Hierarchical customer segmentation is a method of categorizing customers into nested subgroups based on demographics, behaviors, purchase history, or engagement levels. Unlike flat segmentation, hierarchical segmentation allows businesses to analyze customers at multiple levels, from broad categories to granular sub-segments. This approach enhances targeting precision in CRM-driven marketing campaigns. For example, a retail company might first segment customers by region, then by purchase frequency, and finally by product preference. AI-powered CRM systems can dynamically adjust segmentation based on real-time data, ensuring that marketing and sales teams reach the right audience with personalized messaging.