Understanding how to engage shoppers can be overwhelming as their needs are diverse and ever-changing. So how can you effectively tap into shifts in shopper behaviors? Keeping up with the latest shopping trends is a good starting point to stay current on what shoppers are looking for from online brands.
There’s no one-size-fits-all approach, but one proven tactic for capturing the attention of distracted shoppers is creating smaller shopper segments. Breaking down customers into smaller groups allows you to deliver more personalized experiences.
McKinsey’s Next in Personalization 2021 report found that 71% of consumers expect companies to deliver personalized interactions, and 76% reported frustration with generic brand engagements.
Building segments can help you lean into the expectations of today’s consumers.
What’s customer segmentation?
Customer segmentation allows online brands to divide their shoppers into groups based on common characteristics, such as shopping behaviors, location, age, gender, life stage, and device type. Knowing more about your customers empowers you to engage them more effectively.
Classifying different types of customers can offer positive business results regardless of industry or product mix. Specifically, customer segmentation can help solve a few common problems. Start by asking yourself a basic, yet important question: What are my business priorities?
The answer depends on the goals you have for your business. Some questions to consider as you start to align your customer segments to your business goals include:
- Are you interested in finding the best strategies to increase your sales? Which benchmarks should I use? Who is buying my products? How do I identify opportunities for growth?
- Would you like to optimize your marketing promotions and campaigns? How can I save money and be more efficient in ad spending? Which channels are best to find prospective customers? How do I reach existing customers?
- Are you interested in enhancing the way customers experience your brand? How do customers experience my brand today? How do I continuously monitor your customers’ journey and remove friction points?
- Would you realize more sales if you built products around specific customer preferences? Which products are right for a specific customer segment? Do any of my customers have a higher propensity to buy higher-priced products?
“Customer segmentation can help you with all of these and many more questions,” says Valerie Clift, lead market researcher for Buy with Prime. “It can help identify what your shoppers want, provide guidance for your product roadmap, and identify ways to keep them happily engaged.”
Insights gathered from the way different customer segments engage with your brand can also help inform your marketing strategy, which can improve brand awareness and customer loyalty.
How to do customer segmentation well
The first step is to analyze the data you have on shoppers, looking at relevant demographics and psychographics that map to your business priorities. Traditionally, building customer segments requires a robust budget and a sample size of at least 1,000. It also often requires a marketing team to gather information and a data science team to build machine learning models, analyze the data, and deliver actionable insights.
1. Tap into data
The foundation of customer segmentation is analytics because they provide the signals that you can use to understand the behaviors and preferences of your customers. Platforms like Google Analytics offer a wealth of insights about how your customers experience your brand online.
Looking at metrics like page views, unique visitors, and bounce rates, and mapping those to dimensions like device used during a visit and visitor region gives you a starting point to understand the types of people engaging with your website.
You can gather similar customer engagement signals from other marketing channels, such as email and social media. It’s a best practice to look at your channels holistically and look for patterns of engagement to help you fine tune your messaging and investments in each marketing channel.
Another option for merchants with a sizable marketing budget is to hire firms like Bain & Company or specialized agencies such as Suzy to design and run a segmentation study.
Customer segmentation can be an expensive and complex endeavor, but it doesn’t have to break the bank or stretch your resources. Whether you’re an established brand or just getting started, here are some of the basic tips to help you get started.
2. Ask for feedback
Surveys are a proven tactic to gather direct information about your customer base. To be effective, however, surveys must be focused, questions must be smart and concise, and surveys should include an option to provide feedback anonymously—not everyone is comfortable giving up their email until there’s a perception of value.
If you have an email list, you can send your customers a stand-alone survey or include one in your monthly newsletter. If you don’t have an email list, you can experiment with focused polls targeted at specific types of customers on social media. You can also try questionnaires at events to gather feedback from prospective customers.
“When asking for customer feedback, it’s a best practice to avoid collecting unnecessary personally identifiable information, such as emails and addresses, and always provide an opt-out mechanism,” advises Clift.
To be relevant, you’ll need to have a statistically significant number of responses to make decisions. The number of responses depends on a number of variables, specifically your acceptable margin of error and the size of your customer base. A best practice is to strive for a sample size of at least 100 in order to get meaningful results.
If you find that you’re not getting enough responses to inform your decision making, consider offering a coupon code or discount for customers that provide feedback.
3. Draft your segmentation framework
Once you’ve gathered insights from your online analytics platform and analyzed the feedback from your survey, the next step is building your segmentation framework. This is where you outline who you’re seeking to engage, why they’re important, where to find them, and what they’re looking for.
Your framework outlines the variables, such as demographic traits, shopping behaviors, and location, that define the characteristics of the customer segments. During this step, you’re actually building a draft of your customer segments that you can pressure test with key stakeholders.
Clift offers guidance for merchants just getting started with a segmentation strategy: “Keep your framework focused and simple. Consider starting with 2-3 segments that you feel will help achieve your sales and marketing goals.”
4. Validate your findings
Effective customer segmentation is a team sport. From marketing and sales to product and UX design teams, it’s important to engage the right stakeholders and make sure they’re bought into your segmentation approach. These stakeholders serve as a gut check before you make changes to your customer engagement strategy.
Getting stakeholder support can also help drive internal adoption. Validating your framework with invested colleagues not only helps you identify gaps in your approach, but also builds a team of advocates to drive use of the segments to make strategic decisions.
5. Test and learn
You’re now ready to put all your hard work into action! Some sample use cases for your customer segmentation strategy include:
- Marketing: Build personalized marketing campaigns tailored to the preferences of each customer segment. For example, if a customer segment prefers to engage on Instagram, experiment with targeted stories highlighting how your products offer a clear value exchange to that specific segment.
- Sales: Create targeted sales outreach programs that address key pain points for each type of customer. For example, if the research indicates that a specific segment engages more with video content, create a series of explainer videos outlining how your products address a key business challenge.
These are just a few examples of how you can use your segments to attract, engage, and convert more shoppers. A best practice to consider is running A/B tests to test some of the hypotheses you created during your segmentation journey.
As you launch initiatives using your customer segments, pay attention to your repeat customers. If they’re returning, they’re likely seeing value in your brand, so tap into their characteristic profile to find ways to optimize all of your customer segments.
Tapping into your customer data is a critical starting point to understand who your customers are. As a new offering that empowers merchants to grow their ecommerce business, Buy with Prime gives merchants control of their customer data on all Buy with Prime purchases. This helps merchants build and nurture direct relationships with their customers. Using customer order information, including email addresses, you can run remarketing campaigns and provide customer service.
Are you personalizing experiences for Prime members on your site? Buy with Prime can help you easily segment your promotions and repeat purchase campaigns for to keep Prime members coming back to your online store.
Building customer segments can be a challenging endeavor, but if you start with a focused approach, segments can be a productive growth driver for your business.
Learn more about Buy with Prime. If you’re ready to get started, you can sign up today.