Learn about customer segmentation to grab the growth opportunity with both hands.
Whether you’d adopted online sales before the pandemic or after, we’re sure that you’ve been experiencing remarkable growth. We offer you insights on customer segmentation for your e-commerce to grow your business even faster.
COVID-19 Has Helped E-Commerce Grow
E-commerce is one of the few things that has grown as the world battles the COVID-19 pandemic. Online retail platforms experienced a 6% growth in visits globally during January and March 2020, says Staista.
That was just the beginning of COVID times. As COVID-19 spread to emerge as a global pandemic, online retail sales kept on growing. The global e-commerce sales volume in June 2020 was 28% higher than its size in 2019.
Business Standard reported on June 27, 2020, that India’s e-commerce market is likely to reach US$ 85 billion by 2024.
Online Sales Is Here To Stay
This growth isn’t going to slow down in post COVID times, say experts. An Accenture report reflects that customer behaviors have undergone long-term changes.
The average growth of customers who will continue to shop online has been stunning. There has been a 160% growth of online shopping frequency among consumers who used to make less than 25% of their purchases online before the pandemic.
They will continue to do so, says the report, as people get super careful about minimizing avoidable contact.
Gain A Competitive Edge With Customer Segmentation Analysis for Your E-Commerce
Customer segmentation is a globally recognised strategy for acquiring a competitive edge in your business. Segmentation is a tool to improve your relationship with your customers and make tailor-made offers to them. That improves conversions and improves customer loyalty.
So, What Is Customer Segmentation?
Customer segmentation is exactly what it sounds like: dividing your customers into different groups based on their behavior patterns and preferences. But why? How does that help?
Take a moment to think of different groups of people in your life. Elders in the family, siblings and cousins, friends, colleagues, mentors, and so on. Do you communicate with them in the same way? Highly unlikely. Different relationships demand varying communication patterns.
Similarly, different types of customers respond better to different communication styles. When you can identify these varying patterns in your customers and segment them accordingly – you can develop the communication pattern that best suits each group.
Customer segmentation is, thus, a movement away from the “one size fits all” approach to a more realistic business strategy of serving discrepant needs differently.
By studying your customers’ behaviours, you’ll be able to identify varied patterns and needs. When you group customers by the similarity of their needs, you can innovatively create a unique value chain for each group to address their specific needs.
The result is heightened customer satisfaction, one of the most critical needs of business growth.
How To Go About Segmenting Customers?
There are different parameters that you can use to segregate your customers into groups. Each criterion is significant as each one serves a different purpose and gives you a more in-depth insight.
- Behavioural Segmentation: how customers behave in their purchasing journey, at which stage of the journey they are, what makes them loyal, the kind of benefits they seek, etc.
- Demographic Segmentation: age, gender, education, racial-ethnic identity, income, marital status, etc.
- Geographic Segmentation: this one is more than just focusing on the location. It is more like segregating on the type of location, such as metro cities, small towns, suburbs, etc.
- Psychographic Segmentation: lifestyle preferences, hobbies and interests, attitudes, values, etc.
- Technographic Segmentation: type of device use, social media use, apps preference, etc.
Segmentation for Deciding a Marketing Strategy
If you are going to launch a particular campaign, you’re going to spend money on it. Segregating your customers into different groups will help you design your campaign to target each specific segment. That is a sure-shot guarantee of your campaign. It should give you a high return on investment (RoI).
You need to combine your insights from all or several of the above categories of segmentation to design an effective marketing campaign.
An article in Forbes offers the following insights for customer segmentation to design a marketing strategy:
- At what time of the day do they shop? Early morning, or late at night? Or, do they take short breaks during their work hours to do some digital shopping? Do the majority shop during weekends?
Now, think about it this way: the moment you know that the majority of your potential customers usually spend time shopping online during weekends, that’s where you concentrate your campaign.
Send your marketing emails to customers by segments during the time of the day when they are most likely to visit your e-commerce store.
Can you think of a more practical way of enhancing the impact of your marketing campaign? Probably not!
- What are the varied product preferences? There would be some looking for brands, while others would prefer bargain products. Another set would possibly be looking for mid-range items.
When you send your marketing emails specifically targeted as per each section’s preference, your existing and potential customers will be happy. It shows that you care. The chances of conversion increase as well.
- Differentiate your customers based on the stage of life they are in. Prepare your marketing campaign content differently for each group.
Beyond Marketing Campaigns
Customer segmentation is important for your everyday business to ride on a turbojet o growth. It is not just for marketing campaigns. It is to decide on everything from how your website behaves with your visitors to the content of your promotional emails.
Segregate the following categories of customers for enhancing your conversion rate and accelerating your growth:
- Your Loyal Customers: They are your repeat customers. You need to do everything possible to retain them, for they are probably your unpaid brand ambassador also. Think of reward programs. Get them to write positive reviews on your website … Well, whatever you think will make them happy.
Once you gain an insight into their behaviour and preferences, optimise their experience.
- First Time Visitors: Your entire focus needs to be on attracting them enough to keep them engaged. That is your best chance of converting.
- Logged-in vs. Guest Visitor
- Frequent Non-Purchasing Visitor
- Cart Abandoning Visitor
How do I define Customer Segments?
Defining customer segments can be a trickier task. For each of the segments, you need to first figure our criteria. There are various tools available which does this automatically. Google Analytics can help you understand your customer segments based on their activities on your store. For example, You can find out if they’re first time visitor or returning visitor. However, Google Analytics would provide a limited understanding of Customer Segment since it doesn’t have a data of your customers, their purchase behavior etc.
There are tools like Google Data Studio and Shoppr which will help you analyze behavior of your customers on your online store and help you define customer segments. Shoppr would automatically define customer segments for you once you integrate your store. Below screenshot shows various customer segments on Shoppr.
Your e-commerce store needs to have different strategies for every customer segment for your business to experience unprecedented growth. We’ll be back with more on that.