Segmenting the customers on your webshop can minimize the element of chance in your marketing campaigns and drastically improve your return of investment.
In the best of all marketing worlds, every message would make every recipient cheer in excitement and click-through-rates would always hover on the sunny side of 90%
It sounds magical, right?
But the bitter truth for any e-Tailer is that e-Commerce marketing is a trade of inherent hit-and-misses.
But even though no campaign hits home with every recipient, we can still do a lot to increase the relevance that each campaign has on each recipient. To a great extent, in fact.
Activate +30% more of your customers
And this is where customer segmentation can help turn your e-Commerce marketing upside-down by getting +30% more of your customers to respond to your campaigns.
It's quite straightforward, really.
Segmenting your customers according to their specific interests does away with one-fits-all marketing campaigns and this is good for both you and your customers.
The challenge of appealing to everyone
Because fact of the matter is that your customers have very different interests, which reflects on your product popularity - your store most likely holds a number of high-selling products and a fair share of less popular products.
And in lack of more cost- and time effective targeting methods, the only approach that makes sense is to promote products E to J from the table above when you send out your next newsletter.
...And granted - this approach will have great effect to a certain extent.
Attract rather than annoy customers
But the problem with doing this is that while you peak the interest of many, you also risk boring or even annoying the rest - which is a problem.
Not only because the effect of your marketing campaign is reduced, but also because that campaign risks being downright counterproductive:
74% of your customers get frustrated when displayed products, offers and promotions that have no relevance to them (Janrain).
And this is where segmentation can make a difference, because it allows you to appeal to the customers interested in niche products as well as those looking for the bestsellers.
Extracting key knowledge through segmentation
Now, the segmentation process itself relies on a machine learning algorithm to analyse and deliver the data needed.
And when working its magic, this algorithm enables you to extract all kinds of valuable data from your e-Commerce store.
1. Use customer interest and purchase history
First off, you need to define what products you want to push in the given campaign. You do this by using a filter to find customers interested in that specific product.
To further qualify the data, you can then choose to combine this filter with one indicating what other products this segment has purchased on your store.
2. Define customer type
Next, you can specify what customer type you want to target by filtering according to customer loyalty - should they be VIP customers, frequent buyers, loyal customers or one-time customers?
And finally, you can filter customers according to life cycle status - should they be active, slipping away or inactive?
These filters will not only help you narrow down the segment. They will also help you define how to focus your communication, depending on the purpose of your campaign - do you want to nurse your VIP customers or perhaps reactivate lost ones?
Improve on all platforms
Once you have exported your segment, you have yourself a .csv-file of specific customer data and the world is pretty much your oyster from there.
Most importantly, segmentation enables you to improve the life cycle status of more customers and make sure that they return more often.
You can simply hold on to more of your customers by knowing exactly who to shower with gifts for being loyal and who to tempt with great and relevant offers, when they are slipping away.
The value of event-based marketing
The gist here is not that this approach will suddenly make you able to create wide marketing campaigns that appeal to everyone.
Rather, the key take-away is to move away from these wide campaigns and further towards an event-based marketing strategy focusing on more narrow blasts targeted for specific segments.
Customer segmentation is not likely to be the solution to all your marketing challenges, but it will increase your revenue from marketing campaigns and give you a better connection to your individual customers, because you won't waste their time with irrelevant recommendations.
For more tips and tricks on customer segmentation, have a listen to the podcast Pottercut that our CEO and founder Hans-Kristian visited in December 2015 (the interview is in Danish).