The online shopping industry is fiercely competitive: customers have more purchase options than ever before when searching for anything online. Every eCommerce business MUST put time, money, and effort into positioning itself as the ultimate solution for its customers.
But you need to know your audience before you can give it what it needs. And that’s why online consumer segmentation is essential.
What is customer segmentation in eCommerce? What benefits does eCommerce segmentation offer? How can you get it right?
In this post, we’ll provide you with the tips you need to segment your customer base properly and help you increase your sales.
What is Customer Segmentation?
Online customer segmentation should be a priority for eCommerce businesses. Segment your audience into targeted groups based on customer and behavioral data, such as age, occupation, purchase, shopping history, and more.
Your online store may have fewer or more customer segments than other eCommerce brands depending on your niche and products/services. Global corporations selling hundreds of different products to thousands (even millions) of customers are likely to have many more segments than, say, a new eCommerce business offering three types of products. But segmentation remains fundamental to any company selling goods online, regardless of its size.
Examples of Companies that Use Customer Segmentation
Market segmentation is a common strategy among eCommerce businesses to maximize their reach and stay true to the needs of all customers.
Skincare, haircare, beauty product manufacturers; car companies like Tesla; clothing and apparel suppliers such as Forever 21; banks or other financial institutions: these are just some examples of online businesses that use market segmentation to make sure they’re meeting your demands.
Businesses often segment the market based on key demographics such as age, gender, income level, or marital status. For example, Whole Foods, a high-end grocery store chain owned by Amazon, targets specific groups of people: city dwellers who are health or eco-conscious.
One group of companies that utilizes these customer segmentation strategies effectively are manufacturers of hair care beauty, grooming products like razors marketed towards men/women – they’re fundamentally the same but differ drastically when it comes down to packaging/advertising messages based on research; marketers devise different ways selling product.
Women’s skincare, haircare, and grooming products are packaged in soft colors like pink to make them seem gentle. The women featured on these packages have an effortless beauty which many women aspire towards for their skincare routine. The packaging often features a woman who is laughing or playfully smiling on it with messaging that refers to freshness and a carefree lifestyle.
Men’s products are represented by black, gray, red and orange colors. The messaging focuses on strength, durability and ruggedness. If a photograph is included, the subject often looks like he has stubble with an intense look in his eyes as if looking fiercely independent or brooding.
Why is Customer Segmentation So Important for Ecommerce Brands?
Creating clear audience segments helps you make more accurate eCommerce targeting. You can:
- Develop a deeper understanding of your ideal customers
- Recognize their pain points
- Supply the goods they need to resolve specific problems
- Target relevant customer segments with tailored marketing (paid and organic)
Accenture research shows that 75% of consumers are more likely to purchase from brands that recognize them by name, know their buying history, and recommend products based on previous purchases.
Customer segmentation can help you direct visitors to specific pages or product categories when they land on your site, saving them the time they might spend browsing your catalog to find the goods they need. It also creates a more user-friendly experience and can cultivate a better impression of your business. For example, you’ve probably seen online marketplaces recommend products similar to those you bought earlier. This can introduce you to options you might miss otherwise and prompt you to buy.
Another benefit of customer segmentation is that you can create the most relevant, captivating promotions to suit specific audience groups. Customers aged 35 – 50 with lots of disposable income will likely respond to different messaging than those in their teens with little money to spend.
Using a one-size-fits-all approach to marketing your business could result in wasted expenditure and resources. It may also harm the view that specific online shopping demographics have of your business if they feel you’re ignoring and undervaluing them.
In eCommerce, segmentation also enables you to identify the most effective channels to reach audience types. Some groups are more likely to respond to social media advertising, while others prefer video ads or promotional emails.
How to Segment Ecommerce Customers Effectively
We know why customer segmentation matters. But, how do you create a customer segment? How do you put prospects into relevant groups to increase the likelihood of engaging them and securing conversions? Here are five market segmentation techniques.
By Online Shopping Demographics
Gender Segment: Defining consumer gender may be more complex than it was 15 years ago, especially regarding stereotypes like “all women love to shop” or “all men love sports.” But you can still use gender as a way to target specific products (e.g., grooming tools, clothes, shoes) to males and females alike.
You must steer clear of messaging that could be considered sexist or insensitive to different gender identities. However, it is still possible to use gender to create a customer segment.
Age Segment: Your eCommerce business may stock products suitable for various age groups, such as foods, clothing, or electronics. But segmenting customers into age groups (such as “baby boomers” or “Gen Z”) can help you create content, product recommendations, and digital marketing efforts that maximize engagement.
Occupation Segment: Segmenting customers based on their employment can be difficult, as people of different ages and genders may have unexpected jobs. But understanding occupation may be relevant to your products, mainly if you sell clothing or equipment that may be helpful to customers’ work.
Income Segment: Income is closely related to occupation. You may want to avoid pushing expensive products to customers with little disposable income, while those on higher salaries might have little interest in the cheapest items in your catalog.
Marital Status Segment: Consumers who are married with children may have different shopping habits and priorities than single people with no dependents. Marketing messaging for customers with families may focus on responsibility and value for money, while those for single customers could play to their independence.
By Location
Language: Localize marketing to appeal to customers’ dialects, terminology, etc.
Currencies: Only accept payments via specific methods and currencies if you ship to their countries of origin.
Weather: Providing recommendations to customers based on the climate in their region shows that you’re aware of their needs. For example, don’t try to sell raincoats to shoppers in notoriously dry countries.
By Using Psychographic Segmentation Criteria
Personality
One form of psychographic segmentation is based on personality. People shop differently based on their personalities. Are they impulsive? Do they research every product before they buy it? Have they contacted customer service to ask questions?
You can develop a deeper understanding of consumer personalities by analyzing purchase histories and distributing brief post-transaction surveys.
Values
You can segment your customers based on their values. More than 70% of consumers want to shop from businesses that share their values.
This may mean standing against products tested on animals, stocking vegan-only goods, donating a share of profits to conservation, or anything else that customers care about.
Favorite Activities
Research how customers like to spend their time in order to recommend relevant products and promotions that could win their business. For instance, a buyer who purchases lots of sports equipment is likely to be interested in your clearance sale on athletic wear.
By Behavioral Segmentation
Purchase History: A customer’s purchase history is one form of behavioral segmentation. It can reveal a wealth of valuable details to help you offer a personalized experience. Shoppers who buy a tablet may appreciate recommendations for compatible cases, headphones, screen wipes, etc.
Cart Abandonment: Abandoned carts are a major frustration for eCommerce companies, but they can provide you with an opportunity to entice interested customers back. To reduce cart abandonment, offer moderate discounts on an item in their cart and send emails to remind them if they forget. Cart abandonment is one of the ways to segment customer segments based on their shopping behavior.
By Stages in the Customer Journey
The customer journey includes five stages:
Awareness: You need to impress new visitors to your site to keep them interested enough to secure a lead or conversion. You can offer a welcome deal for new customers such as a 10% discount or free shipping to encourage them.
Try to browse your site in the mindset of a first-time visitor and identify issues that may make it off-putting. Is your navigation effective? Can you find information on creating an account, payment methods, etc.?
Consideration: Customers in this segment have developed a little understanding of your business and are reviewing what you have to offer. Engagement is particularly crucial here, so help them find the right products by providing relevant recommendations, informative videos, and eye-catching images.
Acquisition: An active customer might add goods to their cart and review their options before completing the transaction. They might even try other sites to see if they can find a better deal but are still more likely to buy from you than those in the Awareness segment. This is where reminder emails can be helpful, as can motivational offers.
Purchase
Those in the Purchase stage of the customer journey have bought at least one item from your site but may or may not come back. You need to secure their loyalty based on your understanding of their interests and shopping habits.
You can invite them to receive emails with news on products they may like, implement a loyalty scheme to add value and ask them to complete a survey to tailor their experience further.
Advocacy: Loyal customers may be willing to recommend your business to others if you make it worth their while. A referral scheme can help: provide them with a discount if they can direct a friend to you and make a purchase.
Use Net Promoter Scores (NPS) to identify which customers are likely to introduce your company to friends or colleagues. Ask for feedback from those who refuse. You may find improvement opportunities.
Summing Up: Ecommerce Customer Segmentation
Customer segmentation can transform how your business engages with prospective and existing buyers. You can segment your customers, find out what makes different audience groups tick, create personalized experiences to align with their respective preferences and increase sales through accurate targeting.
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