AI and Machine Learning in Marketing: 101

AI and Machine Learning in Marketing: 101

If you’re a marketer, you’ve probably got a few questions about what’s “under the hood” of the martech tools you’ve adopted. However, your biggest concern is that you want solutions to be easy to use, and able to drive the results you expect – whether it's creating and deploying offers, increasing customer engagement or improving sales.

Today, artificial intelligence (AI) and machine learning (ML) are all the rage, and everyone is touting how these marketing tools make their solution a game-changer.

But do you truly know what AI and ML is? Or are you being caught up in the buzz about what you should have, even if you’re not sure what it is and how it works?

If you’re in the ‘not sure’ camp, we’ve put together this primer to help you gain a basic understanding of AI and ML, how they work together, and why it’s important to distinguish between the two when you’re evaluating new marketing technologies.

In This Article You Will Learn

What Is Machine Learning?

Machine learning for marketing is in a nascent stage, but it is poised to play a much more important role as the industry gains a clearer understanding of the possibilities it presents.

Although they are buzzwords that are often interchanged, artificial intelligence (AI) and machine learning are not one and the same. Machine learning is a subset of AI that is being used to make AI even more intelligent.

Ultimately, machine learning helps humans solve problems in a more efficient way. Machine learning occurs when a computer is fed information to analyze, then it "learns" as it discovers trends and patterns. Without explicit programming, the machines teach themselves algorithms that enable them to gain better insights from the data. By feeding the machines more data, the algorithms continue to be refined, making the data analysis and insights even more accurate.

Machine learning is revolutionizing marketing and has quickly become one of the most impactful technologies available to marketers today, enabling them to quickly and efficiently analyze huge amounts of data without errors - something that is not humanly possible to do. Advanced machine learning is playing an increasingly important role in several aspects of digital marketing, including

  • Personalized marketing
  • Content optimization
  • Segmentation
  • Intelligent chatbots

The Difference Between AI and ML

AI is sometimes referred to as machine intelligence since it can be loosely understood as incorporating human intelligence into machines. Machines are considered “intelligent” if they can complete tasks based on a set of problem-solving rules, or algorithms. As a result, artificial intelligence is a very broad concept that can range from “Good Old-Fashioned AI” to futuristic technologies like deep learning.

Many marketing platforms claim to use AI. But in reality, what AI actually is to them can vary greatly – from a simple algorithm, search capability, or chatbot to something more sophisticated, complex, and powerful.

Machine learning is a subset of, and a technique for realizing AI. With ML, a computer is empowered with the ability to learn through a method of training algorithms to make decisions. This training requires massive amounts of data in which the algorithm can keep learning more and more about the information it processes from social media channels and other touchpoints.

Machine Learning – The Secret Sauce for Your Personalization Marketing Strategy

ML is an absolute necessity for brands interested in designing highly personalized offerings. ML enables the processing of vast amounts of data, from info collected by the data science and IT teams to sales, customer service, and customer loyalty sources. So, instead of programming a specific set of instructions, the software is “trained” as it takes in all this information, and continues to “learn” as more data is added.

This is ideal for marketing applications, in which the machine can evaluate customers' interactions in real time, and enable marketers gain better insights into each individual so they can tweak offers to get better results.

These unique capabilities make ML essential if you’re trying to go beyond segmentation and micro-segmentation marketing to achieve true 1:1 personalization. ML-enabled solutions can help you deliver the right offer to each customer, at just the right moment.

How Machine Learning Can Enhance Marketing

Let’s look at some more specific examples of how marketers can apply machine learning to improve engagement, increase customer lifetime value (CLTV) and make them more loyal to your brand:

Customer behavior prediction

Anticipating what a customer wants or needs before they realize it is something that marketers have been trying to achieve for years. It's only with the introduction of machine learning that this can become a reality.

Machine learning enables brands to gather insights on customers’ preferences and determine what they will do next. These insights can help a brand understand if some is likely to leave your website to look for a better deal elsewhere, or if they are a candidate for conversion, then react accordingly.

Amazon is most prominently known for its use of customer behavior prediction. They have used machine learning and prediction models to refine product recommendations, which drive 55% of its sales. Amazon also leverages customer behavioral data to forecast product demand and optimize inventory, to ensure they're prepared for seasonal or trend-based consumer demand.

Engaging Users with Intelligent Chatbots

If you've used Siri, Alexa or other similar interfaces, then you've had conversations with intelligent chatbots. And increasingly, you see these solutions integrated into websites, as pop-ups, to assist with customer service and support. These virtual robots also play a critical role in digital marketing.

Through the use of natural language processing (NLP), intelligent chatbots enable personal conversations between consumers and brands. These conversations allow the intelligent chatbots to collect user data and continually learn from them to provide more accurate answers over time. The results from natural language generation tools can then be analyzed to deliver better service and a more personalized experience for your customers, and improve loyalty to ensure they continue to return to your brand to purchase more products and services.

Customer Segmentation

In the past, marketing efforts, such as advertising, have been scattershot, leading to a lot of waste and inefficient use of marketing dollars. However, the use of machine learning in marketing campaigns helps brands better target their messages through customer segmentation. The insights resulting from machine learning take out a lot of guesswork. Marketers can better understand which messages will resonate with their target customer groups and spur them into action - either greater engagement or conversions.

With so much purchase data available, machine learning can help you understand which products are often bought together, and the types of items on which consumers may splurge, to deliver more effective promotions. Machine learning also supports customer segmentation into groups of high-value prospects, who share attributes with existing customers and will be the most likely to become customers.

Improved personalized marketing

Consumers today face a barrage of marketing messages, whether they're online, watching TV or out in the 3D world. The best way to cut through the noise is if a consumer believes your brand is speaking directly to them as individuals. In fact, Salesforce research shows that more than half of consumers are likely to switch if they feel brands are not personalizing their messaging.

Personalized marketing requires that every touchpoint in the customer's buying journey - from mobile marketing and email to product offers and promotions - be tailored to each individual. This level of personalized marketing is not possible without machine learning, which leverages the continuous flow of information about each consumer - from purchases to clicks to preferences - to ensure that the right offers can reach the right people, at just the right time.

Top 5 Machine Learning Algorithms for Marketing

Now that you have a better understanding of the ways in which you can use machine learning for marketing, let’s dig in and take a deeper look at the five top types of algorithms that deliver the results you’re seeking:

1. Clustering algorithms

A type of unsupervised machine learning algorithm, clustering algorithms are used to analyze unlabeled data and put it into groups with similar traits. These would then be assigned into clusters, which can be used for customer segmentation based on purchase history, app behavior and other metrics, social media analysis, or developing recommendation engines.

2. Regression analysis

This supervised method of machine learning defines relationships between a dependent and independent variable. The most popular types of regression analysis are linear and logistic modeling. Linear regression looks at various data points to define which variables are the most significant predictors, to determine trends. Logistic regression predicts the value of data based on prior data set observations and is commonly used in customer service to personalize offerings using historical shopping behavior.

3. Collaborative filtering

One of the most commonly used recommendation algorithms, collaborative filtering examines individuals with similar interests, analyzes their behavior, then recommends the same items. The basic approaches include user-based or item-based collaborative filtering. Either way, the steps are the same: first, you need to find out how many users or items in the database are similar to the given user/item, then you weigh the arithmetic mean based on the degree of similarity.

4. Hybrid recommendation algorithms

These types of algorithms use deep learning to combine collaborative filtering and content-based models. This enables marketers to fine-tune what they know about interactions between users and items and removes the possibility of over-simplifying users' tastes.

5. Reinforcement learning for sequential marketing decisions

Also known as Markov chains, these are a way to statistically model random processes. These take into consideration real-time customer data without factoring in historical information. These typically have to be combined with other machine learning methods to achieve hyper-personalized offers.

By applying one or all of these types of algorithms into your machine learning for marketing, you will be able to more effectively target customers, improve engagement, strengthen customer LTV, and grow revenue.

Conclusion

Personalization is often a big challenge for marketers because offer creation has long been a time-consuming process that cannot scale to address hundreds of thousands, or even millions, of customers. ML helps facilitate the marketing automation process so that 1:1 offers can be achieved, even if your brand has millions of loyal customers.

Integrating ML into your marketing toolbox can help you automate processes, such as identifying relationships between disparate data. Then, as more data is gathered with every customer interaction, ML gets smarter in conjunction with marketing analytics to enable you to quickly test and analyze alternatives, and fine-tune offers to deliver the most impactful customer journey to each person.

If you’d like to learn more about AI and ML in marketing, and how they can help you deliver effective personalized offers more quickly, download our white paper, “Bridging the Gap Between Data Science and Marketing: How to Achieve Personalization at Scale with AI and ML.”

Learn More About Artificial Intelligence for Marketing

Artificial intelligence and machine learning are an absolute must for brands interested in designing highly personalized offerings. AI enables the processing of large amounts of data collected from IT teams, sales, and customer service. AI algorithms are trained as it takes in all this information, and continue to “learn” as more data is added. This way marketers gain better insights into each individual so they can tweak offers to get better results.

10 Artificial Intelligence Marketing Tools Driving the AI Revolution

Marketers can now use AI-based tools to analyze customer data and ultimately design and deploy highly personalized offers that customers find appealing. This article reviews 10 cutting edge AI marketing tools that can improve your results.

Read more: 10 Artificial Intelligence Marketing Tools Driving the AI Revolution

See Our Additional Guides on Key Marketing Topics

We have authored in-depth guides on several other hyper-personalization topics that can also be useful as you explore the world of AI for marketing.

One-to-One Marketing Guide

Learn how one-to-one marketing can impact marketing effectiveness and your bottom line, and how brands are scaling personalization across digital channels.

See top articles in our one-to-one marketing guide:

Customer Loyalty Guide

Today, marketing is not just about customer acquisition but also retaining your biggest fans. And the best way is to increase customer loyalty through a loyalty program.

See top articles in our customer loyalty guide:

Customer Engagement Guide

Learn about the importance of customer engagement, and get practical advice to build a customer engagement strategy that transforms customers into fans.

See top articles in our customer engagement guide:

Customer Segmentation Guide

Traditional types of customer segmentation fall short on many accounts. Learn how AI and ML can personalize offers with the best combination of incentives.

See top articles in our customer segmentation guide: