Increasing competition in eCommerce means there’s little room for mistakes. Convincing a customer to convert means providing them with a flawless experience from discovery to checkout.
But doing that requires understanding exactly what your customers want. And in many cases, that means segmenting your customers based on the way they shop, the channels they use, and the outcome they expect.
Customer segmentation, whether done online in eCommerce or at a brick-and-mortar retail store, is one of the most effective strategies for ensuring profitability in the long-run even in the face of changing markets and competition. Your client base is a diverse set with different needs and preferences, so appealing to individual segments of the market is the best way to cast the widest net.
Read on to learn the basics of eCommerce customer segmentation, as well as a few strategies you can use to increase your sales.
What Is eCommerce Customer Segmentation?
Marketing specialists study customer behaviors and expectations all the time and probably notice patterns and trends in the data. They might discover ways to categorize the clients into groups with similar interests and develop specialized marketing initiatives for each.
This strategy is much more effective than blindly trying to appeal to everyone, which is ultimately what you’re doing when you send out the same advertisement or email to everyone on the list of potential clients.
The benefits of segmentation include:
- Honing your focus on the most profitable customers.
- Improving customer service and satisfaction by appealing to specific needs.
- Giving you market research data to tweak products and services
There are also many ways to segment the audience. Some examples of eCommerce segmentation strategies are:
- Demographic: Age, gender, income, and other demographic traits have an influence on purchasing habits.
- Behavioral: How has this customer interacted with your business in the past? How regularly is a purchase made, or how often does the customer visit your website or location? Would you consider the customer a price-conscious buyer or an enthusiast willing to pay for quality?
- Locational: Geographic location has a significant bearing on purchasing trends for many customers, especially if you deal with local or seasonal goods.
Need more concrete examples? Let’s get into some specific ways to approach retail or eCommerce segmentation.
The Most Important Customer Segments for eCommerce Brands
If you’re interested in market segmentation but are not sure where to start, the following are some common segments used by online and physical stores.
The Frugal
Let’s start with one category that can apply to both eCommerce and retail segmentation. Some buyers are coupon clippers; they scour social media for promotions and giveaways all the time. Offering discounts can be used to your advantage as a business. You can also:
- Offer bundle discounts
- Provide information regarding similar products
- Ask directly for feedback regarding the purchase to learn more about the client’s needs
Don’t think of discounted transactions as lost profits. If done right, they can provide you with a more consistent stream of business compared to the competition.
The High Spenders
On the opposite side of the coin, we have the type of customers who spend more than other segments of your client base. We can define this group as all buyers who spend more than the average customer lifetime value (CLV). It makes sense to identify this group early on and focus your marketing efforts there. For example,
- Regular messages thanking high spenders for their loyalty to your brand.
- Fast and free shipping options
- Special bundles and value packs
- Dedicated channel for communication and service
High spenders are typically responsible for a large portion of your overall profitability, so spare no expense in making sure the customer experience in this segment is flawless.
The Cart Abandoners
Anyone working on the segmentation of eCommerce will tell you about the frustration of online shoppers who abandon their carts right before checkout. Giving that little push necessary to follow through with the sale is a challenge that marketers today are still working on.
Cart abandonment can happen for a variety of reasons, from a hidden shipping fee to a sudden realization that the need for the product isn’t as strong anymore. Either way, sending out a reminder email later regarding the cart can be an effective form of action.
Just don’t go the lazy route and send out generic “come back, please” messages. Use customer segmentation to determine related products that might be more enticing or provide a customized message that shows you relate to the needs of potential buyers.
The Indecisive Buyers
A related group is the customer unsure of the purchasing decision. This category might browse through your store shelves constantly or visit the website multiple times without making a purchase. Pushing for the conversion can be as simple as:
- Providing additional information about your products, such as adding more photographs online or highlighting the unique selling points of an item.
- Emphasizing your cheap/free shipping rates and generous return policies.
- Add product comparisons and wishlist functionalities to your website to make the decision easier.
Indecisive buyers can be identified based on the ratio of the number of visits compared to the number of transactions made.
The One-Time Purchases
Unless you work in a general goods store, chances are that some customers will come in to buy one single product before leaving. You can actually drive this segment towards becoming more loyal buyers by:
- Upselling and cross-selling
- Offering discounts and coupons for other products
- Creating unique marketing initiatives that make your brand memorable
If you’ve ever received coupons or promotional emails after shopping at a new store just once, you’ve been identified as such a customer segment before.
What You Can Do To Implement Stronger Customer Segmentation
Now that we’ve talked about examples of segmentation in action, you might be wondering what best practices to keep in mind if you want to apply segmentation properly to your online or physical store.
- Define segments clearly. A more exact definition separates segments properly so that any marketing efforts you make fit in with the clients involved.
- Use the information you gather. Is focusing on a particular product lineup going to appeal to the right segments? If so, adjust your eCommerce catalog management accordingly.
- React to changes in real-time. Much like your clients, segmentation changes quickly over time. Remember to keep up with changes in the data for best results.
Get eCommerce Segmentation Right With Algopix
Real-time market research is at the heart of any customer segmentation system. So, where do you get up-to-date information about the market, your customers, and their needs?
Finding deep insights into the marketplaces you sell on isn’t easy. And in many cases, it may require using several tools to identify new strategies and patterns.
Luckily, there’s an easier way. Algopix is the leading tool used by brand and product managers to identify industry trends, customer data, and more.
Are you looking to implement a cross-channel customer segmentation strategy? Book a demo with one of our customer segmentation specialists today to get started.
