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How ecommerce brands can leverage customer segmentation for growth

May 25, 2021 / by LimeSpot Team

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.

Audience-Segmentation

What is customer segmentation for ecommerce brands?

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.

Why customer segmentation is needed

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.

Get better returns on ad campaigns

Segmentation significantly improves marketing efficiency. You're essentially breaking your customer base into easily manageable pieces, better placing you to launch the most relevant marketing campaigns for each cluster. At the end of the day, the time you spend on personalization will drive better returns on your marketing investment.

Discover new market opportunities & product ideas

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.

Improve customer retention

Segmentation can 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.

Examples of customer segments for an ecommerce brand

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:

  • Exclusive or early access to premium products, special editions, and new products
  • Two-day shipping, free shipping, free doorstep delivery, etc.
  • Guarantees and maintenance support
  • Special bundles and value packs
  • One-click reorder messages
  • Dedicated customer service personnel
  • Free gifts with their deliveries

Cart abandoners

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.

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:

  • Observe their replenishment time and send promotional messages around the time they buy again
  • Introduce new trends and products
  • Send promotional offers and product recommendations based on previous purchases

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:

  • Segment them based on products purchased and send cross-sell or upsell offers
  • Develop helpful content that revolves around their purchase interest so they'll have your brand in mind
  • Ask for feedback and offer a repeat purchase discount
  • Present new collections to them using seasonal or climate considerations

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:

  • Send product-heavy email marketing campaigns and include direct links to products in your store
  • Fake a sale of the desired items for leads coming in via wishlists
  • Promise discounts for the first order
  • Remarket products related to those that first attracted the customer

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:

  • Create exclusive offers
  • Set up a loyalty program / rewards points system
  • Ask for their feedback often and improve on the highlighted points
  • Set up separate discount based on the number of orders
  • Create a subscription plan if you sell frequently replenished items

How ecommerce brands create customer segments

Customers can be grouped into different clusters based on the similar traits they share. The most commonly used segments employed by ecommerce brands include:

Demographic segmentation

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

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.

Geographic segmentation

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.

On-site behavior

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.

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.

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.

What can ecommerce brands personalize for customers?

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 dynamic content blocks, overlays, footer/header banners, sliders and pop-unders, product recommendations, etc.

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

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:

  • Gathering all relevant data about email subscribers by monitoring their behavior pre- and post-registration
  • Segmenting customers based on their purchases
  • Tracking customer interaction with your website as well as email marketing messages
  • Filtering customers based on tracked data

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.

Make segmentation & personalization easy with LimeSpot

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.

Learn More

Website personalization

LimeSpot delivers real-time personalization at scale across web and mobile browsers. It can:

  • Show customers the right products at the right time
  • Personalize every step of the customer's browsing experience, from the homepage to post-purchase recommendations
  • Match each recommendation type to suit each customer's needs

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:

  • Send personalized email campaign and newsletters to each customer
  • Send 1:1 content to drive customers back to your site
  • Seamlessly integrate with all major email service providers like Omnisend, MailChimp, Klaviyo, HubSpot, Shopify, Bronto, etc.

Conclusion

Your marketing 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.

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Topics: Segmentation

LimeSpot Team

Written by LimeSpot Team

LimeSpot is an AI driven personalization platform proven to lower acquisition cost, improve customer experience and increase merchant revenue. Thousand of ecommerce brands worldwide trust LimeSpot to create optimal customer experiences. "Request a demo" or "contact us" to learn more.