Meanwhile, discover strategies to boost conversion rates, transaction size, and customer engagement in our Idea Guide.
Although mass marketing strategies may still deliver some results, the consensus is that they're expensive and largely ineffective. Marketing technologies have evolved beyond delivering campaign messages to everyone and hoping enough people will buy. As an ecommerce marketer, it's your responsibility to identify customers and tailor your marketing messaging and offers to meet their needs.
Research has consistently shown that personalization significantly increases marketing effectiveness. However, many ecommerce businesses that serve a wide demographic of customers believe they can’t market to each customer as an individual. That’s where they’re wrong. It’s indeed possible for ecommerce brands to market to individuals to deliver a personalized online shopping experience they won't easily forget. Not only that, but it's something consumers are increasingly demanding, leading to ecommerce segmentation becoming an increasingly important trend to watch out for.
Customer segmentation in ecommerce entails dividing customers into smaller groups that share similar characteristics to improve marketing effectiveness. The segments will depend on the nature of your business and target customers.
For example, if you operate in the B2B space, you might segment customers based on their industry, the number of employees, location, purchase history, etc. If you’re a D2C business, segments based on gender, age, marital status, etc., may be more applicable.
Customer segmentation shouldn't just apply to one part of the customer journey either. A huge part of customer personalization and segmentation comes down to understanding what buyers need at every stage. If they're new to your brand, start by highlighting your bestsellers or why customers love you - save offers and product guides after they've shown some interest. Discover more about optimizing the customer journey with segmentation.
According to a recent survey by Researchscape, two-thirds of marketers reported using customer segmentation to deliver personalized experiences to their customers. These marketers reported an improved customer experience, conversion rate, and visitor engagement.
In the same vein, another report by Appboy revealed that sending marketing messages to well-defined customer clusters can boost conversion rates by as much as 200% compared with generalized campaigns.
In short, it's been proven time and again that segmentation significantly improves marketing efficiency. You're essentially breaking your customer base into easily manageable pieces, better positioning you to launch the most relevant marketing campaigns for each cluster. Admittedly yes, this takes more work, but at the end of the day, the time you spend on personalization will drive better returns on your marketing investment.
A couple of notes! While grouping your customers into segments, it's not unusual to discover an entirely new market segment or product ideas that would have remained hidden without segmentation. When this happens, you simply have to adjust your marketing strategy to fit the new opportunity.
Segmentation can also help identify customer groups that churn quickly or those that require extra attention. It also enables you to personalize your ad campaigns and ecommerce experiences to meet the needs of each user. The more you can satisfy your customers, the higher your customer retention rates.
You might be wondering what segments are most appropriate for your site. There are generally two strategies you can take. The first is based on your customer interests. to literally look at your website's navigation and collections. If you think it's worthy of creating a collection for, it's probably worth creating a segment for as well. These could be as basic as having a 'Male' vs. 'Female' segment, but it can also be significantly more complex. For example, a hobby shop could create a segment for every type of hobby product line they carry (trains, rockets, models, cars, etc.)
The second segmentation strategy is to look at your customer behaviors. The two of these strategies overlap a bit, but behavior is based more on a customer's browsing and purchasing behavior on your site, similar to the classic 'customer journey funnel' of Awareness, Interest, Desire, Action (and sometimes Advocacy). You can segment customers by how many purchases they've made, how often they make them, when they make them, and the size of their purchases.
You can also mix and match these strategies. For example, a sneaker store could have a specific segment dedicated to high value Nike customers, and send them targeted emails about new Nike drops or special sales.
Here are some of the critical customer segments every ecommerce store owner should pay attention to.
High spenders
This segment caters to your most valuable customers. They either have the highest average order value by making large orders, or the highest purchase frequency by shopping often. Either way, they're more profitable to you than any other customer segment, and you should do all you can to keep them for as long as possible.
Your marketing strategy should focus on showing appreciation, enhancing customer satisfaction, and introducing special offers to reward their loyalty. Some examples include:
Cart abandoners
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Cart abandoners can be tough to deal with. You wonder if the shopper was interrupted before completing the purchase, or the shipping fee was prohibitive, or they no longer want the product. Whatever the reason for cart abandonment, you should tailor your marketing messages to increase their chances of returning to complete the order.
Rather than stick with sending emails appealing to them to come back, you should consider introducing other beneficial promotional offers like subsidized shipping. You can also segment them based on the products they were interested in and entice them with related products.
Coupon lovers
If your ecommerce business uses coupons, you'll observe that some customers only buy with a coupon. Although you'll rather they pay the full price, you can still take advantage of their conservative spending habits. Simply segment them and ensure you give them as many coupons as you can afford to provide without hurting your bottom line.
Moreover, having a segment for coupon lovers saves you from giving coupons to all your customers. And since you're cutting back for people outside the customer segment, you won't be devaluing your products as much. Here are some other strategies to work your magic on coupon lovers:
Thrifty shoppers
Identifying your customers' spending habits is critical to effective segmentation. While some specific groups of customers may prefer spending big in one visit, others may prefer coming often and buying only what they need at that moment. The latter group are the thrifty shoppers. They typically have an above average number of orders but a relatively low customer lifetime value. Below are some possible tactics you can use to milk more out of thrifty shoppers:
One-timers
One-timers are a unique customer segment because they offer so much potential. Your marketing should involve getting them to come back and, hopefully, inspiring customer loyalty out of them in the long run. Here are some strategies that may help:
Registered browsers (leads)
This segment comprises customers who have interacted with your brand through pop-ups, email subscriptions, wishlists, etc. but have yet to make their first purchase. Your goal should be to convince them to take that big step and place an order. Here are some of the things you can do:
Loyals
Inspiring brand loyalty is the dream of every ecommerce store owner. The customers in this segment will not only buy from you, but also refer others and advocate for your brand. Loyal customers are usually high spenders, but some high spenders may not be loyal customers. Your loyal customers are another highly critical customer segment. Although they may not need too much convincing, you should still devise strategies that will reward them for their loyalty and ensure they continue being brand advocates.
Some suggestions include:
Customers can be grouped into different clusters based on the similar traits they share. The most commonly used segments employed by ecommerce brands include:
This broad segmentation category is one of the oldest and most common around. It divides customers into different groups based on demographics to allow for marketing personalization. Here are the most common demographic segments you can explore for more effective marketing:
Age
Shoppers from similar age groups may share the same interests. You can divide your customers based on generational groups like Gen Z, Gen Y, Gen X, baby boomers, etc., or age groups like seniors, middle-aged, young adults, etc.
Gender
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Men and women may have different shopping preferences across specific product categories. As a result, you may tailor your marketing campaigns to fit a gender. Still, you should be careful not to fall victim to stereotypes such as promoting household essentials exclusively to women or sporting goods for men only. You could be leaving a lot of money on the table and, at the same time, risk your brand being labeled as sexist. However, in some cases, it may make sense to target based on genders (i.e. a jewelry brand targeting men to recommend gifts for their partner).
Socio-economic status
This type of segmentation groups customers based on their purchasing power. Typically, you'd want to push high-priced or luxury items to customers with enough spare income and stick with the essentials when it's time to market for customers with low spending power.
Occupation
This entails grouping customers according to their profession and experience levels. For example, if your ecommerce store sells trendy fashion items, you may be better off focusing your marketing on models and PR professionals rather than doctors or university professors.
Marital status
Marriage can greatly influence peoples' purchasing habits and interests. Married people will most likely prefer buying household essentials to splurging on luxuries, even if they belong to the same age group. It's also worth noting that people who have been married for longer are more likely to have kids. Chances are you’ll have more success pushing school supplies or toys when catering to this demographic.
Your customer's location can significantly influence their shopping habits. For example, geographic location determines the climate in a region. So, if you're trying to promote sweaters, you'd want to target customers that live in a colder region.
Language
Segmenting customers based on language is essential if you're targeting international audiences. You won't want to send promotional emails in a language your readers won't understand or use a cultural nuance that some customers may find offensive or confusing.
Values
Customers naturally prefer to buy from brands that represent the values they share. For example, buyers that care about animal rights will gladly pay extra for cruelty-free beauty products. On the other hand, you'd get little success by dangling a mink fur coat in front of a vegan customer. In fact, they could take that as a reason to shop elsewhere. So, identify the causes your customers are passionate about and tailor your marketing messages to fit these causes.
Personality
Unlike demographics, using personality traits is a form of psychographic segmentation, and it entails grouping customers based on their personalities and promoting similar products to them. The different customer segments in this category can include introverts and extroverts, easy goers and go-getters, thrifty and extravagant shoppers, etc. You can better understand what personality your customers have via surveys, then tailor your promotions to fit each group.
Behavioral segmentation helps you predict what customers are likely to buy and when. With the right CRM platform, you can gather relevant customer data and draw valuable insights to inform your marketing decisions. Below are some relevant customer clusters you can create from on-site behavioral data.
Purchase history
Purchase history is a vital segmentation tool for any savvy customer. It can guide you on similar products to recommend, upsell or cross-sell offers, and complementary products to suggest. For example, a shopper that purchased an iPhone may jump at a promotional offer for Airpods or a matching phone case. In other cases, you may introduce a more recent version of the same product or offer trade-in deals.
Awareness (first-time visitor)
This segment covers new visitors that have only learned about your website recently. For this segment, you'll want to monitor the lead magnet that attracted them and the products they're interested in. It's vital to be patient with this segment of customers because they can easily get turned off by aggressive marketing.
Consideration (casual browsers)
This segment is one step above the awareness segment because the members have viewed a product page or two, and you have a better idea of their preferences. The goal is to keep them engaged until they are convinced enough to place an order. You can achieve this by recommending similar or complementary products or providing content that will spark their interest.
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Acquisition (active customer)
These customers are very close to making a purchase, but they're not quite there yet. For example, they may have wishlisted items, added products to their cart, or even added their payment details. Even though they're just a click from buying, you'd benefit by sending abandoned cart emails or dangling enticing promotional offers.
Purchase (active shopper)
This customer segment comprises people who have bought once or twice from your store. You'd typically want them to keep visiting till they become loyal customers. Your focus should be getting them to sign up for your newsletter or follow you on social media platforms, and offering deals that will stimulate repeat purchases.
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Advocacy (loyal shopper)
As mentioned earlier, your loyal customers or advocates are your store's biggest assets. They'll choose you over your competitors and encourage their friends to do the same. Your marketing efforts for this segment should make them feel appreciated and special. New product trials, exclusive discounts, and early access to sales promotions are a few useful strategies you can employ.
The ultimate aim of customer segmentation is to offer personalized experiences for each customer cluster. Still, a lot of marketers do not fully understand what comes next after segmentation. Here, we offer some suggestions on the critical areas of your business to personalize and improve conversion rates.
Website
Your website should be equipped with automation tools to help you identify customer segments and offer them personalized experiences while scrolling through your store. Website personalization strategies include:
For example, while first-time visitors may get pop-ups that prompt them to sign up for promotional campaigns or fill up their wishlists, loyal customers should not be getting the same pop-ups. Instead, your website should offer thoughtful product recommendations based on their purchase history or get them to sign up for loyalty programs.
Email marketing personalization remains one of the most effective ways of driving customer retention and loyalty for many ecommerce brands. However, with the declining open rates of promotional emails, it's vital to properly plan and execute your email marketing campaigns for the best results. Here are a few keys to email personalization:
Ads
If you wish to improve your conversion rate, you should have separate advertising messages for each customer segment. Aside from the fact that ad personalization gives you a competitive advantage, it also makes your customers more receptive to your ads. As always, you'll need all the customer data you can get to achieve the desired level of ad personalization.
Data gathering and analytics are the foundation of all segmentation and personalization efforts. As a result, every ecommerce store owner needs a reliable customer data platform to segment effectively and personalize the on-site and marketing experiences for each customer segment.
LimeSpot is an advanced personalization platform that offers customers personalized experiences every time they interact with your brand. The platform's numerous features and automation capabilities guarantee a significant boost in your bottom line while ensuring you do less work. Below are two major ways LimeSpot can help you deliver personalized experiences, converting casual shoppers into repeat customers and brand loyalists.
Website personalization
LimeSpot delivers real-time personalization at scale across web and mobile browsers. It can:
Email personalization
LimeSpot delivers personalized email experiences to every customer. The platform gathers pre-and post-campaign launch data to inform your marketing decisions and guide your campaign modification strategies. LimeSpot can:
Your marketing and merchandising campaigns will not achieve the desired results if you keep adopting a one-size-fits-all approach to advertising. To get the best results and inspire brand loyalty in your customers, you have to go the extra mile by segmenting them and personalizing their shopping experiences.
Knowing critical customer segmentation strategies and how to track them is a great way to start. Importantly, marketers should understand that they do not have to target all customer segments at once. For better results, concentrate on your most valuable segments and tackle the smaller segments as your advertising budget increases.
Get started with LimeSpot today.
