Top Ten Benefits of Customer Segmentation for Ecommerce Brands
Mass media and advertising have radically changed in the past few decades. Although there are many old-school advertising strategies you can continue to use to engage your audience, the emergence of ecommerce and social media has revolutionized how people shop.
In the old days, brands would spend their marketing budget on print ads, TV spots, brochures, and other media to try and reach their target audience. Although the price of Super Bowl commercials continues increasing, expensive and general marketing campaigns have largely fallen out of fashion.
Today’s brands rely on targeted ads, search optimization, or social media to engage with their audience. They dive deep into their marketing analytics and try to find ways to further optimize their messaging to resonate with shoppers and move them down their conversion funnel.
When it comes to ecommerce, one of the most effective tactics you can use is customer segmentation. Shoppers expect a personalized experience and flock to marketplaces offering curated recommendations and messaging tailored just for them. If you want to increase revenue and compete with Amazon and other big retailers, you must start to think about practical customer segmentation solutions.
In this article, we will explore the following:
- What is customer segmentation: We’ll define exactly what it is and how it applies to ecommerce.
- Why customer segmentation is important and the top ten benefits: Learn why the top ecommerce players use customer segmentation to grow their business.
What is Customer Segmentation?
Customer segmentation is the process of dividing customers into groups based on a shared factor and creating tailored experiences and messaging specifically for each segment. The more customer segments and buckets you can place customers in, the more granular and specific you can engage with each prospect.
Some of the most common ways you can segment customers for ecommerce include:
- Geographic and demographic factors: Age, location, gender, income, profession, etc.
- Psychological or Behavioral: How they like to shop, marketing communication preferences, when they are most likely to purchase, etc.
- Visitor Profiles: Repeat vs. first-time shoppers, account vs. guest users, premium members vs. basic members, subscribers, etc.
- Purchase Behavior: High vs. low average order value (AOV) customers, single item vs. bulk shopping, card abandonments, inactive shoppers, subscriber reengagement, etc.
- Source of Visit: Shopping device (desktop, tablet, smartphone, etc.), including initial touchpoints from a brick-and-mortar location, social media platform, or search engine, etc.
Why Customer Segmentation is Important
Customer segmentation is important for ecommerce companies because it helps create messaging, offers, and content that align with each visitor’s unique persona to create an elevated user shopping experience.
Categorizing visitors based on specific traits or behaviors will help guide your marketing messaging and offers to maximize your budget and get the most tangible results and ROI from your efforts.
10 Benefits of Customer Segmentation
Don’t let your audience data go to waste. Leverage customer segmentation to turn potential shoppers into loyal customers. Some of the top benefits of customer segmentation include the following:
- Improved Customer Retention
- Stay Competitive with Big Retailers
- Turn Shoppers into Loyal Brand Enthusiasts
- Find the Right Price and Offers
- Stop Wasting Time Trying to Reach Cold Audiences
- Discover How Your Audience Wants to Be Engaged
- Riches are in the Niches: Identify Your Big Spenders
- Better Marketing Messaging that Makes an Impression
- Improve Inventory Management and Merchandising
- Gain Audience Insights to Guide Product Development
1. Improved Customer Retention
Segmentation should be at the top of your customer retention strategy. Retaining existing customers is cheaper than finding new ones.
Repeat customers already have a shopping account, and you can continue to nurture the relationship through email or other touchpoints since you have their contact information.
Segment customers based on the most engaged and loyal segments rather than trying to reengage with one-time shoppers who have opted out of your pipeline. Reward your most-active and frequent shoppers with coupons, exclusive offers, or loyalty points. Spend more effort rewarding your best shoppers and encourage them to leave valuable five-star reviews.
2. Stay Competitive with Big Retailers
Customer segmentation is essential to stay competitive with big retailers like Amazon and Walmart. They invest billions of dollars to create a superior ecommerce experience for visitors, and customer segmentation tactics are crucial to retaining their shoppers.
You can deliver comparable experiences using customer segmentation strategies to reach their audience. Giving personalized content unique to each visitor and sending them marketing content relevant to their interests will keep them active in your funnel.
Don’t turn off your shoppers with spammy marketing offers that don’t convert. Create positive customer experiences through customer segmentation and keep your shoppers coming back.
3. Turn Shoppers into Loyal Brand Enthusiasts
You can use customer segmentation to create deeper connections with your audience, leading to loyal brand ambassadors. Segmenting customers based on similar demographics, product interests, or stages in the buyer’s journey will help you create stronger messaging and offers that improve click-through rates and engagement.
Whether it’s personalized recommendations, exclusive offers, or relevant content recommendations, your goal should be to turn visitors into repeat customers. Creating better experiences using customer data will build stronger relationships with your audience, making them more likely to share positive reviews or mention your brand in relevant online forums, comment sections, and social media groups.
4. Find the Right Price and Offers
You should constantly experiment with product listing and retail pricing strategies to find optimal price points that convert customers. Do bundle offers increase purchases? Should I increase the price of the product so I can offer free domestic shipping? Customer segmentation will help you answer these types of questions.
Once you start segmenting customers, you can examine which audiences are converting and which ones are walking out the door. Use your customer data to understand your visitors’ spending habits and which thresholds you must overcome to increase average order values by finding optimal price points or product recommendations.
5. Stop Wasting Time Trying to Reach Cold Audiences
Customer segmentation will help show your team how to spend their time best. You’ll quickly identify your top-performing audiences so you can allocate more time to craft compelling content and offers to keep your big spenders spending.
Find cost-effective strategies and stop wasting your team’s efforts on cold audiences. Once you gain insights into disinterested customer segments, you can experiment with stronger offers and discounts to see if you can finally turn them into loyal shoppers.
6. Discover How Your Audience Wants to Be Engaged
Are your customers glad when they receive a push notification or a new product or annoyed? Are those daily emails helping or hurting your bottom line? Marketing is crucial to keep customers engaged and informed, but sometimes, it can hurt a brand.
Discover how to communicate with different audience segments using segmentation. Learn which channels are helping past shoppers return so you can stop wasting your time on marketing collateral that isn’t resonating with your audience. Create tailored messaging based on visitor behavior and uncover the best channels to reach your customers for better engagement, open rates, and, most importantly, conversions.
7. Riches are in the Niches: Identify Your Big Spenders
Most brands have a highly varied audience. Each visitor has unique interests, buying habits, and how much they are willing to spend. Customer segmentation will help you deploy marketing collateral specific to each shopper. As you start to bucket shoppers into groups based on their behavior and user profile, you can gain insights into each niche marketing segment.
For instance, you can bucket customers in colder climates and deploy email offers with discount codes on winter essentials, like coats and gloves. The further you segment audiences based on their behavior and interest, the easier it will be to develop marketing collateral that aligns with what drives them to make purchases.
8. Better Marketing Messaging that Makes an Impression
Once you begin segmenting your audience, you can create better marketing messages that align with each customer’s profile. Generic email and marketing campaigns often have low engagement rates and can leave the wrong impressions on prospective shoppers. You can begin fine-tuning your messaging based on each customer segment’s preferences and needs.
Generate positive impressions on your audience with personalized messages, and you’ll start to lower customer acquisition costs while achieving better results on your marketing efforts with fewer expenses. Get better leads, increase ROI, and improve each shopper’s lifetime value with customer segmentation.
9. Improve Inventory Management and Merchandising
Use customer segmentation to make better merchandising decisions and keep your hottest-selling products in stock. Once you start to group your audiences on shared demographics, interests, or behaviors, you’ll better understand which products are selling and which are sitting on the shelf.
Customer segmentation will also give you valuable insight as to how to display your products in ways that appeal to specific segments and make data-driven decisions on the inventory you’ll need to stock so you can buy in bulk to save money while increasing sales, reducing operating costs, and creating better customer experiences.
10. Gain Audience Insights to Guide Product Development
Customer segmentation is a great way to gain valuable insights into product development. Dividing your customer base into smaller groups based on a specified criterion will help you discern what product features particular audiences want.
Reverse engineer customer desires and create new products to appeal to specific groups or improve existing products based on the preferences of your target shoppers. Develop the products your audience wants and reap the benefits of increased sales, improved customer satisfaction, and create a stronger brand.
Plug Into Intelligence Commerce and Transform Your Business with our Advanced Customer Segmentation Technology
Customer segmentation has never been easier than with Nogin. Our headless enterprise technology plugs into Shopify Plus, supercharging it with market-leading functionality that outperforms against legacy enterprise platforms. Our dynamic solution features sophisticated research and development built in and our clients can migrate to an enterprise level with no upfront costs in less than 8 weeks.
We developed our own customer segmentation technology that automatically divides customers into buyer personas. Our Nogin A.I. analyzes their unique profile and delivers personalized and dynamic content without any complicated analysis on your end. Intelligent Commerce also features superior microtargeting capabilities to automatically assess site and marketing performance to push custom offers and customer differentiation, increasing conversions and lowering acquisition costs.
Here are some of the main benefits you can expect migrating to Intelligent Commerce:
- Our servers are connected to Meta, Google, TikTok, and other social media platforms, so your ad performance won’t be affected by updates and changes, such as the iOS 16 update. While your competitors’ ad performance suffers, yours won’t.
- We can handle multiple frontends and multiple backends.
- Access 40 enterprise-level tools and features that improve conversions and lower marketing spending, shipping, and returns.
- Replatform to a superior enterprise platform without replatforming fees and go live in just 6 weeks.
- Your store will connect to our Luminate research and development technology that tests, analyzes, and deploys superior ecommerce tactics based on the best strategies across our brands. (Over $1 billion in annual Gross Merchandise Value.)
- True global enterprise ecommerce to reach and convert international customers.
- Our 3PL ecommerce fulfillment solution will lower your shipping and return costs.
- Leverage marketing automation driven by Artificial Intelligence (AI) and machine learning to convert more customers at lower acquisition costs.
- Plug into our enterprise ecommerce platform solution with NO upfront costs!
Nogin is a different approach to enterprise ecommerce, and the results speak for themselves:
- Our clients achieve an average 3X growth rate.
- Conversion rates are 40% on our platform.
- Traffic costs 30% less on Nogin.
If you want to recession-proof your business and instantly become more profitable, it starts with a smarter approach. Learn more about the research and data behind a Commerce-as-a-Service business model and download the Coresight Research Reports below, or contact us today: