In today’s competitive e-commerce landscape, understanding and catering to the diverse needs of customers is more critical than ever. In large part, this is because customers expect a personalized shopping experience. In fact, 66% of consumers said they’d be dissuaded from making a purchase after encountering content that just doesn’t resonate with them. On the other hand, 80% of customers are more willing to buy from a brand that creates a personalized shopping experience.
The Importance of Customer Segmentation
Customer segmentation is a critical strategy for e-commerce brands. By dividing customers into distinct groups based on their behaviors and preferences, brands can create more effective marketing strategies and personalized experiences by tailoring offerings to distinct customer needs. This approach goes beyond basic demographic data, utilizing advanced analytics to gain deeper insights into customer behaviors, ensuring more precise and impactful engagement.
From enhancing personalization and optimizing marketing budgets to driving data-driven product development, customer segmentation is a cornerstone for strategic decision-making in D2C businesses. Here are just a few top reasons why segmentation is crucial for e-commerce brands in today’s competitive landscape:
- Enhanced personalization and customer experience — By leveraging customer segmentation, e-commerce brands can deliver highly personalized shopping experiences, tailoring product recommendations, promotions and content to specific customer segments. This targeted approach not only increases customer satisfaction but also boosts conversion rates and average order value.
- Optimized marketing spend and ROI — Segmentation allows brands to allocate marketing resources more effectively by focusing efforts on high-potential customer segments. This precision targeting reduces wasted ad spend, enhances campaign efficiency and drives a higher return on investment (ROI).
- Data-driven insights — When you understand the distinct needs and preferences of different customer groups, you’re better able to serve them by developing and refining product offerings that resonate with each segment, which ultimately enhances your competitive advantage.
How Nogin excels at customer segmentation
Nogin’s Commerce Platform uses advanced machine learning models to automatically identify and categorize customers into unique segments in real-time. As customers interact with your store, they are dynamically assigned to a segment, which is continually refined as more data is collected. This allows you to track segment performance and tailor your strategies to meet the specific needs of each group.
Even more powerfully, you can use the data gathered from each segment in several ways to increase your profit, including:
- Email campaigns that are custom-tailored to each segment
- Generate lookalikes by exporting segment data to other platforms and generate marketing audiences that are similar to your most valuable customers
- Use the Smart Offer system in the Nogin Commerce platform to create discounts coupled with content that is targeted at specific segments
What’s more, Nogin Smart Offers are automatically A/B tested against each other to find the best offer for each segment. Say goodbye to manual testing and over-discounting, and say hello to truly data-driven decision-making.
Nogin’s Customer Behavior Segments
Nogin’s standard behavioral segments are automatically identified based on machine-learning models that group customers based on purchase history, page views and other signals. Unlike rule-based systems, this approach doesn’t rely on explicit criteria like “this customer belongs in segment A but not in segment B.” However, each segment has certain traits that represent their behavior, and groups are updated regularly to ensure an accurate reflection of their latest behavior.
Here are six standard customer behavior personas that Nogin uses to identify the purchasing behavior of e-commerce customers for a retail brand. While these personas aren’t universal, they provide valuable insights into how shoppers are segmented based on their interactions with your brand:
- High Rollers — Although “high rollers” make up a relatively small percentage of the total customer base, their spending sets them apart. They also tend to be loyal and engaged with the brands they shop from.
- MVC (Most Valuable Customers) — After high rollers, MVCs are your next top customer — they don’t spend quite as much on an individual purchase, but their lifetime purchase value is high. Together, high rollers and MVCs make up just under 10% of customers but account for 35% of the net lifetime value of the brand’s sales.
- Discount Shoppers — These buyers make up a substantial portion of your shoppers — those who buy when there’s a high discount percentage available.
- Average Joes — These shoppers don’t stand out for any particular trait, and make up the majority of your customer base.
- Newbies/High Shipping — These are relatively new customers who are still in discovery mode and are sensitive to high shipping costs.
- Returners — These shoppers index high on returns, to the extent that they have almost no Lifetime Value (LTV).
Nogin leverages these customer personas to tailor marketing strategies and offers that resonate with each group’s unique behavior. For instance, High Rollers might receive exclusive early access to new product launches or personalized recommendations that align with their high spending habits. In contrast, Discount Shoppers could be targeted with flash sales or special discount codes to encourage repeat purchases. MVCs might benefit from loyalty programs that reward them for their consistent engagement, while Newbies/High Shipping could be offered free or discounted shipping on their next order to encourage further purchases. However, Returners might be excluded from free shipping promotions, as their high return rate impacts overall profitability. By delivering specific offers to one group and not another, Nogin ensures that each customer segment receives the most relevant and compelling incentives, driving both engagement and sales.
Make e-commerce personal with Nogin
Nogin’s sophisticated customer segmentation enables e-commerce brands to deliver personalized experiences, optimize marketing efforts, and ultimately drive sales. By continuously updating and refining customer segments based on their behavior data, Nogin ensures your strategies are always relevant and effective.
Experience the power of customer segmentation with Intelligent Commerce by Nogin. Set up a conversation with our team today to learn how we can help you enhance your customer engagement and grow your e-commerce business.
