How to Thrive in the Algorithmic Age: It’s (Finally) Time to Let Go of Detailed Segmentation

You’ve seen those perfectly tailored ads — the ones that somehow seem to know exactly what you want, what’s top-of-mind, or what you were just about to buy. One day you buy a travel backpack online, and the next, Instagram bombards you with ads for group travel, meticulously matching your age group, dream destinations, and budget. And the people in those inspiring images? They even look like you and your favorite travel companions, hiking in the very place you’ve been daydreaming about. 

This level of hyper-personalized advertising defines the modern digital marketing landscape. Instead of sharing broad-appeal ads with an equally broad audience and hoping for the best, digital marketers use detailed segmentation, sorting audiences by gender, age group, ethnicity, education, interests, and many other factors. And with those segmented audiences in place, they craft micro-targeted campaigns with these specific customer profiles in mind.

But now, just as digital marketers mastered the art of segmentation, the game is changing again.

Micro targeting in Flux

Detailed segmentation is even more challenging, given recent privacy laws restricting first-party data use and limiting profiling and targeted advertising. While these policy changes strengthen consumer privacy, they also throw a curveball at digital marketers: the precision that makes microtargeting click — getting a highly-tailored message to a niche audience — is at risk because of broader audience requirements.

These shifts have pushed marketers to reassess their strategies, with half now questioning the value of traditional customer segmentation models.

So how can digital marketing adapt to this new landscape?

The good news? While detailed segmentation may be losing effectiveness and availability, technologies like generative AI marketing and predictive analytics have grown powerful enough to fill the gap. Thanks to advances in artificial intelligence (AI), advanced platform algorithms have improved remarkably over the past decade. Tech giants like Google, Meta, and TikTok, among others, argue that algorithms are now more effective than detailed segmentation. These platforms are also beginning to require advertisers to target larger audiences to access certain features and ad formats.

Algorithmic Evolution

With micro-segmentation growing more constrained, marketing tactics need to be adjusted. Digital marketers must let go of the manual work central to audience segmentation and trust algorithms to analyze data and determine the most relevant audience.

More importantly, marketers must shift toward a broader targeting approach, extending outreach to a larger audience — but with a finely tuned strategy that directs algorithms toward desired demographics. For example, if young urban foodies are the target, using creative imagery and text that resonates with this demographic is essential to guide the algorithm effectively.

Digital marketers can also leverage algorithms to delve into values and psychological drivers that connect with the audience. It’s like an election — just like voters choose candidates based on political leanings and attitudes, consumers make spending decisions guided by emotions and beliefs. Marketers can identify these driving forces by setting hypotheses about what they may be, and testing them through tailored messaging.

A good example? Let’s say your audience is those young urban foodies. To test the hypothesis that these audiences value hassle-free restaurant booking experiences, marketers could create campaign messaging speaking to this value proposition. By analyzing how people respond to these messages, the agency can more precisely pinpoint primary drivers among this audience.

In this scenario, campaign messaging becomes a form of new micro-segmentation. Instead of relying solely on detailed data about individuals, marketers can now tap into broader motivational factors that influence a larger audience. This helps navigate privacy regulations and allows for a more dynamic and effective approach to reaching diverse customers. The focus shifts from targeting based on explicit individual data to crafting messages that resonate on a broader yet psychologically relevant level.

All this marks a significant departure from what is the current norm in digital marketing, and change always comes with resistance. Much like there were skeptics of micro-segmentation, some marketers are reluctant to shift toward algorithms. Especially among customer-based marketers, a strong inclination toward detailed segmentation persists.

But evolution is inevitable – and these aren’t the final changes coming down. Google, for example, plans to start phasing out third-party cookies next quarter, nudging everyone toward broader strategies based on algorithms. Savvy marketers must refine their game plan now before the runway comes to an end.

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