Much like an onion with its infinite layers, the market of any brand, product or service will never comprise only a single type of people. Like the layers of onions, the market comprises diverse groups that can be categorized separately. Segmentation refers to this process of dividing up the market into small groups, each with a particular characteristic in common. By doing so, the retailers and salesmen can thereby use different marketing strategies tailored to the needs of these groups. A different and relevant message is then delivered to each group to ensure maximum sales.
Customer segmentation therefore plays a vital role in improve marketing strategies. Segmentation can be done along many different dimensions. Here are some ways that a market can be effectively divided.
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Division by type of visitor
Visitor types include new visitors and return visitors. By dividing the customers along these lines, special offers can be tailored to the particular customers. The new visitors for example can be given special offers on their very first purchases or discounts offered to repeat purchasers in the form of welcome rewards.
Segmentation by duration of site engagement
Site engagement can include the number of pages that the customers visit or the extent of browsing they do. Audiences visiting the site at various times can be targeted differently too. Personalization is most effective with customers that have been engaged with the site for long.
Segmentation by product viewed
The most popular segmentation is based on product viewing. Customers can be shown products related to their normal purchases or views. By dividing the customers in terms of the products they normally view, these sites can then personalize and tailor what the customers are shown so that they according to their needs.
Customer profile based segmentation
This refers to the type of customer the person is for the company. These types normally include the VIP, the first visitors, the cart abandoners, the very infrequent visitors etc.
Likes and favorites
You can also segment your customers according to the likes from their previous purchases. In terms of brand, product or the category, the customers’ favorites and likes can be determined and future offers and promotion done on this basis.
RFM refers to Recency, Frequency and Monetary value. RFM is a strategy used to evaluate and understand the customers. Scores on these three variables are used to generate customer profiles that can then help customize the approach to the different segments. Purchase history of the customers in terms of how recently they last bought something, how frequently and products of what monetary value do the customers usually buy, can be used to improve marketing strategies. An RFM Analysis is a helpful tool in eCommerce. The aim of an RFM analysis is to increase likelihood of future purchases by a customer.
Benefits of customer segmentation in eCommerce
- Customer segmentation can ensure high Conversion rates. Conversion refers to desirable and positive behaviors ranging from subscribing to a newsletter or a package, to buying a product.
- It helps understand the customer base better and thereby draw conclusions regarding progress of the company. This can in-turn help improve strategies and other aspects of the marketing strategies.
- Customer segmentation can also help significantly improve customer satisfaction figures as a tailored and personalized approach is more likely to please them than the one-size-fits-all approach.