Segment of One - From Vision to Reality Through New Technologies

1. What is the Segment of One and why is it interesting for you?
2. What are the challenges on the way to the Segment of One?
3. New technologies enable the Segment of One
4. What does Segment of One mean for your company?
5. What can Segment of One look like for you? 
6. Conclusion 

In this article, our guest authors Michael Strelow and Gregor Bürkle discuss the opportunities and challenges around the concept of "Segment of One" in customer relationship management, illuminating how novel technologies in the field of artificial intelligence affect it.

A Customer Data Platform (CDP), for example, can contribute to enabling a maximally personalized customer approach with your customers. It also covers the challenges for the "Segment of One" associated with the elimination of third-party cookies and stricter data protection requirements, and illuminates why it is becoming increasingly difficult to enrich detailed customer profiles for targeted customer communication.

What is the Segment of One and why is it interesting for you?

The "Segment of One" in customer relationship management represents a concept to provide all customers with truly individual and customized offers and services at every moment of the customer relationship. Not in segments or audiences of a few hundred customers, but really individually in a 1:1 control.

In other words: Your customers are considered as a unique segment and receive offers that are specifically tailored to the respective context as well as the needs and preferences right at the moment of interaction. We are thus finally moving towards understanding, evaluating, and individually understanding every customer interaction in microjourneys, playing out an ideally possible offer in a 1:1 relationship between company and customer.

Segment of One as the ultimate goal for your customer relationship management

The relevance of offers or communication in customer interaction is the overarching goal pursued with the concept of the "Segment of One". It is intended to lead to a significant improvement in customer experience by addressing your customers very individually and offering personalized offers. This should result in a greater appreciation and more relevant perception of the interaction, thus customers are more likely to remain loyal to your company and allow communication with the company. At the same time, the "Segment of One" should naturally also contribute to an improvement of your business results, by increasing conversion rates and thus increasing customer value or profitability.

Using new technologies for individual customer dialogue

The "Segment of One" in customer relationship management is a frequently cited, but often not yet implemented concept that is made possible in the first place by the use of new technologies. Until recently, there were constraints in terms of real-time data availability, sufficiently performant decision logics around the topic of "Next Best Action" (NBA) and the sheer readiness of companies to really understand and shape customer relationships individually. New technologies as well as the necessity to stand out positively in the vast amount of interactions seem to herald a new evolutionary stage in CRM here.

In particular, the use of novel technologies in the field of AI and data processing as a company offers you the first opportunity to analyze the preferences and needs of your customers. To understand in detail and to draw real conclusions from this in order to ensure highly personalized communication based on individual offers and services – this is definitely how you take your customer relationship management to the next level.

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What are the challenges on the way to the Segment of One?

New data protection requirements based on the introduction of the Basic Data Protection Regulation (DSGVO) from 2018, the need for relevant communication and interaction, the sensible handling and combining of internal and external data as well as the availability of new technologies bring a whole lot of new challenges that need to be overcome on the way to a "Segment of One" approach. 

The loss of third-party cookies by mid-2024 in particular presents a major challenge, as it will become increasingly difficult in the future to get an accurate and consistent picture of the interests and needs of your customers. Companies are also faced with stricter data protection requirements around the ePrivacy Regulation, which came into force with the new General Data Protection Regulation (GDPR), which require careful handling and processing of customer data. More and more consumers also value the protection of their personal data and want to decide for themselves which data they want to share for advertising purposes.

As a company, you therefore face the great challenge of finding the right technical set-up in the tension field between the wishes of the customers regarding data sovereignty, legal and regulatory requirements, but also your own interests in a relevant and offer-oriented interaction with the customers, as well as the best possible content control of your CRM measures to put on the road. The requirements around permission management add to this. 

The six biggest challenges for customer relationship management and the path to the "Segment of One" can be found here: 

• Loss of Third Party Cookies & Emergence of New ID Ecosystems
• Customers are increasingly valuing data protection & data sovereignty
• Handling large amounts of data in real-time / Creating Customer Data Graph
• Value consideration and profitability are the future in customer relationship management
• Relevance of interaction before customer and context-related customer dialogues
• Integration of new technologies into existing Marketing Tech-Stack

New technologies enable the Segment of One

The concept of the "Segments of One" seems to be a good and viable solution to position oneself in the tension field of the aforementioned challenges. In order to meet these challenges very specifically and to take your customer relationship management to the next level, it is important to use new technologies and software solutions. Keywords like Customer Data Platform (CDP) or Reinforcement Learning from the field of artificial intelligence are certainly to be mentioned here. It is also important to find a sensible concept for building up the entire CRM tech stack specifically for your company and to find answers to questions around "Best-of-Suite vs. Best-of-Breed".

The goal for your company must be to learn from the available data and to recognize patterns in order to create personalized offers and to hand them over to the contact channels.

Building a detailed customer profile with a CDP

A Customer Data Platform (CDP) is a powerful technology in customer relationship management that supports companies in creating a comprehensive customer profile. By combining customer data from different sources such as websites, social media platforms, email marketing, and transaction data, companies can create a 360-degree image of the customer and always update it dynamically.

The CDP enables companies to get important insights into the behavioral patterns and preferences of their customers in order to develop personalized marketing campaigns and sales strategies. Furthermore, companies can collect and analyze customer information in real time using the CDP to quickly react to changes in customer behavior and increase customer loyalty. By using a Customer Data Platform, companies can thus respond more effectively to the needs of their customers and build more successful customer relationships. At 
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⁠OMR Reviews, you can find a Overview of available Customer Data Platforms.

Output of context-related offers through AI

With the arrival of artificial intelligence (AI) in real and practical application cases around customer base management, new possibilities are now available. The great strength of AI lies in its ability to help companies build an individual customer dialogue in a self-learning and highly automated way, and as a result, to deliver offers and services to customers that are perceived as highly relevant by customers. The continuous relevance of offers and services is ensured by the integration of a Reinforcement Learning (RL) component and the associated flow of feedback from the channels.

Based on behavioral patterns and past transactions, AI can analyze the preferences and needs of the customers and create predictive models to give personalized recommendations. These recommendations can then be played out on various customer touchpoints such as websites, email and social media channels to encourage customers to make a purchase.

By using AI in customer relationship management, companies can improve their marketing strategies and build more successful customer relationships by gaining a better understanding of their customers' needs and creating individual offers that appeal to the customers.

At OMR Reviews, you can find an Overview of available AI text generators.

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Perfect Match: Customer Data Platform and Artificial Intelligence

The interplay of Customer Data Platform (CDP) and artificial intelligence (AI) is a "game changer" for customer relationship management in your company. The CDP is responsible for building a detailed customer profile and collecting information from different sources. The AI then uses this profile to create matching offers and send them to the appropriate customer contact channels in both inbound and outbound. By combining CDP and AI, companies can develop personalized and targeted marketing and sales strategies, thus building more successful customer relationships. With this, we can come very close to the idea of an individual playout in the sense of the "Segment of One".

Use Case AI-NBA: How can Reinforcement Learning help you here?

As already mentioned, artificial intelligence can be a crucial technological component for enabling the "Segment of One" in customer relationship management. One manifestation of artificial intelligence, with which we have already successfully implemented projects, is so-called Reinforcement Learning (RL).

Optimization of customer dialogue through Reinforcement Learning

Reinforcement Learning is a learning approach based on reward systems. The algorithm here is trained to execute certain actions by interacting with the environment to achieve a rewarding goal. This approach is particularly suitable for making decisions in a dynamic environment where there are many uncertain and unpredictable factors or offers – like in customer relationship management.

Illustration, what RL does: State – Reward – Action

By using Reinforcement Learning, companies can respond more specifically to the individual needs of their customers and bring the customer experience to a new level. An example here could be a personalized email newsletter. By collecting data about the behavior of customers, such as clicks and interactions with previous newsletters, a reinforcement learning algorithm can be trained to select the best possible content and offers and present them in the next newsletter. This leads to higher customer loyalty and a better customer experience.

What does Segment of One mean for your company?

Future corporate success in competitive and saturated markets will, in our view, strongly depend on the abilities of a company to ideally service and develop its customers. The concept of the "Segment of Ones" describes an ideal image that must bring together all the following aspects: 

Optimization of Customer Experience and Customer Value (Relevance in Customer Relationship Management)

Improvement of the Customer Experience, which has a positive effect on customer loyalty and customer value. Because customers feel understood and appreciated when they feel that companies know their needs exactly and can make them suitable offers.

Automation of processes (Marketing/CRM Automation) 

Likewise, by using the technologies mentioned above, companies can also automate and optimize processes in customer relationship management. This results in faster response times to customer inquiries and more efficient processing of orders and returns.

Freedom for new value-adding activities

The use of artificial intelligence in customer relationship management changes the activity of campaign managers. Previously, they were primarily responsible for performing and optimizing the selections for campaigns. But in the future, this task will be taken over by artificial intelligence. This allows campaign managers to focus on maintaining and optimizing the algorithm to ensure that artificial intelligence produces the best possible results.

In addition, they can focus on other aspects of campaign planning and implementation, such as developing creative campaign ideas, cooperating with other departments, and managing budgets. By using artificial intelligence, campaign managers can therefore concentrate their time and resources on strategic tasks instead of dealing with the manual selection of target groups.

The human factor remains important

Overall, the use of new technologies in customer relationship management opens up many opportunities to improve and deepen customer relationships. However, you should always make sure that the use of technology does not come at the expense of human interaction. Because despite all technological advances, personal interaction with your customers remains a decisive factor for successful customer loyalty.

What can Segment of One look like for you? 

To approach the concept and implementation of the "Segment of One" concretely, it is important to think about the following aspects and possibly make decisions: 

• Strategic importance of CRMs in the company and for my corporate success: Is CRM already firmly anchored in corporate strategy today and is customer centrality not only a wish, but lived practice? If so, your company seems ready for the next evolutionary stage
• Data-driven CRM: Are all relevant data available centrally in the company for the CRM? In real-time and without manual hurdles or delays? If there are still tasks to be done here, a CDP could be a sensible solution, in any case an excellent data strategy and availability is the basic prerequisite to really bring CRM to the 1:1 level.
• Is there a willingness to abandon a manual, human-driven offer and service logic (NBA logic in general) in the future and to leave control and coordination to an AI algorithm? This is something that most organizations struggle with in our experience and it requires suitable solutions to undertake this "loss of control".
• Sensible integration into the CRM Tech Stack: The CDP and AI need to be integrated into the existing CRM tool landscape as required and to fit perfectly.
• Willingness to change roles & tasks: With the use of AI and a high degree of CRM automation, new, different tasks, job profiles and roles come along – this needs to be considered in parallel and accompanying and supported by suitable measures.

If you can support all of the above points, the path to the "Segment of One" is open for you and your company.

Conclusion 

With the use of artificial intelligence and Reinforcement Learning in customer relationship management, the "Segment of One" becomes possible in your company as well. Through individual approach and personalized offers, you can increase customer satisfaction and build long-term customer relationships. The key findings for you are:

• Artificial Intelligence enables context-related offers and thus increases customer value and the customer experience
• Reinforcement Learning helps companies to better understand their customers and to play out personalized recommendations
• The loss of third party cookies and the importance of permission management make personalized customer approach more difficult, but can be overcome by using new technologies
• Companies should focus on collecting first-party data and use this intelligently to play out personalized offers
• The "Segment of One" is an important factor for successful customer loyalty and long-term success in the company.