Updated: Oct 24
We all know that one-size-fits-all marketing and growth strategies don’t work, particularly in a domain like eCommerce where customer preferences change all the time.
Customer segmentation is the silver bullet that can help you adapt and cater to changing customer needs, thus ensuring that your brand achieves sustainable growth over time.
How does customer segmentation work?
Why does it sometimes fail?
What are some customer segments that brands can create today to see tangible results?
These are the questions we will address in this article, along with five customer segments that your eCommerce brand needs in order to improve various success metrics.
Customer Segmentation: How It Works, And Why It (Sometimes) Under-Performs
We understand the term ‘customer segmentation’ to mean separating and segmenting users by the behaviors and attributes that can be attached to them. Because it is such a broad term, it often causes confusion in terms of the kind of segments that can be created. For example, we can create a segment of customers who are all women in the 22-30 age group. This segment does have some attributes such as the average age, gender, and some preference for social shopping.
However, as we will see in a bit, it is also an extremely broad and diverse segment. How many of these people prefer to apply coupons on their purchases? How many of them spend a significant sum of money?
With that context, it is easier to spot the key issue with customer segmentation as it stands today- we often segment based on parameters that are too broad, or do not sufficiently address the outcomes of segmenting.
In other words, we segment people by who they are rather than how they behave. By fixing this simple issue, we can expect to see significant results in terms of sales and retention.
5 Customer Segmentation Tactics To Implement In eCommerce
Now that we know what kinds of customer segmentation perform sub-optimally, we can proceed to understand a few that do help. Here are five customer segmentation tactics that always work for an eCommerce brand.
1. Highest Spenders
For every eCommerce brand, the highest spending segment is a lifeline and cash flow generator. Without people with a high Average Order Value (AOV), most online stores would be unable to generate adequate free cash flow to keep functioning. This is also why we focus on this segment first.
The highest spenders can be identified by consistently higher than average AOV. This segment can be created by filtering in anyone who has spent more than your average CLV during the entirety of your business cycle. You can read more about calculating your CLV here. If you have a large enough audience segment at this stage, you can further filter this into two segments- the really high spenders, and those whose AOV shoots up during a specific time of the year.
Here are a few ways to engage your highest spenders.
Giving them early access to sales and new collections.
Free shipping over their usual order value threshold.
Easier-than-usual returns and exchanges.
Special gifts in their birthday month, or for special occasions throughout the year.
The key is to keep this segment happy so they stay with your brand beyond their average lifetime value and hopefully turn into advocates for your brand over time.
2. Cart Abandoners
These people are on the other end of the spectrum. In many ways, cart abandoners are worse than casual browsers because they express a certain stake in buying, before dropping off. Cart abandoners are fairly easy to identify and segment. The key is to get them to drop their email address so they can be nurtured without needing to spend too much on remarketing. Here are a few ways to entice the cart abandoners.
Running a remarketing campaign with limited time offers on their product of choice.
If they share their email address, give them a coupon to get an instant discount when they complete checkout.
Over time, it also helps to see if a majority of the cart abandoners just do it in order to score a good deal. Also, it can be expensive to nurture this behavior, so cart abandonment discounts must only be given once per customer, or when the abandoned cart value is much higher than your current AOV.
3. One-Time Buyers
One-time buyers often follow a very specific path to the checkout stage and do this only once. This segment can be created by filtering out all of the users on your analytics platform who complete your conversion goal only once. Doing this only serves an analytical purpose- it helps us see whether they have ever come back to the website after making their first and only purchase. To create a segment here, we can filter out all email addresses of customers who have made only one purchase up until the past month. This filter must also take into account recent purchases- we do not want to bombard people who just bought from us last week.
One-time buyers can be enticed to purchase again by
Cross-selling a highly relevant item mapped to their previous purchase.
Offering them a discount on the second purchase for writing a review about the first one.
Showing them what’s new, such as new apparel for the new season, or a new product collection.
4. The Lost-In-The-Cycle Leads
Sometimes, the casual browsers never turn into buyers. They usually come through a social media channel or a paid campaign but never complete a purchase despite repeated visits to the website. These users can be identified on an analytics platform as returning users with a similar average session duration as the buyers. Segmenting these users through the platform allows you to run targeted ads. However, it is even better to capture their email address.
Since repeated visits have not led to a conversion, it is unlikely that a simple discount campaign will cause them to drop their email address. If this segment is particularly large, the best way to entice them is with a nurture campaign. Apparel brands can rope in a fashion influencer for an exclusive session, and use this messaging as a pop-up to capture people from this segment.
Once the email address is shared, nurturing can be done in the form of
Carefully curated content from the website and the blog, with minimal sales-only messaging.
Sharing access to more events and encouraging purchases from that stage.
5. The Influencers
This is the age of the influencer, and what they think about your brand matters to their often highly-engaged audience.
In order to capture the influencer segment, it is important first to identify them. Most influencers post unboxing videos and tag your brand in their posts, or leave reviews on marketplace websites. Social listening, therefore, is very important for your eCommerce brand.
Engaging an influencer is a game of synergies. Here are a few ways to stay on top of their minds.
Resharing their content and stories on your social handles.
Carefully curating a list of influencers who have featured your brand before, and sending them goodies from time to time.
Giving them access to merchandise and influencer-only deals.
Featuring their work on your handles, even when it isn’t directly about your brand.
Influencers want to know that they can grow with you. Facilitating this can mean a dedicated group of buyers for you, even without involving an influencer marketing agency.
With that, we come to the end of five segmentation tactics that you can use today. With a powerful eCommerce analytics tool, you will likely have access to all of the markers that make up each segment. It is always a good idea to start with two segments- highest spenders, and your largest segment by numbers from the above categories, and take it from there.