recommendations-dont-work-anymore\" title=\"Why Cohort Based Recommendations Don\u2019t Work Anymore\">Why Cohort Based Recommendations Don\u2019t Work Anymore<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.vue.ai\/blog\/ai-in-retail\/customer-segmentation-is-not-real-personalization\/#valuing-consumers-data\" title=\"Valuing Consumers\u2019 Data\">Valuing Consumers\u2019 Data<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.vue.ai\/blog\/ai-in-retail\/customer-segmentation-is-not-real-personalization\/#what-is-real-personalization\" title=\"What is Real Personalization?\">What is Real Personalization?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.vue.ai\/blog\/ai-in-retail\/customer-segmentation-is-not-real-personalization\/#read-more-about-virtual-dressing-room\" title=\"Read more about Virtual dressing room\">Read more about Virtual dressing room<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.vue.ai\/blog\/ai-in-retail\/customer-segmentation-is-not-real-personalization\/#check-about-our-personalization-engine\" title=\"Check about our Personalization Engine\">Check about our Personalization Engine<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.vue.ai\/blog\/ai-in-retail\/customer-segmentation-is-not-real-personalization\/#read-more-about-personalization-platform\" title=\"Read more about Personalization Platform\">Read more about Personalization Platform<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.vue.ai\/blog\/ai-in-retail\/customer-segmentation-is-not-real-personalization\/#check-about-our-personalized-search-solution\" title=\"Check about our Personalized Search Solution\">Check about our Personalized Search Solution<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<span class=\"rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time: <\/span> <span class=\"rt-time\">6<\/span> <span class=\"rt-label rt-postfix\">minutes<\/span><\/span><p><span style=\"font-weight: 400;\">A quick search on Twitter would reveal a string of hilarious and facepalm worthy #personalizationfail retail stories shared by consumers. From suggesting a collection of mosquito nets to someone who bought a tennis net once to suggesting baby products to someone who was trying to find gifts for a baby shower, many brands have failed to crack the personalization code.<\/span><\/p>\n<figure id=\"attachment_3057\" aria-describedby=\"caption-attachment-3057\" style=\"width: 750px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-3057\" src=\"https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/Screenshot-2018-12-24-at-4.11.33-PM.png\" alt=\"Personalization fail \" width=\"750\" height=\"565\" srcset=\"https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/Screenshot-2018-12-24-at-4.11.33-PM.png 580w, https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/Screenshot-2018-12-24-at-4.11.33-PM-300x226.png 300w\" sizes=\"(max-width: 750px) 100vw, 750px\" \/><figcaption id=\"caption-attachment-3057\" class=\"wp-caption-text\">Source: Twitter<\/figcaption><\/figure>\n<p><span style=\"font-weight: 400;\">Should this be regarded as a failure of personalization strategy? Does that imply that personalization is a tool (<strong><a href=\"https:\/\/www.vue.ai\/solutions\/ai-personalization-engine\/\">personalization platform<\/a><\/strong>) that might work for some businesses and might not for a few? No, not really. Primarily because the concept hasn\u2019t failed, it\u2019s the implementation that did. The biggest contributor to these gaps in customer experiences is confusing segmentation with personalization.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"evolution-of-segmentation\"><\/span><strong>Evolution of Segmentation<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Marketing concepts such as segmentation and positioning were popularized in the 1940s and 1950s when professors like Wendell R. Smith started documenting marketing techniques through research papers, books and articles. But segmentation has existed ever since trade practices began, albeit in an undefined form minus any labels.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The crude form of segmentation worked until the scope of business was restricted to the local market. As means of transportation developed and the effects of the industrial revolution started showing up, the need for organized marketing techniques was realized. Thus began the era of demographic, behavioural, psychographic and geographic segmentation of consumers.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">These broad classifications worked for brands until the infusion of technology into retail. Access to the internet changed the face of the retail industry dramatically. The growth of smartphones, digital media, and global eCommerce started influencing consumer buying behavior. While retailers got access to an abundance of consumer data with just a click, buyers\u2019 expectations climbed up exponentially. As a result, predictive personalization gained prominence in the retail industry.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"why-cohort-based-recommendations-dont-work-anymore\"><\/span><strong>Why Cohort Based Recommendations Don\u2019t Work Anymore<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">While the term \u2018personalization\u2019 is thrown loosely around, not every retailer has managed to utilize its full potential. In most instances, \u2018segmentation\u2019 and \u2018personalization\u2019 are used interchangeably, despite both being two independent marketing techniques.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Traditional customer segmentation treats people as cohort \u2013 a group of people with similar tastes and interests. It focuses on categorizing, labelling and boxing people, instead of treating them as individuals with specific style preferences and needs. It offers a rather myopic view of categorizing based on limited data points that usually are just broad fragmented categories.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">On the other hand, real 1:1 <a href=\"https:\/\/www.vue.ai\/solutions\/ai-personalization-engine\/\">personalization<\/a> requires brands to invest in AI &amp; automation and prioritize it (not just on paper) in order to individualize their strategy, understand shopper intent and provide relevant recommendations that add value in real-time. It goes beyond just showing recommendations to understanding in detail the products you have and the shoppers who visit your website. Only with proper product AND customer intelligence can a brand successfully personalize for their shoppers.<\/span><\/p>\n<img loading=\"lazy\" decoding=\"async\" class=\"wp-image-12829 aligncenter\" src=\"https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/groceries-3-1-300x154.png\" alt=\"Personalization \" width=\"700\" height=\"360\" srcset=\"https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/groceries-3-1-300x154.png 300w, https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/groceries-3-1-768x394.png 768w, https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/groceries-3-1-150x77.png 150w, https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/groceries-3-1.png 993w\" sizes=\"(max-width: 700px) 100vw, 700px\" \/>\n<p><span style=\"font-weight: 400;\">Only when you segment shoppers instead of personalizing for them, we hear cases like a customer being recommended mosquito nets after purchasing one a week back. Or a person waking up to a dozen promotional emails about baking trays after buying an oven. These examples don\u2019t imply that they aren\u2019t \u2018personalization\u2019. It implies that they are \u2018irrelevant personalization\u2019, which would be regarded as a failure.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For example, out of the 100% oven buyers there might be a percentage that needs trays. However, sending all of them a prompt to buy \u2018tray\u2019 reflects that the brand has put everyone from that group under one category, instead of mapping their individual needs. This illustrates the outcome of confusing segmentation with personalization.<\/span><\/p>\n<blockquote>\n<p><i><span style=\"font-weight: 400;\">Brendan Witcher, VP &amp; Principal Analyst at Forrester Research disclosed that 90% of organizations are going to invest in personalization but only 40% of consumers say that the information they get from a brand is relevant to them. He added that one of the reasons for this gap between brand\u2019s effort and actual results is \u2018segmentation\u2019 in the garb of \u2018personalization\u2019 as it creates the wrong experience for consumers.<\/span><\/i><\/p>\n<\/blockquote>\n<h2><span class=\"ez-toc-section\" id=\"valuing-consumers-data\"><\/span><strong>Valuing Consumers\u2019 Data<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Consumers today are aware that their digital footprints are visible to brands that they interact with, directly or indirectly. After multiple privacy scandals in the recent past, people are more aware of their data privacy rights. They also understand that today, a customized shopping experience can only be delivered if they allow brands to capture their data. So they happily give consent, allow mobile apps to access their personal data, accept \u2018cookie\u2019 policies, diligently fill out account information forms, rate shopping experience, provide feedback, share preferences and turn on their notifications.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><a href=\"https:\/\/www.inmar.com\/blog\/press\/inmar-intelligence-survey-shows-65-percent-shoppers-are-willing-share-their-data\">65%<\/a> of consumers are willing to share their personal information with a brand or retailer in exchange for more personalized shopping experiences, coupons or other benefits.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In spite of doing all that, if brands fail to offer relevant <a href=\"https:\/\/www.vue.ai\/products\/product-recommendations\/\">product recommendations<\/a>, then it would lead to distrust and dissatisfaction.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Consumers often wonder what exactly brands are doing with their data, if they are not using it to offer personalized service. The statistics mentioned in an Accenture <a href=\"https:\/\/newsroom.accenture.com\/news\/us-consumers-turn-off-personal-data-tap-as-companies-struggle-to-deliver-the-experiences-they-crave-accenture-study-finds.htm\">report<\/a> reflects this exact sentiment.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The report stated that US-based companies suffered a loss of $756 billion as customers switched to other brands. The reason for this switch was lack of trust and companies\u2019 abysmal attempt at personalization. 79% of consumers were frustrated with the fact that some companies cannot be trusted to use their data correctly. Accenture\u2019s report also states that \u201cthe percentage of consumers saying their biggest frustrations with providers\u2014failure to deliver on their promises, inefficient and slow customer service, and lack of interaction convenience\u2014have remained consistent in the past few years.\u201d<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"what-is-real-personalization\"><\/span><strong>What is Real Personalization?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">This shadow of frustration that\u2019s hovering over customers can be swiftly removed if brands sincerely agree to invest in AI and technology to address customers\u2019 needs. The emphasis is on the word \u2018sincere\u2019 because personalization can only bring good results if companies agree to prioritize this strategy and implement it properly.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">1:1 real personalization is not grouping your shoppers into buckets based on demographics or psychographics but rather understanding what drives each of your shoppers. It is understanding the visual cues that your shoppers leave on your website, combined with their intent in the current session and long term purchasing behavior. This is just one part of the puzzle. The other part is using AI to extract and standardize product data across the entirety of your catalog. This product data is then mapped to your customer data to surface relevant recommendations. <\/span><span style=\"font-weight: 400;\">This is what true <a href=\"https:\/\/www.vue.ai\/solutions\/ai-personalization-engine\/\">personalization<\/a> means, and this works by addressing each individual shopper instead of groups.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Companies need to increase the value generated by customer experiences through automation and meticulously focus on metrics &amp; initiatives that are truly relevant to customers with the help of analytics.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A good example of great personalization is Spotify\u2019s \u2018End of the Year Wrapped\u2019 Report.<\/span><\/p>\n<figure id=\"attachment_12840\" aria-describedby=\"caption-attachment-12840\" style=\"width: 660px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-12840\" src=\"https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/spotifywrapped-8-300x173.jpg\" alt=\"Spotify wrapped \" width=\"660\" height=\"381\" srcset=\"https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/spotifywrapped-8-300x173.jpg 300w, https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/spotifywrapped-8-1024x592.jpg 1024w, https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/spotifywrapped-8-768x444.jpg 768w, https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/spotifywrapped-8-1536x888.jpg 1536w, https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/spotifywrapped-8-150x87.jpg 150w, https:\/\/www.vue.ai\/blog\/wp-content\/uploads\/2018\/12\/spotifywrapped-8.jpg 1658w\" sizes=\"(max-width: 660px) 100vw, 660px\" \/><figcaption id=\"caption-attachment-12840\" class=\"wp-caption-text\">Source: Spotify<\/figcaption><\/figure>\n<p><span style=\"font-weight: 400;\">For those of you who are not familiar with Spotify Wrapped, it&#8217;s a yearly report that Spotify publishes where it accumulates all of your listening data from Jan to Oct and creates a personalized report for each user. Yes, you read that right, it creates a personalized report for every single user (and <a href=\"https:\/\/www.fastcompany.com\/90630368\/spotify-q1-2021-covid-at-home-streaming-boosts-premium-subscribers-to-158-million\">spotify reported 158 million listeners in Q1, 2021<\/a>). <\/span><span style=\"font-weight: 400;\">It usually tells you how many new artists you discovered, how many genres you listened to along with several top fives: your five most played songs, your top podcasts (a new feature), and your top artists. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Last year (2020), Spotify went a step further and introduced in-app quizzes to these reports to make it more interactive.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The reason why Spotify is also able to curate these reports is because they use collaborative filtering, NLP, and audio models that predict and suggest new music to their users. All interactions that a user performs is fed back into the model which then proceeds to learn more about the users themselves. On paper, the very idea of <\/span><a href=\"https:\/\/www.springboard.com\/blog\/data-science\/spotify-data-insights\/\"><span style=\"font-weight: 400;\">producing 150+ million personalized reports<\/span><\/a><span style=\"font-weight: 400;\"> sounds like a daunting task, but Spotify makes it possible using their unique ANNOY library. It goes to prove that data and technology can assist in realizing any goal as long as brands have the foresight to envision a unique and relevant experience for its customers.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There was a time when recommending products was enough to impress buyers and convince them that the brand is at the top of their game when it comes to machine learning and AI in retail. But today companies need to personalize all points of contact, be it offline or online.\u00a0 It is more than producing 30 search results for a burnt orange dress. It is all about providing custom-made relevant recommendations across all channels of sales, marketing and service. It is all about not letting irrelevant recommendations reach consumers\u2019 inboxes. It is all about muting irrelevant recommendations based on an individual\u2019s feedback.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Optimum use of AI and automation enables brands to understand shopper intent and individualize their offerings and service! If your interest is piqued, then get an exclusive demo of how <\/span><span style=\"font-weight: 400;\">our <a href=\"https:\/\/www.vue.ai\/solutions\/ai-personalization-engine\/\">solution<\/a><\/span><span style=\"font-weight: 400;\"> can help you and your business by dropping a comment or signing up for a demo.\u00a0<\/span><\/p>\n<p><strong>Related Articles:<\/strong><\/p>\n<p><a href=\"https:\/\/www.vue.ai\/blog\/ai-in-retail\/personalized-product-recommendation-retail\/\">Dynamic Personalization: Tailor Shopper Journeys With Personalized Product Recommendations<\/a><\/p>\n<p><a href=\"https:\/\/www.vue.ai\/blog\/ai-in-retail\/ecommerce-visual-search-engine-retail\/\">VueFind: 4 Things You Need To Know About Visual Search<\/a><\/p>\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"read-more-about-virtual-dressing-room\"><\/span><strong>Read more about <a href=\"https:\/\/www.vue.ai\/products\/virtual-dressing-room\/\">Virtual dressing room<\/a><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"check-about-our-personalization-engine\"><\/span>Check about our <a href=\"https:\/\/www.vue.ai\/solutions\/ai-personalization-engine\/\">Personalization Engine<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"read-more-about-personalization-platform\"><\/span>Read more about <a href=\"https:\/\/www.vue.ai\/solutions\/ai-personalization-engine\/\">Personalization Platform<\/a><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"check-about-our-personalized-search-solution\"><\/span>Check about our <a href=\"https:\/\/www.vue.ai\/products\/ai-powered-personalized-search\/\">Personalized Search <\/a>Solution<span class=\"ez-toc-section-end\"><\/span><\/h3>\n","protected":false},"excerpt":{"rendered":"<p><span class=\"rt-reading-time\" style=\"display: block;\"><span class=\"rt-label rt-prefix\">Reading Time: <\/span> <span class=\"rt-time\">6<\/span> <span class=\"rt-label rt-postfix\">minutes<\/span><\/span> A quick search on Twitter would reveal a string of hilarious and facepalm worthy #personalizationfail retail stories shared by consumers. From suggesting a collection of mosquito nets to someone who bought a tennis net once to suggesting baby products to someone who was trying to find gifts for a baby shower, many brands have failed  &#8230;<\/p>\n","protected":false},"author":23,"featured_media":3059,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1162],"tags":[55,53,883,1172,29,1385,1249,548,1438,1306],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Customer Segmentation Is Not Real Personalization | Vue.ai<\/title>\n<meta name=\"description\" content=\"\u2018Personalization\u2019 strategy is thrown around loosely, and many retailers haven&#039;t managed to utilize its full potential. 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