How to Segment Buyers of an Online Store

For any business, understanding who your most frequent and highest-spending customers are is crucial, as they form the core of your customer base and represent the greatest financial value to your company.

A nuanced understanding of these key customers enables your marketing, sales, and service teams to build productive relationships with your entire customer base.

Customer segmentation is an essential strategy that divides a larger customer base into homogeneous groups based on various attributes. This allows the development and implementation of effective approaches tailored to each customer group, satisfying their unique needs and expectations.

The segmentation process employs a range of variables, such as demographic, behavioral, psychographic, and geographic data. Segmentation enables marketers to make the most out of their budgets by developing diverse marketing strategies that cater to each consumer segment.

The purpose of customer segmentation is multi-fold:

- To accurately identify and describe the core customer groups, understanding their motivations and needs.

- To prioritize customer groups that will yield the highest return on investment.

- To assess the size and growth potential of each group.

- To refine the product offering and adapt marketing communications to meet the needs of target customers.

- To design a marketing strategy focused on maximizing reach and engagement in channels most relevant to target groups.

- To foster loyalty within the target audience and improve customer retention metrics.

There's a plethora of ways to segment your customer base, from basic to deep-dive methods that rely on a thorough understanding of your audience's needs, motives, and behavior, as well as a data-driven approach.

In a data-driven approach, business optimization and strategic decisions are made based on data collection and subsequent analysis through analytical tools.

The criteria for grouping can be dictated by the specific nature of your business. And the higher the competition in your niche, the more precise your segmentation needs to be. We've compiled the most popular customer segmentation methods useful for e-commerce businesses.

The first set of segmentation methods falls under basic segmentation, revolving around socio-demographic factors and geographic locations of customers. Here are the key criteria for building this fundamental level of segmentation:

A customer segmentation strategy can begin with distinguishing customers based on gender. Ad campaigns in channels like social media, messaging apps, and email newsletters are most effective when tailored to a specific gender. A one-size-fits-all campaign across genders will likely yield lesser results.

Segmenting customers according to various age groups also holds significant importance. If your products or services appeal to a range of age demographics, it's prudent to create age-specific segments to maximize the impact of your marketing efforts.

If your e-commerce store serves multiple regions with unique pricing or product ranges, it’s imperative to consider these factors in customer communications. Settings for contextual, targeted advertising and email campaigns should include options for grouping customers geographically.

Certain industries may focus on customers of specific professions. For instance, sporting goods, construction tools, and musical instruments cater to distinct professional groups. Being aware that a significant portion of your target audience falls into these categories, you can offer special promotions and discounts. When focusing on specific professions, seasonal trends should also be considered to maximize campaign effectiveness and garner attention.

Birthdays offer an excellent parameter for customer segmentation that should not be overlooked. Therefore, collecting birthday data when customers register or create an account on your site is crucial. Sending automated personalized emails, which can be set up in various mailing services, is a no-brainer marketing strategy. Some companies even allow customers to include the birthdays of close relatives, thereby providing opportunities to send relevant offers multiple times a year.

For example, H&M sends its customers a festive email that includes a pleasant 25% discount in honor of their birthdays.

Segmenting your current customer base based on their income is also invaluable for e-commerce stores. This is a challenging segmentation to execute, as customers are generally reluctant to share such information, and when they do, they may not always be forthcoming.

When you combine this income data with age metrics, you can increase the relevance of your email communications and employ fitting messaging.

This type of segmentation is particularly useful for industries like real estate, automotive, luxury jewelry, and many other niches.

By employing these basic segmentation methods, you lay a solid foundation for customer understanding, allowing you to target your marketing strategies more effectively.

The next set of segmentation methods focuses on more nuanced adjustments. Here, behavioral characteristics such as purchase readiness, frequency and volume of purchases, and product usage experience are employed. Additionally, psychographic traits such as value systems, hobbies, personality characteristics, brand loyalty, degree of loyalty, and motivation are taken into account.

Behavioral segmentation nicely complements demographic-based segmentation in e-commerce.

Let's delve into the primary methods within this segment.

What type of device do clients prefer for visiting your online store? Do they browse from desktop or mobile devices? What do analytics systems tell you about the dominant operating systems among your clientele?

Understanding the device preferences of your visitors can be foundational to all your marketing efforts, from targeting to pricing. This will also help you optimize your emails for each device, making them more effective.

One indirect indicator of income level is understanding the percentage of customers using iOS/iPhone versus those on Android systems.

The same division applies to desktop users when considering Windows vs. Mac users.

Where are your customers coming from? Are they directed to you via your newsletters, social media advertisements, affiliate links, or word-of-mouth?

In digital marketing, it’s crucial to identify which channel generates the most potential customers so that an effective strategy can be developed.

For example, if you find a significant number of customers are directed to your e-commerce site via social media, you may consider developing a landing page on those platforms.

Implementing this type of segmentation allows you to measure how effectively users from, say, social networks are converting into new and loyal customers compared to users arriving through contextual advertising or search engines.

It can be beneficial to segment consumers based on the frequency of product usage. This information is handy for planning advertising campaigns, identifying growth sources, and assessing market potential.

For instance, frequent users might be targeted with loyalty programs or upselling initiatives, while occasional users could be re-engaged with special offers or educational content to increase their product usage.

By applying both demographic and behavioral segmentation, you can craft marketing strategies that are more personalized, effective, and responsive to the needs and behaviors of different customer groups.

Segmenting your potential and existing customers according to their journey stages is crucial. The customer journey encompasses the path from the emergence of the need for a product or service to the point of purchase or conversion into a loyal customer.

This is critical segmentation as abandoned carts represent one of the major pain points in e-commerce. This group can be further segmented with a specific action plan. For example, you could divide these customers into those who:

- Added items to the cart and remained inactive for 5 days
- Received a discount email after 5 days but remained inactive
- Added only one item to the cart
- Have more than three items in their cart
- Added items to the cart with a value exceeding 5,000, 10,000, or 20,000 rubles, etc.

As long as users are actively visiting your online store, there’s a chance to engage them with promotions and hot deals. But what if they have not visited your site for a long time? Here, too, customer segmentation strategy comes to the rescue.

Ideally, you would want to re-engage these customers with messages like "We missed you" or "Long time no see…" etc.

The reason you want these customers back is that they are already familiar with your brand and products. It is often easier and cheaper to re-engage them than to attract new customers.

A good incentive for return could be the announcement of new products coupled with a compelling discount.

To automate engagement with inactive customers, you may set up automated email sequences that get triggered when a customer hasn’t appeared on the site for, say, 30 days. The length of the period between a purchase and the triggering email will depend on the average purchase frequency for your product—groceries may have one period, car tires another.

These are customers who have visited your website, filled out some form, and left their email addresses. They too can be engaged effectively. You can set up an automated email to be sent to those who haven't visited the site in the last 3-4 months. The email should remind them of who you are, update them on what's new on your website or in your product range, and highlight the most attractive hot offers.

By doing so, you’re not only keeping your brand in the minds of these individuals but also providing them with compelling reasons to engage with your brand again. This comprehensive segmentation strategy across various stages of the customer journey allows for more targeted and effective marketing campaigns.

Frequent users are those who return to your site from time to time. By "frequent users," we don't necessarily mean frequent buyers. This customer segment can be divided into those who are highly engaged and those who are not.

This means you'll need to find ways to increase engagement for those customers who need an extra nudge to make a purchase.

You can identify several sub-segments here:

- Viewed 3-6 pages on the website
- Spent more than X minutes on any product or page
- Viewed product reviews or video reviews
- Requested a callback or used the chat feature
- Added products to their favorites, etc.

Practically speaking, contextual advertising based on micro-conversions often yields higher results than overtly conversion-focused actions like purchases and cart additions.

To ensure that new customers do not become one-time customers, you need to pay them maximum attention.

A few days after their purchase, it's good to send a thank-you message via email or messenger. Ask them if they liked the product and were satisfied with the service. Offer a generous discount on their second purchase.

To maintain contact, offer them to subscribe to your newsletter or social media, promising not to spam but to offer only beneficial information and promotions.

You can also keep monthly lists of new customers to track their customer journey and work on retention.

You can segment customers who have bought an older model or design of a product to send them information about updated versions or to suggest complementary products, ingredients, or accessories.

Upsell: A sales technique that encourages the customer to purchase a more expensive or upgraded version of an item.

Cross-sell: A marketing method aimed at encouraging customers to purchase additional products or services.

How it Works:
Suppose a customer has bought a GoPro Hero 5 camera and falls into the segment of clients for this model. This means that as soon as GoPro Hero 7 is released, they will receive a personalized email saying:

"Hello [Your Name], it's time to meet Hero 7! Check out its potential…"

Have you heard of the Pareto Principle? Around 20% of your users bring in approximately 80% of your revenue. This 80% is what keeps your business afloat, meaning these 20% of customers deserve special attention.

For this segment, a well-configured automated sales funnel works effectively, which could include:

- Automated emails with special offers or discount codes for a specific month
- Special banners and pop-ups during their site visits
- Exclusive offers

By segmenting your customers in these various ways, you can target your marketing efforts more effectively, offering personalized experiences that are more likely to convert leads into loyal customers.

This is an interesting and quite important segment as we're talking about customers who have been regained by your online store.

It's useful to identify when these customers had churned out to determine why it happened and what were the main reasons. It's also essential to understand which marketing steps were able to bring them back.

If long-term customer relationships are essential for you, it's crucial to include psychographic segmentation in the overall segmentation process. Psychographic traits include a system of values, hobbies, personality characteristics, brand affinity, degree of loyalty, and motivation.

Lifestyle segmentation allows marketers to understand the needs and requirements of customers to use arguments that resonate with their values in communications.

For instance, Nike actively works with segments like "extreme runners," "fashion followers," "people who lead an active and fashionable lifestyle," etc. For the "extreme runners" segment, they offer a specific model of durable and comfortable sneakers, and so on.

If you offer products from a wide range of brands, you can segment users based on their brand preferences.

For example, you can segment customers who have clicked on several products of one brand more than three unique times.

This way, every time you plan to promote new products or offers from this brand, you'll be targeting those customers who have shown interest in this particular brand.

As a result, your communications will be more targeted and, therefore, more effective. Then, among those who responded to the message or email and made a purchase, you can form a group of "highly engaged" brand-loyal customers.

Some call these customers indecisive. They spend a lot of time studying the product and its alternatives before buying. They also like to read reviews and watch overviews to make a well-founded decision from their perspective.

For such clients, create a segment "viewed a specific product/page," filter by "number of times" (for instance, more than twice in the past seven days) and "has not yet purchased."

Set up marketing automation with a special offer and valuable content, convincing these clients of the rationale behind purchasing your particular product.

By using such multi-dimensional segmentation, you can create a more personalized shopping experience for different types of customers, which in turn helps in increasing conversions and customer loyalty.

The term "cherry-picking" refers to customers who are very price-sensitive and are always looking for the best deal. These are people who love coupons or discounts more than other customer groups. By running a few "test" advertising campaigns, you can easily identify them.

When you need to stimulate sales, you can turn to this segment. It doesn't necessarily have to be a money-off discount; free shipping, free samples, or some other bonus can also work well.

With this segment, you'll have a pool of customers who are very likely to place an order when there is additional value, such as free products, services, or accessories.

Customer segmentation can serve various purposes and can be applied differently. It's crucial to understand that customer segmentation is an ongoing process; you must observe how your customer base changes over time, which segments are growing, and which ones are losing their significance.

Firstly, website analytics will help you better understand your customers and segment them for focused work with the most significant and crucial groups for your business.

Secondly, more precise segmentation will be facilitated by working with customer reviews and surveys. Don't hesitate to ask your customers clarifying questions to better understand their motives, needs, and the key factors in their purchase decisions.

Start with a small number of segments and monitor their effectiveness over time. Gradually add or remove segments depending on their performance.

Customer segmentation not only helps to increase customer loyalty but also allows for the creation of relevant advertising campaigns that will set you apart from competitors.