MARKETING SEGMENTATION IN ECOMMERCE - METHOD AND EXAMPLES OF SEGMENTS

Marketing segmentation is still under-exploited in e-commerce, through ignorance or because it is considered too complex to set up. When a merchant is building their marketing strategy, customer segmentation is rarely the first idea that comes to mind. And that's a shame, because we will see that even basic ecommerce segmentation can have a big impact on the marketing and sales performance of the company.

MARKETING SEGMENTATION IN ECOMMERCE - METHOD AND EXAMPLES OF SEGMENTS

We will, step by step, explain how to build a marketing segmentation for your ecommerce activity. More than an article, we offer you a guide that is both comprehensive and accessible to all. We will see, in order:

  • Why ecommerce companies have an interest in implementing marketing segmentation.
  • How to take your first steps in segmentation.
  • How to build marketing segments based on the life stages of your customers.
  • How to use your marketing segments effectively (Objectives> Opportunities> Campaigns and scenarios)
  • More than 45 examples of ecommerce customer segments to go further.
    To help you navigate this guide more easily, we have provided a summary. If you are already convinced of the value of marketing segmentation (that you are "in consideration" rather than "awareness" as they say), I advise you to go directly to Section 2.

Before embarking on customer segmentation, it is advisable to have a clear vision of the different stages of your customer journey and the different phases of customer life. How does a prospect become a customer? How does a customer become a regular customer? etc. At Cartelis, we often recommend starting with a mapping of customer journeys. Here is an excerpt from a customer journey designed with Google Sheets for one of our customers:

Section 1 - Why is it so important to segment in ecommerce?

Remember, very quickly, the definition of customer segmentation. Segmenting, as the name suggests, is creating homogeneous customer segments - grouping together customers who share common "attributes", "characteristics" - in order to then target them in marketing campaigns or scenarios. Ultimately, segmentation is used for marketing targeting, to implement differentiated marketing on each segment vs. mass marketing consisting in sending the same campaigns to all the customers in your base. Via segmentation, you can propose offers, products, services (but also possibly types / levels of "speech") in line with the needs and expectations specific to each category of customers.

In the end, the interest is to improve the relevance of the messages (the match between offers and needs) and therefore their performance, it being understood that a customer is more likely to convert if you offer him a product in line with his interests and needs.

The segmentation of a customer base is done on the basis of segmentation criteria, which correspond to attributes. These attributes can be demographic (age, age group, gender), geographic (country, department of residence, municipality, point of sale closest to the place of residence, etc.), psycho-graphics (centers of interest, values, opinions), etc. You can segment your customers based on a lot of criteria. This is what makes the exercise of customer segmentation so difficult and very confusing when you start.

But what we see is that in the world of e-commerce, the most used and most relevant segmentation is that based on behavioral attributes. In ecommerce, we tend to segment our customers not according to what they are, nor according to what they think or feel, but according to what they do: their purchasing behavior, their web behavior, etc.

This observation is quite old because it is at the origin of the famous RFM segmentation, which does not date from the age of e-commerce since it dates back to the ... 60s! Recency (date of last purchase), Frequency (of purchase), Amount (of basket): This segmentation is built from 3 attributes which all have in common to be behavioral attributes. More specifically: attributes related to purchasing behavior.

Customer segmentation or the art of combining personalization and automation, to create "personalized mass marketing"

Behind the question "Why is it so important to segment your customer base in e-commerce"?, There is another question. If even today we must take the time to show the benefits of customer segmentation, it is first of all because entrepreneurs - and e-merchants in particular - are not comfortable with this method. For reasons that go beyond the simple question of skills. The first thing you learn as an entrepreneur is to treat each client as if they were unique.

When you have 10 clients, 20 clients, say 100 clients, 150 clients, we can afford to nurture a 100% individualized relationship with each of them, to deploy 100% personalized marketing, without automation. But beyond this (and in B2C the threshold of 150 customers is in principle quickly crossed), it simply becomes unmanageable. And this is not a drama: the important thing in the expression "treat every customer as if they were unique", it is not so much "unique", it is more "as if". And the only way to be successful in "as if" is to segment your customer base.

In 80% of cases, companies, out of ignorance or fear of customer segmentation, go directly from a fully individualized customer dialogue to a completely uniform approach consisting, in order to be quick, to send the same campaigns to all customers, to offer products to all customers, send the same messages at the same time to everyone, etc., etc. Customer segmentation is what brings together personalization and automation, mass marketing and personalized marketing.

In e-commerce, even light customer segmentation can have a huge impact on your bottom line.

From the moment your customer base includes a few hundred or a few thousand customers, you can start to set up a light, basic segmentation, composed of 2 or 3 segments, using 1 or 2 variables (= attributes). No need to set up a gas plant. All studies show: even simple segmentation can have a big impact on your marketing and sales performance.

In e-commerce, the most used technique to exploit customer segmentation is email marketing. Normal, this is the simplest technique, the cheapest and the one with the easiest results to measure. A study by Campaign Monitor, based on analysis of user data, showed that emails with a personalized subject line were 26% more likely to be opened than others. Even more interesting, segmented email campaigns generate 760% more revenue than mass campaigns sent to all customers. It’s a sobering statistic to say the least. A MailChimp study corroborates these claims. The popular email marketing platform found that segmented email campaigns had a 14.45% better open rate than others, as well as a 63.71% better click-through rate.

Faced with these results, it makes you wonder why so many companies are not yet using customer segmentation. Especially since customer segmentation has another major advantage. It is a customer knowledge tool. Working on the segmentation of its embedded customers, it provides a lot of useful lessons to improve your business, product and marketing strategies. The work of customer segmentation makes it possible, through the data analysis it requires, to better understand who your customers are, what their needs, expectations, motivations, purchasing behavior, etc. You will inevitably discover new business or marketing opportunities.

Customer Segmentation & Customer Knowledge - What You Can Discover Through Ecommerce Segmentation

To segment, you need to analyze your data. This work is an opportunity to make a lot of interesting discoveries. Here are some examples of discoveries you can make while working on customer segmentation in ecommerce:

  • Detect upsell & cross-sell opportunities. While customer segmentation allows you to uncover patterns in the purchasing behavior of each of your customers, it also allows you to identify general trends, behavioral patterns common to one or more groups of customers. Suppose you are an e-commerce marketer for men's skincare. You have noticed that 80% of customers who have bought high-end razors tend to buy their shaving foam at the same time. What about the remaining 20%? Clearly, you have one simple thing to do: offer shaving foam to these customers when they add a high-end razor to their shopping cart.
  • Realize that some clients are very expensive to retain. Your most loyal customers are the ones who buy the most often and ask the least for your customer service. You have to pamper them. Conversely, there are customers who could be described as "problematic". These are customers who often request customer service, often complain about your products, and often ask for a refund or exchange for their product. Prepare to draw the line on those customers who cost you more than they earn you. Seeking to recover this kind of eternally dissatisfied customers is surely the worst investment to make!
  • Find out that certain products are bad for your business. Analyzing the buying behavior of your ecommerce customers can help you identify products that are "harmful" to your business. For example, if you have an online shoe store, you may find that the cheap shoes you sell attract customers that are not "interesting", such as customers who buy but never see you again. never after. Having a product catalog made up of low-end shoes can also scare away some more profitable buyers. There are certain products that, even if you are successful in selling them, have a negative impact on your overall business. Ecommerce customer segmentation can help improve your product catalog.
    Realize that passive customers can be reactivated. It is often said that it is between 4 and 10 more expensive to acquire a new customer than to retain an existing one. This is true and this is why most e-merchants take care of their existing customers. But, among these customers, there is a category that is rarely the center of attention, which is frankly often overlooked: I mean inactive customers. As you analyze your data, you may find that your inactive customers are far from the least profitable, paradoxically. Why ? Because targeting these customers with reactivation campaigns doesn't cost a lot (much less than acquiring new customers!) And can pay off big. The ROI of reactivation campaigns is often among the highest.
    Okay, I hope you are convinced of the value of customer segmentation in e-commerce. Without further ado, let's get down to practice.

Section 2 - Take your first steps: How to get started in ecommerce customer segmentation?

An ultra-easy ecommerce customer segmentation method to get started and take the plunge.

The oldest method of segmentation is probably that inspired by the economist Pareto and his famous 80/20 rule. Applied to the corporate world, this means that 80% of your sales come from your top 20% customers.

The real question is of course: Do you know your top 20% customers? You can easily find out, by using just one variable. For example :

The geographic origin of your customers. You can divide your customers into two segments: local customers and international customers.
The lifetime value of your customers. You can divide your customers into two segments: "Spent less than $ XX in total" and "Spent more than $ XX in total". From this single variable, you can split your base into two well-defined segments.
This is a good start to familiarize yourself with the principle of customer segmentation, even if it is very basic. Once you have your two segments, you can design campaigns and set up marketing scenarios designed specifically for each of these two segments. For example, you can send a "VIP Customer Support" campaign to your best segment and send a promotional campaign with a coupon or discount to the other segment, to encourage them to buy.

When you analyze the performance of your campaigns, you will see a significant increase in results compared to those you had on your overall campaigns. Customer responsiveness is much more important when marketing messages are targeted.

The choice of customer segmentation criteria and the characteristics of a "good" segment.

You will probably want to go a little further and set up a little more advanced e-commerce customer segmentation. You will very quickly be confronted with a question: What segmentation criteria to choose? We can identify at least 6 major families of criteria:

  • Demographic criteria: age group, gender ...
  • The criteria linked to the customer lifetime value: total amount spent by the customer, number of months in the customer's life, etc.
  • Criteria related to the customer's life phase> We will zoom in on this family of criteria in a moment and show you how to build a complete marketing segmentation from it.
    Buying habits.
  • Channel behavior / Source of acquisition, etc.
  • Psychographic criteria: centers of interest, shared values, beliefs, etc.
  • Before jumping headlong into your segmentation, here are the 6 criteria to consider when evaluating the quality of a customer segment (according to the Harvard Business Review):

->The customer segment must be identifiable. In front of a customer, you should immediately be able to tell whether or not they belong to this segment. The segment must therefore be based on objective and unambiguous attributes.
->The customer segment must be substantial. It is bound to be more expensive for marketers to separately target each segment. It means creating a lot more campaigns and scenarios. There must therefore be enough customers in a segment. You are not going to create a campaign targeted at a segment that has 3 customers. Beyond the variable of the number of customers, you must also and in fact especially take into account the variable potential income.
->The customer segment must be accessible. You need to be able to communicate at scale with all customers in the segment, whether through email, social media or advertising campaigns.
The customer segment must be stable. Clearly, the definition of your customer segments should not vary too often. The use of dynamic customer segments tends to negatively impact the performance of marketing campaigns.
->The customer segment must be differentiable. Each segment must be characterized by preferences and needs that are different from other segments. If two segments are similar at these two levels, it is advisable to consolidate / merge them.
->The customer segment must be operable. You need to be able to clearly design the type of products / offerings in line with each customer segment to be able to effectively activate them in the media.

Section 3 - How to build customer segmentation in ecommerce? Focus on segmentation based on customer life phases

This is a segmentation that always works in the world of e-commerce. This is one of the most used. You can create 7 different customer segments, each segment corresponding to a life phase (except the first):

Customer Segment 1 - All Customers (Base Segment)

To start, you can create a first segment bringing together all of your customers in a single list (with each customer's email address). You will be able to use this basic segment (which by the way, in the strict sense, is not quite a segment) all of the other segments.

Examples of campaigns or scenarios:

Promotion campaign linked to an exceptional event: Sales, Christmas, customer anniversary, etc. * Most of the sample campaigns we are going to show you can turn into a scripted sequence of emails. We should therefore always say Campaign OR Scenario. The campaigns or scenarios presented here rely heavily on email, but other channels can of course be activated, such as SMS (however much more expensive than email: to begin with, it is better to focus on email) . Last note: the different examples of campaigns can be combined to form a sequence of messages, a scenario.
Presentation campaign for new offers.
Branding campaign, presenting for example your company's events.
Be careful to manage the marketing pressure. These kinds of campaigns sent to all your customers must be rare. No more than twice a month!

Customer segment 2 - Potential customers (prospects)

You can group together in a segment the "customers" who have not yet made any purchase, but whose contact you have - because they have filled out a form to download a white paper for example, or participated in a competition, or have subscribed to your newsletter, or have an abandoned cart, etc. We should rather speak of "lead". These are individuals who have shown an interest in your product but are not ready to buy. They might want to take the time to familiarize themselves with your brand before taking the plunge. Or maybe they find your products too expensive.

A combination of branding campaigns, targeted coupons or educational content can help develop their engagement.

Examples of campaigns or scenarios:

Follow-up email scenario.
Relaunch of abandoned cart.
Newsletter with educational content.
Testimonials from satisfied customers.
Coupon for a first purchase.
The welcome email should be sent immediately after capturing the email. You can send a second email 24 hours later, another 72 hours later, and then on a weekly basis.

Customer segment 3 - First-time buyers (new “real” customers)

You can create a segment of customers who have bought only once. The goal with this segment is to turn these customers into repeat buyers. There are several reasons that can explain why a customer does not make a second purchase. It could be because he only needed the product he bought, that that product met a specific need at a specific time. But the reason can also be that the purchased product did not fully satisfy the customer, that he did not meet his need properly. Another reason: these customers find your customers too expensive. It is also possible that these customers are not familiar with the other products that you offer. Or quite simply some customers have forgotten your brand and therefore need a little reminder! Because there are many reasons, there are many possible campaign types and scenarios for this segment.

Examples of campaigns or scenarios:

Order confirmation email.
Email presentation of new products.
Highlighting product reviews.
Product recommendation.
Educational content.
Customer satisfaction questionnaire.
Request for an opinion on the product purchased.
The order confirmation email must be sent immediately after the customer has completed the order. Following this email, you can send an email a maximum of two times per week. It is advisable to wait for the products to be delivered before sending a request for customer opinion or a customer satisfaction questionnaire. A month or two after the first message, you can submit a purchase renewal form (depending on the products marketed of course).

Customer Segment 4 - Customers who have bought at least twice (repeat customers)

In this segment, you include buyers who have made at least two separate purchases over time. Repeat customers are customers who liked the first product they bought enough to make a new purchase. You must pamper them, nurture a dialogue with the customer so that they do not forget you or so that they become ambassadors of your brand to those around them. Customer service must prioritize these customers, responding to them quickly when they ask a question. You need to encourage them to make new purchases. Examples of emails

Examples of campaigns or scenarios:

Order confirmation.
Offer on new products.
Order renewal form.
Product reviews.
Product recommendation.
Referral request (referral program for example).
Educational content.
Customer satisfaction questionnaire.
Request for customer / product reviews.
Exclusive coupon for repeat customers.
For this type of message, we advise you to limit yourself to 3 per week.

Customer segment 5 - Loyal customers (your BEST customers)

You can then create an e-commerce customer segment that brings together customers who have purchased multiple times in a short period of time (it's up to you). You need to see these customers as your best customers. They are ambassadors of your brand. They have demonstrated over time, day after day, month after month, their attachment to your brand and its products. To maintain their loyalty, you must set the bar high in customer service, or even involve them in your product innovation process.

Examples of campaigns or scenarios:

Confirmation email.
Access in preview to your new offers.
Product reviews.
Product recommendation.
Sponsorship.
Educational content.
Customer satisfaction surveys.
Customer / product review request.
Exclusive “Loyal Customers” coupon.
Similarly, we advise you to limit yourself to a maximum of 3 communications per week.

Customer segment 6 - Repetitive customers at risk

When a repeat customer, or at least one who has bought several times, hasn't bought for an unusual long period of time, you have to worry. These are customers at risk of attrition. These are not necessarily customers that can be classified under the "Inactive Customers" segment. We can consider that a customer becomes inactive when he has not bought for a period of time equal to 3 or 4 times the average time between two purchases. Obviously, it varies from company to company. The important thing is to understand the value of creating two different segments: a "Repetitive customers at risk" and "Inactive customers" segment. At-risk customers are customers you can win back by sending them positive messages about your products, your brand, giving them a coupon, or asking them why they haven't been buying for a while.

Examples of campaigns or scenarios:

Questionnaire with incentive.
Coupon with limited period of use.
Email "We miss you".
Sharing about the evolution of your services or the release of a new product.
Regarding the timing and frequency of shipments, you must be careful. No more than one message per week at the start. If you don't see any feedback from customers, space out the submissions.

Customer segment 7 - Inactive repeat customers

It's inevitable, all good things come to an end. Even the most beautiful and profitable customer relationships. You can lose loyal customers. There are many reasons: their needs have changed, your brand or your products have changed, or they simply forgot you. Either way, it's up to you to take the first step to rekindle the relationship and rekindle the dialogue. Inactive repeat customers are customers who have purchased several times but whose last purchase date corresponds to a period equal to at least 3 or 4 times the average period between two purchases. Inactive customers are unpredictable since you don't know what caused them to be inactive. It's up to you to find the answer and imagine what will bring them back to you. There are only advantages to experimenting with different approaches. Many inactive customers have valid reasons for not buying from you. Be forewarned: there are many of these customers who are actually already lost to your business. Basically, you have nothing to lose. Unleash your creativity!

Examples of campaigns or scenarios:

Announcements of major changes concerning your company (you are internationalizing, or you are buying a CAC 40 group) or your products (you are releasing a revolutionary product or at unbeatable prices).
Big product promotions.
A questionnaire like: “How can I help you”?
A last chance message.
A farewell message.
You can send one email per week. We recommend that you limit your efforts to a maximum period of one month. If you have no reaction from the customer after a month, you can consider them lost. But that's okay, get over it: one customer lost, 10 found!

Section IV - The 3 steps to exploit an ecommerce customer segmentation

As we said in the introduction, it is useful to start with a mapping of customer journeys. This will help you to clearly visualize the different phases of life that your customers are going through. Here are the 3 main steps to follow to effectively exploit your customer segments.

Step # 1 - Define clear goals for each customer segment

There is a general objective, common to all customer segments: to extend the lifetime value of your customers. But as an e-merchant, you need to list for each of your segments the specific goals you are looking to achieve. If we take the ecommerce customer segmentation that we have just proposed, we think it is good to focus on the following 5 objectives:

Move customers from the “Potential Customers” segment to “First-time buyers”.
Move “First-time buyers” customers to the “Repeat customers” segment.
Keep customers in the “Repeat Customers” segment active.
Turn repeat risky customers into active repeat customers.
Reactivate inactive clients.

Step # 2 - Prioritize your goals based on business opportunities

You can then prioritize your goals based on the additional value of accomplishing them. For example, is it more interesting to move a customer from segment 1 to segment 2 than from segment 2 to segment 3. The problem of prioritization is all the more important if you have resources (financial, human, technical) limited. This is where we see one of the benefits of marketing segmentation - and not the least: helping you focus your marketing efforts on the most profitable actions, helping you to allocate your optimal resources. There are very few e-commerce companies capable of running all the opportunities at the same time.

Step # 3 - Deploy your actions (campaigns & scenarios) to achieve your priority objectives

We are going to quickly (too quickly) summarize the main actions to be taken to achieve each of the 5 objectives presented above.

  • Objective # 1 - Move customers from the “Potential Customers” segment to “First-time buyers”:

A welcome scenario.
An abandoned cart recovery scenario.
A display and social media retargeting campaign.

  • Objective # 2 - Move “first-time buyers” customers to the “repeat customers” segment:

A welcome scenario.
A post-purchase email scenario.
A scenario of targeted offers.
A newsletter with promotions.
Sending product catalogs, discount coupons or product samples.

  • Objective # 3 - Keep customers in the “Repeat customers” segment active:

A post-purchase email scenario.
A newsletter with exclusive content.
Replenishment or repurchase notifications.
Sending product catalogs, discount coupons or product samples.
Free delivery.
The deployment of popups on the pages most viewed by your customers.

  • Objective # 4 - Turn repeat risky customers into active repeat customers:

A birthday scenario.
A message "We miss you".
A coupon with a limited period of use.
A display and social media retargeting campaign.

  • Objective # 5 - Reactivate inactive clients:

A campaign of reconquest.
A birthday scenario.
Questionnaires oriented "How can I help you?" ".
Important announcements about your business.
A display and social media retargeting campaign.
Sending product catalogs, discount coupons or product samples.
To select the techniques & actions to deploy as a priority, you can use a double entry matrix:

The value of the goal: potential marginal income for example.
The completion time (short or medium term) and the impact.
I strongly advise you to organize your campaigns and scenarios in relationship programs, themselves organized in a relationship plan. Otherwise, you will not find yourself there and it will quickly be a mess. To find out more on the subject, discover our page dedicated to the Relationship Plan.

Section 5 - 45+ examples of ecommerce marketing segmentation

So that you can find your recipe, so that you can build your ecommerce customer segmentation, we are going to offer you more than 40 very concrete examples of segments. These are segments that have proven themselves in ecommerce. But you must of course adapt them to the determinants and specificities of your activity. Typically, you will most likely need to change the values and times offered.

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