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How Customer Segmentation Can Improve Ecommerce Sales

Customer Segmentation in E-commerce
Written By Louise
On Nov, 27 2019
4 minute read

It is essential for e-commerce businesses to understand the way their customers think and act. What values do they hold? How often do they shop? What do they do for a living? And, how do they really perceive themselves?

Of course, these aren’t easy questions to answer. But, by being open to exploring the world of customer segmentation, businesses can gain clarity and insight into what makes their clients tick. Through the categorization of customers into groups defined by common characteristics, businesses are able to market on a more personalized level - and increase e-commerce sales as a result.

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The benefits of customer segmentation

Without customer segmentation, an e-commerce brand can only hope that its marketing efforts resonate with potential clients. Untargeted guesswork is quick and easy, of course, but it doesn’t produce anywhere near the same quality of results as highly targeted messages do.

By segmenting their audience, brands are able to shape their marketing campaigns to catch the attention of specific groups. This comes with a huge range of benefits:

In-Depth Customer Segmentation

Building better relationships with customers

Let’s say an e-commerce brand sells all-natural cleaning products. Through testing, they may find one marketing message is effective in engaging suburb-dwelling new parents; perhaps it’s a message that conveys the product is safe for the entire family. On the other hand, they might find another message draws in pet owners who live in cities - perhaps something that speaks to how well the products kill odors.

Customer segmentation empowers the brand to relate better to their customers and make them feel recognized. In turn, it helps to retain these clients for longer.

Bringing in new clients

Customer segmentation can also help brands bring in an entirely new audience group interested in their product. When Puma wanted to increase its popularity amongst female consumers back in 2014, for example, the brand partnered with Rihanna who worked as their global ambassador and creative director. A year later, their fourth-quarter sales had increased by 17.1%, which the brand says is thanks to the pop star.

Getting feedback from specific segments

Once brands have a clear understanding of which customer segments buy from them most, they can focus on improving products to address clients’ wants and needs. If a furniture brand understands their most profitable clients are condo-owning Millennials, for example, they might focus on designing mid-priced furniture for smaller spaces.

Choosing the right communication channel

E-commerce brands reach out to their clients on a range of communication channels. By understanding who their most profitable clients are, brands can gain insight into where their marketing spending really counts. This means brands have the opportunity to target an audience segment with a message that resonates most with them on the right channel - whether it be email, social media or SMS.

What are the 4 types of market segmentation?

When it comes to segmentation, there are four main factors that are most often used to break up and group audiences:

Geographic segmentation

As you might expect, geographic segmentation groups customers based on location, using filters such as country, city, or climate, etc. The all-natural cleaning products brand mentioned at the beginning of this article may market dryer sheets to customers in cold climates who use their dryers regularly, but decide against doing so for customers in warm climates who tend to dry clothes on a rack.

Demographic segmentation

Demographic segmentation is also quite straightforward. It divides customers based on things like gender, income, and age. It can also cover education, nationality or lifecycle stage - such as whether someone is entering retirement. This can be useful when selling a female-oriented product, or a service for people with a certain level of income.

Static and dynamic lists

Behavioral segmentation

This type of segmentation is all about customer actions, and groups customers based on their purchase history and spending habits. For example, the natural cleaning brand may choose to target customers who regularly buy natural hair and skin treatments - since they’re likely to be interested in other eco-friendly products or complementary items.

You can target these lists in a number of ways.

For example, by:

  • Recommending items that customers in the same segment also bought
  • Sharing exclusive offers on related items via email
  • Targeting highly relevant product ads on social media
  • Giving a related gift or discount on a certain essential item after a minimum purchase

Psychographic segmentation

Psychographic segmentation separates customers into distinct groups based on their values, interests, lifestyle, priorities, attitudes and other traits. This might mean marketing to customers who are environmentally conscious, or perhaps those who to take public transportation to reduce their carbon footprint.

Some of this information can be gathered quite easily through market research sites, a customer’s previous purchase history, or a listed geographical location. It could also be available on Google Analytics, or analytics found in a brand’s marketing automation platform.

However, in order to really delve deep into certain customer traits, more research needs to be done. You might use automated feedback collection emails, popups or onsite widgets to learn more about current or potential clients. You can then use this information to develop accurate market segmentation groups.

Dynamic versus static email lists

When it comes to email marketing and retargeting, your e-commerce brand should be sure to leverage both dynamic and static lists.

So what’s the difference? Well, with static lists, the clue is in the name; these email lists don’t change much. They contain important information relevant to a brand’s wider audience and are used for emails containing newsletters, news releases, or as follow-ups after events.

Dynamic lists, on the other hand, are always changing based on customer geographic, demographic, behavioral and psychographic information. These lists are for nurturing leads and closing sales. And as you can see, both static and dynamic lists are equally important.

There’s no doubt about it: customer segmentation is an incredibly important pillar in today’s marketing world. Customer segmentation gives brands everywhere crucial insights into what customers really want and need. In turn, brands can build loyal customer bases, reach new clients, and see your e-commerce sales go through the roof.

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